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Comment by arjie | Hacker News Reader

Surprisingly small contract. It's interesting to see that a full government contract for a payment provider is a fraction of a US mid-size company's cloud bill. I am constantly surprised by things like this. Here's another: there are more foreigners in Taiwan (total pop. 25 m) than in China (total pop. 1.4 b).

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Payment processing costs are a scam. They're 10x as expensive as they need to be to fund rewards programs and fund the financial system.

EU max credit card transaction fees are 0.3%, in the US they can be up to 4%.

It just doesn't cost 4% of a transaction to handle the exchange of funds. Just wealth transfer to finance people and the upper class who take advantage of credit card perks.

Can someone explain to me if EU card transactions are capped, why Stripe charges me (US) the full ride on my EU customer's cards? In fact, I get charged even more for EU cards – perhaps as much as 2.5% extra.

I just checked and I get charged ~8% in fees on a 10 euro transaction on Stripe. Of course some of that is the low transaction amount (flat 0.30), but it's brutal for a small business like myself.

    2.9% + 1.5% (intl card) + 1% (currency conversion) + 0.30

    Payment amount (€1.00 EUR = $1.15253 USD)
 
    €10.00 EUR -> $11.53 USD

    Fees

    Total:    - $0.93 USD

    Stripe currency conversion fee 
    - $0.12 USD

    Stripe processing fees
    - $0.81 USD

    Net amount
    $10.60 USD

I guess the NA interchange is charging the card, rather than the EU? Could using a MOR reduce the fee structure?

The EU only capped interchange fees, which is the amount that goes to the bank that issued the card. It did not cap the fees that go the your PSP. Which makes sense, since you can pick the PSP you do business with, but you can't pick the bank that issues your customers' cards.

(And I don't think it applies to US merchants like you anyways)

https://ec.europa.eu/commission/presscorner/detail/en/ip_15_...

perhaps they are capped only for EU merchants, because EU government works to protect their own companies and citizens from foreign artificial unregulated monopolies.

in US, the government is more protective of private monopolies due to lobbying

How are you defining monopolies? Companies that are successful? Because you seem to be defining most US companies that do business in Europe as monopolies. It seems that this is the kind of mindset that has kept Europe behind. Too bad. Regulation that keeps out competition or needlessly puts obstacles in place is bad for the consumer, bad for employment, and bad for the general standard of living. And If you think US companies are unregulated then you haven't seen the 20 ft of federal CFR regulations together with the regulations of 50 different states that US companies have to deal with everyday.

Monopolies are one-two companies that capture the market and lobby the government to fortify the regulatory capture via:

1. regulatory bloat, artificial increase in cost of business to prevent new competition

2. lack of anti-trust enforcement, government fails to protect the consumer and instead protect the monopolies' income

You're not in EU so the full stack is happy to charge you whatever it can.

Yeah, you don't live in the EU.

Interestingly, the EU did manage to cap interchange on US cards paid by EU merchants to pretty much the same rate as that paid for domestic/intra-EU cards, at least at the POS. Many things are possible with a regulator with teeth.

Uh… more profit?

The funny thing about that is that HN used to say if the fee was 4% it's because that's what it costs and if it was any lower the card networks would just abandon the country that forced it to be lower, since they'd lose money.

> HN used to say if the fee was 4% it's because that's what it costs

Do you have a link to the comment you're thinking of?

I remember people saying the same thing. It was some time ago. Turns out some markets really aren’t that efficient and corporate capture really is a thing…

As someone who really enjoys rewards programs, keep those scams alive!

The irony is that every couple you shop with just increases the prices of their items to deal with the fees, so you're just paying more for items to feel good about getting reward program benefits.

You are also being subsidised by debit card users.

How many people are actually buying things on a Debit card? I imagine not a lot

Most places other than the USA, when they use these card networks or their local country networks, are normally using debit cards. There's just no reason to overcomplicate a payment card by making it also a loan.

Mid-thirties Brit here. I've never owned a credit card, neither has my partner.

All of our card transactions are with a debit card.

I've never needed instant-access debt so it's not really an attractive proposition. Perhaps the added consumer protection rules could be worth it, but it's not been an issue to date.

Depending on your annual spend you could be missing out on one or more free trips per year in airline and hotel points.

I’d say it’s the norm in much of Europe for starters…

Much more common in Europe, which is partly cultural, and partly because there's not the same single/dual message technical distinction between debit and credit cards, so you don't "need" a credit card in the way you would for certain things in the US (e.g. a hotel that wants to preauth it).

Roughly half of all card users in the US, and probably much more elsewhere.

That surprises me, I've never met someone that uses Debit cards as their primary method of payment.

You lose a lot of consumer protections and many cashback rewards by using only Debit cards. The only drawback to credit cards is the interest, if you don't pay it off at the end of the month. So long as you're responsible with your spending, it's a direct upgrade.

> That surprises me, I've never met someone that uses Debit cards as their primary method of payment.

That in turn is not surprising – the split is very much correlated with socioeconomic status (to the point where quite a few of the people working on debit card products have never themselves used a debit card to pay, in my experience).

> The only drawback to credit cards is the interest [...]

Which is a significant drawback if your bank account balance regularly oscillates around zero and/or you've seen your peers get in financial trouble from credit card debt.

I buy flights on credit card, and other one-off purchases like house and car insurance, and often my Costco purchases (because the credit card lives in a different wallet where I normally keep my membership card).

My day-to-day wallet just contains a debit card so that gets used for almost everything else.

Internet transactions are usually done using Revolut because then I can use a disposable card number.

do consider that in Italy most credit cards cost around ~30€ per year + a 2€ tax for all months you spend more than ~70€ and most offer no benefits. Debit cards are offered for free by all banks. So credit is only used to rent cars (not really mandatory anymore) and if you really need the credit (but other ways of getting short term credit exist now).

I can’t remember the last time I paid using anything else in the UK. Occasionally a credit card if I need additional protection

Anyone who's credit rating is bad enough to not be able to get a credit card.

Given the price at the register is $X across all payment methods, I prefer to use my card that lets me pay 0.96X 30 days later. (I don't know what discount you can get from UK rewards cards...)

I hope that rewards cards go away, because they distort the market, but I'm going to use them while they're here. Rewards cards push costs onto customers that don't use them, and I don't want costs pushed onto me.

Might want to think twice about that: https://www.nytimes.com/2023/11/21/opinion/credit-card-rewar...

You are assuming they don't know about all this already when I feel like they have made it quite clear they do.

I briefly skimmed this, but why are you wasting my time? What does this have to do with me earning free trips from being smart about how I buy things? does not compute.

The only good use case for a credit card is if you are buying something from someone you do not trust. I have a CC and it use it a few times a year. But using them to pay for groceries or ordering something from Amazon is just moronic.

The way I see it: you are either rich and don't care or you are poor and need to spend money that is not in your account (no judging I grew up poor and had to hide from debt collectors when I was a kid).

Note that this is highly location dependent. In most of Europe, credit cards are basically all that exists (that is, even "debit cards" are just credit cards with a balance); and regardless of the type of card, because all payments are either chip & pin, biometric based, or verified with some additional 2FA, it's extremely hard to dispute a charge, whether a charge to a credit or debit card.

There's also "contactless" credit card payments in the UK and are common for buying things in shops/pubs etc. I don't know what the situation would be if you were to dispute an incorrect contactless charge.

Those are common in all of Europe, and they are still based on either biometrics (if using your phone) or the card's chip. They do typically include a transaction value and count limit below which the biometrics or pin don't actually get checked, for ease of use. But, given that this limit is controlled by the user, I expect that the contract terms also prevent you from disputing transactions below those limits - though I haven't read carefully enough to be sure.

I don't think I can control the contactless limit on any of my cards (I'm in the UK). Occasionally, the contactless device will prompt to enter a pin, but it happens fairly rarely (probably more common if the payment is at a new location).

I also haven't examined the various contracts, but I'd be surprised if there was no option to dispute transactions below a certain limit as that could be exploited by banks or thieves (but I repeat myself) or shops. An unscrupulous shop could double up transactions or change the amount paid and customers would not be happy if the bank turned round and said "it's below the £50 limit, so we don't care". The bank is more likely to push the problem onto the retailer and simply refund the customer and charge the retailer.

Personally, I don't like contactless due to the change of responsibility between the customer and bank and prefer to use PINs. As far as I know, I can't get just a PIN card as they all have contactless enabled.

Third option: You have the money and like paying less than people paying with non-rewards cards.

Fourth option: You use tap-to-pay and pay the balance in full every month for the convenience at zero cost.

Do American debit cards not have tap?

I'm in Australia, I have my credit card set up as the default to tap.

Means one payment from my savings account a month to cover all daily expenses.

In some places Visa/MC is the default way to pay. Such as large parts of Europe now that the fees are capped. The cashier asks you to pay, you hold your card up to the terminal, and you've paid. Some places like Australia have their own local systems that are more commonly used by locals and probably have lower fees, but those POS also support Visa/MC. It's just the default way to pay internationally now.

Except in the US, it does. Depending on the card, it can cost as much as 4.5% (or more!) to run the card. You can argue that it shouldn't, but that's a different statement than it doesn't.

uh, I'm including the card issuers as participants in this multi-party scam

it is illegal for Merchants to charge credit card processing fees by law, they have to absorb these fees and cannot display them to the customer.

This naturally protects the artificial oligopoly of visa/mc/discover systems.

The moment you allow Merchants to charge cc fees (even 2-3%) and allow customer to choose low processing option (ACH/debit card/cash), the whole scheme falls apart and Visa/MC will slowly go bankrupt

>it is illegal for Merchants to charge credit card processing fees by law,

This is only true in 4 states.

the typical Merchant<->bank agreements all have clauses forcing them to absorb these fees and explicitly barring them from separately charging customer CC fee.

and most small/med businesses dont have clout to protest that, so they have to accept these terms in order to earn money

FYI there was a lawsuit about this a while back and part of the settlement was merchants can pass on fees now.

This hasn't been the case for a wide variety of payment processors for quite a while now. Many of the new startup-based ones have features to help you pass through the fees even. Small business can use Stripe, Square, Clover, or one of many other payment processors that don't ban them from passing credit card fees forward to consumers.

> the typical Merchant<->bank agreements all have clauses forcing them to absorb these fees and explicitly barring them from separately charging customer CC fee.

These clauses would be illegal in many states and countries these days, so they don’t.

> they have to absorb these fees

absorb and then pass on as general "costs have risen". It's not like it's coming out of their profits, exclusively.

if people could choose Debit card for no fee vs Credit card for 2.5% fee, then customers would reduce their usage of cc for purchases

It's still costing them > 3%.

Interchange average in the UK was about 0.2% last time I looked (which was a few years ago), it't not much anyway.

Also the government doesn't really do card transactions. I imagine this is for fairly rare things like renewing your passport, booking a driving test or buying a title copy. Oh and visa fees maybe? Small beer anyway, it's not like people are paying taxes via card.

Interchange as a standalone might be low but scheme fees are about the same nowadays. Aydens provide a detail breakdown per transaction, for example on a UK consumer credit card there's sometimes 8 different line items (interchange, ayden markup, various scheme fees), one generally does not get out under 0.5% on interchange++ even in the UK on the most favourable cards. When you're on interchange pricing with either Stripe, Adyen or another big boy you're paying extra for AVS, 3DS, and several other scheme services. No one is walking away with 0.2% all in. A lot of people find these Visa and Mastercard published PDFs for interchange and think that's cheap, but reality is when the schemes got their nuts tightened on interchange fees they just spread the loss by marking up various scheme services and mandating them. John still want's his Avios points even in Europe/UK.

The gov.uk runs card transactions for dozens of services - which add up - from car tax, driver license renewal, passport replacements, to paying previous NI years (do you consider this tax?) and so on..

0.5% is a pretty incredibly low interchange rate in any case. But if you are saying that half of it is going to scheme fees, I doubt it is funding rewards programs for consumers.

Why do you think that? People definitely pay taxes by card.

But regardless this contract is _not_ for HMRC payments, its for gov.uk pay which is basically a centralised service that other services can use.

GOV.UK pay has done £9.2B in payments in the last decade, with an average of £67

https://www.payments.service.gov.uk/performance/

A very crude calculation for £1B a year in payments (thats probably too low) would mean a payment to Ayden (contract is upto £25M over 3 years) of 0.8%

Most of the things I pay on the government website (except vehicle tax renewal), so basically tax, I've been pushed towards a one-off direct debit each time instead of a card payment.

Most underpaid taxes are collected via a change in tax code for the following year.

> Small beer anyway, it's not like people are paying taxes via card.

I do. If I’m going to give the government a big pile of money, I may as well earn some points for my trouble.

They charge a surcharge when you pay by card, don't they?

They do, but with the redemption value I still end up ahead.

Not in Europe, where there are strict limits on credit card surcharges

My state government certainly does

Depends on the tax - I pay my vehicle tax through the gov.uk website!

With CC or bank transfer?

By credit card, it's quite useful for the reward points - I'm fairly sure it was MC and Visa only (no AMEX) last time I did it, though that may change with this new payment provider

Paying UK corporation tax can be done with a personal credit card.

Isn’t it illegal to pay a corporate entities tax with a personal card?

If it isnt it would be one hell if a headache with reimbursement and the accounting and reporting around it.

I imagine it is a bit of a headache, but it is an available option you can choose.

Has to be a personal debit (not credit) card - https://www.gov.uk/pay-corporation-tax/debit-or-credit-card

Road fund licence aka car tax is probably the most common thing that lots of people pay for regularly.

In the UK, the so-called car tax is an emissions tax (i.e. electric vehicles pay £0) and doesn't pay for road maintenance etc. Roads are paid for out of general taxation (e.g. income tax). Actual road tax ended in 1937.

I feel this is worth correcting as "don't bloody pay road tax" is a common form of abuse aimed at cyclists which is wrong on a number of levels. A lot of cyclists also drive a car and non-driving cyclists would fund roads if they pay tax. Another way to think about it is that the emissions tax for cycles would be zero anyway.

The tax for electric cars is normally £200 after the first year or £20 for electric cars older than 2017.

Ah yes - looks like they changed it in 2025.

And Companies House - still relatively rare though, like one payment of £50 per company per year.

Brazil's central bank operates their instant payment network Pix [1] [2] [3] for ~$10M/year [4]. Its not that these are small contracts, but that large, inefficient, unnecessary contracts have become the norm (I argue). Similar example from India's UPI payment system [5]. The US has FedNow to move instant payments for pennies, but banking and payment system participants in the US ecosystem are avoiding it to continue to private payment system rake [6] (cc networks, Zelle commercial bank network, private wallets, etc).

The evidence is clear you don't need to skim 3% off of an economy to provide instant payment capabilities. The enterprise value of US payment companies is a function of how long they hold onto this volume for, when competition is ramping up. You're just pushing ISO 20022 XML messages around a bus.

[1] https://en.wikipedia.org/wiki/Pix_(payment_system)

[2] https://frontierfintech.substack.com/p/55-send-pix-brazils-i...

[3] https://brazilstockguide.com/behind-the-lines/the-cost-of-pi...

> This makes the American dispute more sophisticated than it may first appear. Pix certainly puts pressure on private payment models, card networks and acquirers. It also reduces friction for consumers, small businesses and person-to-person transfers. But its deeper effect is institutional. It turns the bank deposit into an even more efficient payment instrument — and, by doing so, changes the role of banks in liquidity intermediation.

> There is an irony here. For decades, the United States built the narrative of private financial innovation. Brazil, through a public, interoperable and massively adopted system, produced one of the world’s most efficient payment infrastructures. The study notes how unusual Pix adoption was: more than 150 million users in its first year, use by nine out of ten small businesses, and daily volumes capable of reaching about 1% of annual GDP on a single peak day.

> The reading should not be triumphalist. Pix is a powerful innovation, but it is not cost-free for the financial system. It improves the user experience, reduces transaction costs and increases competition in payments. At the same time, it requires banks to hold more liquidity and may reduce the transformation of deposits into credit. For the United States, Pix appears as a digital-trade issue. For Brazil, it is a question of financial sovereignty. For banks, it is a question of liquidity. Pix began as a button inside an app. It became a piece of financial policy — and now, of geopolitics.

[4] https://news.ycombinator.com/item?id=44753626

[5] https://en.wikipedia.org/wiki/Unified_Payments_Interface

[6] https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...

The BCB in Brazil does very little to operate Pix. It's effectively a P2P system, where the BCB forces all the banks to interop with one-another (and all the banks directly call eachother). They can operate it that cheaply because they do close to nothing technically (they host the main discovery endopints). The only place the BCB actually ingests data is via their reporting mechanisms.

UPI is a bit more centralized, where the NPCI does the top-level routing between banks, so their operating budget is likely much higher than Pix. It also is drastically more simple to be a participant in UPI compared to Pix.

For Pix adoption: you can thank Covid for that. The Brazilian government said if you wanted to get free money from the government, you had to set up and use Pix.

US Financial Innovation: I'd say the hard thing here is that the government is extremely strict (lots of regulation) when you start looking like a bank. Lots of companies have tried to innovate here, but regulation makes it really hard to do. There's a lot of regulator capture going on.

This is incorrect . The system is not P2P, while it appears to be for customers. The BCB keeps both the directory that ties a chave pix to an actual account (DICT), and a centralized ledger (SPI - Sistema de pagamentos instantaneo)

[Payer bank] ──(1. Lookup key)──> [ DICT - Name Service] (Returns account data)

         │

  (2. Send order)

         ▼

     [ SPI - Central Ledger] ──────(3. Real time settlement over Financial Institutions account: Debt/Credit)

         │

  (4. Notification Message)

         ▼

[Receiver Bank]

The ledger doesn't keep individual accounts, but a Instant Payments account for each institution. This account is not the master bank account in the Reserve Transfer System (Sistema de Transferencia de Reservas) which is the system of record for banks funds, so the banks need to allocate funds from the STR to the SPI every day to be able to honor PIX transfers. The STR system doesn't work out of normal banking hours, so the banks need to predict how much money they will need for PIX transfers and move that money from the STR to the PI (pagamento instantaneo) account during defined liquidity transfer windows, to avoid banks double-spending the same funds over different rails (traditional vs PIX). If a bank finds itself without funds on its PI account in a saturday night, it can loan the funds from another bank who still have excess liquidity on his PI account).

As you can see, between the SPI, STR an DICT, it is a very centralized system.

Also, the system operates in a dedicated zero-trust networks which is completely isolated from the internet. The messages between banks and the central bank follow the ISO 20022 format. IBM MQ is used to route messages back and forth between banks and the BCB.

In both Brazil and the US, making something like Pix mainstream requires regulation. Brazil did its part, but it’s unclear whether the US will do the same anytime soon, I don't think so, unfortunately. Technically, it would benefit the American population (the process of making pix payments is so smoothless), but payment companies may have little incentive to support it, and could lobby against it.

In Brazil, the Central Bank overpowered the coordination problem. In the US, it may be the opposite: the government seems to have less power over the payment lobby, or at least less willingness to confront it directly.

Thanks for that. I am wondering if anyone have written up a high level technical comparison between different payment systems including Pix, UPI and others.

Feels odd that you exclude mentioning the EU, which has had instant transfers for more than a decade. More than two decades, if you include things like iDeal from The Netherlands.

Wasn't intentional, I mention SEPA and Wero in other comments, not intended to be an enumeration of all instant payment systems currently active globally. My apologies!

https://www.pymnts.com/wp-content/uploads/2025/05/PYMNTS-Rea...

https://www.emerald.com/cemj/article/33/4/575/1248919/The-ri...

https://en.wikipedia.org/wiki/Instant_payment

> not intended to be an enumeration of all 54 instant payment systems currently active.

Even then, not mentioning those who pretty much started / invented instant transfers still seems odd :) but no need to apologize haha, maybe I was a bit too abrasive.

I get why you prioritized to mention those though. The Chinese and Indians have leapfrogged us. No more fussy legacy (digital) cards, just scan a QR and go. Even illicit food stalls and street wanderers have accounts, when they wouldn't be able to get a 'real' bank account.

And the Chinese and Indians don't have to pay tribute to the Mastercard-Visa overlords either. Although Wero and the digital Euro might eventually change that for Europe too.

Can you imagine how cumbersome conversations would become if people felt obligated to qualify ad-hoc statements with what amounts to a historical ledger?

Every new entry would open up an opinion around “if you included that, why didn’t you include this?”

In such cases we’ll always up at Kevin Bacon.

The comment literally mentioned how unusual Pix adaption is and how innovative it is. It is neither of those things. Because of aforementioned history.

Some banks in some parts of the EU have - SEPA instant was only mandated in January 2025, only for Euro payments.

Canadians have been able to transfer money via email for ages, only Americans think their system is unique, it is. Uniquely inefficient and costly.

don't centralized payment systems like this reduce the overall resilience of the ecosystem and prevent future innovation? You hint on those lines with the possible future transformation of deposits into credit.

Why doesn't the US private ecosystem manage to lower costs similarly? (Zelle comes to mind). It is interesting that this has happened in more highly regulated countries where the free market likely could not have come up with a cheaper solution on their own due to the same overbearing system that effectively forces adoption of this centralized solution.

Yes, centralised payment systems reduce resilience - whether it's Visa, EFTPOS, or Pix. The alternative is cash.

All payment systems are centralized. Zelle is owned by the largest US commercial banks ("Early Warning Services"), Congress directed the Federal Reserve to build and offer FedNow as a utility so smaller banks would not be excluded from offering instant payments. It costs $~30/month (last I checked the rate sheet) to plug into it. The instant payments are the utility, your opportunity to innovate is using this as a component of your user experience.

Propose some innovation here, I am interested, as someone adjacent to payments in financial services. Besides instant payments, the most we've seen is closed wallets (Venmo, Cash App) no longer needed with broad instant payment access from most demand deposit accounts and Buy Now Pay Later (BNPL) (and I argue BNPL is simply dressing revolving credit card debt up as innovation).

> Why doesn't the US private ecosystem manage to lower costs similarly? (Zelle comes to mind). It is interesting that this has happened in more highly regulated countries where the free market likely could not have come up with a cheaper solution on their own due to the same overbearing system that effectively forces adoption of this centralized solution.

Because it is a grift ("regulatory capture") [1] [2]. The "overbearing system" is the result of regulation to bring the consumer excess of cheap payments to an entire country's financial user population. Why does Jamie Dimon not like stablecoin yield [3]? Because JPMC makes almost $100B/year in interest income taking customer deposits and lending against them, which stablecoins would compete against by operating as a form of narrow bank, parking the underlying deposits in risk free US Treasuries [4].

As a US financial services consumer, it is hard for you to avoid the rake of the machine built to skim off of you as you hold onto fiat or move it, but the rest of the world can avoid being captured by it (as this piece demonstrates). Also, Europe can't regulate Stripe as easily as they can Adyen. You don't have to be the biggest or the greatest, it just has to work "good enough".

[1] https://www.thebignewsletter.com/p/the-109-billion-bank-hust...

[2] https://www.thebignewsletter.com/p/the-cantillon-effect-and-...

[3] https://www.politico.com/news/2026/05/29/dimon-jpmorgan-cryp...

[4] https://news.ycombinator.com/item?id=48331082

> Propose some innovation here, I am interested, as someone adjacent to payments in financial services. Besides instant payments, the most we've seen is closed wallets (Venmo, Cash App) no longer needed with broad instant payment access from most demand deposit accounts and Buy Now Pay Later (BNPL) (and I argue BNPL is simply dressing revolving credit card debt up as innovation).

UPI for instance only works with a physical SIM. Your phone number on the account must match the physical SIM on the device. This indirectly relies on India's insistence on KYC (for accounts naturally) on issuance of physical SIMs. "Innovation" here would be a player who can support VOIP based phone numbers (maybe by complying with phone number KYC in some other way).

UPI also makes it quite confusing to deposit money to a particular account you own. You could share a specific identifier (string or qr) based on your account but the other party generally assumes they can send you money using your phone number, and sometimes follows through with that.

(I don't have a finance background.) There any multiple instances of a one-size fits all user experience decision which strikes me as a result of the centralization and removal of competition (in efforts to drive up adoption).

I don't disagree with most of your reply (thanks for the thoughtful citations too). But i wonder why the free market cannot lower cost/settlement time similarly.

> UPI for instance only works with a physical SIM. Your phone number on the account must match the physical SIM on the device. This indirectly relies on India's insistence on KYC (for accounts naturally) on issuance of physical SIMs. "Innovation" here would be a player who can support VOIP based phone numbers (maybe by complying with phone number KYC in some other way).

The Indian government has mandated this for strong identity assurances. Your only hope at "innovation" (ie violating financial services regulators and laws) here is cash or something like Monero.

> UPI also makes it quite confusing to deposit money to a particular account you own. You could share a specific identifier (string or qr) based on your account but the other party generally assumes they can send you money using your phone number, and sometimes follows through with that.

I haven't used UPI recently, but I imagine this is a UX issue around aliases (phone numbers, email, and other human identifiers that associate to an underlying account).

TLDR People problems cannot be fixed with tech (in this context, regulatory requirements or alias UX, submit a public comment to the regulator if you can).

> I don't disagree with most of your reply (thanks for the thoughtful citations too). But i wonder why the free market cannot lower cost/settlement time similarly.

Because without regulation, it turns into Monopoly (the board game). Sometimes, competition can be encouraged, but in some cases (broad, shared infrastructure) it cannot and regulation must fill this gap to ensure the target outcome. This is why we regulate electric utilities similarly. Happy to help, I am very interested and curious on this topic.

I loved your explanation and POV on this.

> Propose some innovation here, I am interested, as someone adjacent to payments in financial services.

Well, as a brazilian who is used to pix and has also faced the bad payment ux in american, I think a possible solution should be adding the missing Pix-like layer above the existing US rails.

One of the best part that makes Pix an incredible experience, It’s that the app almost doesn’t matter. I can use one bank, you can use another, a merchant can use a different provider, and it still works through the same basic language: QR code, Pix key, payment request, confirmation screen. I can even transport my "pix key" to another app/bank provider.

So maybe the US opportunity is a agnostic interoperability layer on top of FedNow/RTP/Zelle/bank APIs: universal aliases, QR payments, routing, fraud checks, receipts, and reconciliation. Making instant account-to-account payments feel universal before the government forces a universal standard.

I don't think consumers broadly should be the main goal first, the best initial path should be small-business, marketplaces, rent, etc.

If someone could own that neutral UX/addressing layer, that seems much closer to the useful part of Pix than just another closed wallet.

> All payment systems are centralized

Except for blockchain based ones

None of which are in production at scale. I admit crypto is optimal for less than legal transactions and speculation, but the volume for legal payment transactions is negligible.

Solana mainnet was shown to have capability to handle 100k transactions per second [1]. Granted, it was a synthetic benchmark of noops, but it shows the capability is there. For reference, Visa claim 83k TPS [2] for their system. It also has the advantage of being vastly cheaper than tradfi payment networks at ca. $0.0005 per transaction [3] irrespective of transaction amount.

[1] https://www.coindesk.com/markets/2025/08/18/solana-briefly-h...

[2] https://corporate.visa.com/en/sites/visa-perspectives/securi...

[3] https://solana.com/learn/understanding-solana-transaction-fe...

Until it is in prod, it is a proof of concept. Blockchains solve for low trust; if you have trust, you don't need the efficiency loss of a decentralized ledger or blockchain. Central banks provide trust.

As mentioned in one of my other comments, Pix in Brazil costs ~$10M/year. They process ~6-8 billion monthly transactions and roughly $6.7 trillion in payment volume a year [1]. That's roughly ~$0.0015/transaction based on the math in this comment, and we don't know what the ceiling is based on existing capacity (which would drive per transaction costs down further). Choose boring technology, when possible [2].

The innovation in this context is nuking the profits of Visa and Mastercard (their margins are ~45-50% [3] [4] [5]), replacing them with central bank instant payment systems run at cost. The reduction in their revenue is money back in the pockets of everyone paying unnecessarily to move value around. I highly recommend the book "The Innovator's Dilemma" on this topic [6].

[1] https://www.ebanx.com/en/insights/articles/five-years-on-pix...

[2] https://www.elibrary.imf.org/view/journals/002/2023/289/arti...

[3] https://finance.yahoo.com/markets/stocks/articles/visa-vs-ma...

[4] https://finance.yahoo.com/markets/stocks/articles/mastercard...

[5] https://aftabborka.substack.com/p/over-50-profit-margin-how-...

[6] https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

Pix is really good but I don't think it beats Solana or Ethereum L2s.

Most recent indicator of peak Pix transaction volumes I could find [1] was 227M/day (=2700 TPS). You can see yourself that Solana does 130-140M/day consistently. Pix fees you quote are still triple Solana's.

Not to mention there is the entire decentralization aspect, which means the government does not control your money as with other blockchains.

[1] https://agenciabrasil.ebc.com.br/en/economia/noticia/2024-09...

[2] https://blockworks.com/analytics/solana/solana-onchain-activ...

And then we watch fraud soar. The 3% pays for a lot of bad transactions reversals and dispute management.

Fraud can be managed at instant payment rails, you don't need credit card rails to manage it; fraud must be managed on any rails utilized, so it is somewhat agnostic. If you as a consumer want credit card chargeback protection insurance, push the fee onto the consumer with a surcharge to cover the cost. I believe the evidence is robust credit card rails are unnecessary in today's world, plain and simple. They are a bloated legacy holding on for relevance (and their grossly excessive margins) imho.

On fraud management:

Pix: https://www.europeanpaymentscouncil.eu/news-insights/insight...

UPI: https://ieeexplore.ieee.org/document/11063926

Common misconception - it's the merchant who pays for fraud and the 3% is pure bank profit. If there's a fraud transaction, the merchant has to pay the whole amount back and ends up negative the transaction fee and the chargeback fee. The banks just want you to think they're earning the 3% but actually it's pure profit.

Most blockchain systems are fairly or even extremely centralized as well and amount to little other than decentralization theater. Bitcoin and Ethereum are arguably more of an exception than the norm.

> Why doesn't the US private ecosystem manage to lower costs similarly?

Why would anybody willingly lower their own margin?

> It is interesting that this has happened in more highly regulated countries

It’s almost like regulation can sometimes achieve good outcomes in a not very competitive (due to network effects) market…

Regulations to do what exactly? Set price ceilings on markets with monopolies?

If £8m/year is a fraction of a mid-size company cloud budget, I don't think you can class them as "mid-size"

Mid-size in the US is comparable to a large european company, so yeah... mid-size.

I'm with a rather small company (~ 250 people) in the US and we pay about $1,2mm-1,4mm yearly on GCP alone.

Note that in the EU and UK mid-size has a definition: "fewer than 250 employees and a turnover of under €50 million (or a balance sheet total below €43 million)"

Thus by definition that company wouldn't be mid-sized over here anyway.

edit: in-fact after checking even in the US, the IRS for example declares a large business as one with more than 10 million in assets, though there is no set rule like in the EU to be used by other gov orgs.

Why bring up Taiwan and China? This feels incredibly cherry picked?

If you know Taiwan’s history, and you understand China - there’s no surprise to be..

Well, obviously it’s cherry-picked. It’s an example of something that challenges my intuition. Most things align with my intuition because I’m in my late 30s and have seen enough of the world to have a fairly good idea of the rough numbers. Here’s another one: the London Underground is older than the telephone.

There’s a light board game called Timeline where you have stuff like this and there are so many surprises. Temporal stuff is hard to reason about and the game catches that. But with large numbers one loses intuition easily: NYC’s subway vs. all domestic and international US air travel is closer in total passengers than one would think. The median American did not fly last year.

Stuff like this. It’s just Gladwell-fodder but numerically fun.

I misinterpreted your intent here, and that’s on me. Thank you for explaining, you clearly picked the sample as a comparison of fact, not as narrative. Apologies

> Why bring up Taiwan and China? This feels incredibly cherry picked?

It’s because many times the obvious intuition is incorrect

He could’ve compared Singapore and China too

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