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Comment by a_c_s | Hacker News Reader

The overblown rhetoric used makes this piece hard to read.

For example, charging a rate that the market will bear for a product like payment processing is simply the free market, not some kind of 'evil' practice.

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> simply the free market

This is a common misconception. A market is only "free" to the degree that it is perfect[1].

I hope we'd all agree that payment processing is nowhere near a perfect market. The barriers to entry are quite high. It takes a huge amount of lawyers and regulation wrangling to get a new financial startup up and running. Consumers certainly do not have clear information or free choice about which payment processor to use. I'm sure there are other things making this area far from perfect.

I like the idea of the free market, and it seems to work tolerably well for a lot of things, but I really get frustrated by this idea that it's a magic bullet. Free markets are pretty great for determining prices for brain-dead simple physical commodities that are simple to produce. As soon as you start straying from that, they very quickly become inefficient.

[1]: http://en.wikipedia.org/wiki/Perfect_market

I upvoted your post, but I wanted to reply because this is so on-point. So very many people who talk about free markets fail to understand that imperfect markets and free markets are at odds. The veneration of free markets sounds so very good...and then the people who cheer for them happily go along with unregulated, imperfect markets which hurt them.

Of course there are market imperfections for other reasons. Back at the turn of the century when people were railing at Ebay because it "raised the price of junk incredibly" I defended it as just bringing more buyers and thus making the market "more free". The result was higher prices.

In that case, buyers wanted their imperfect markets because nobody at the local garage sale realized this old Lionel electric train was "collectable" and so would sell it for $10, but on Ebay it was going for $300 and that caused the garage sale prices to skyrocket.

From the payments market perspective it is one of the reasons I find Dwolla so interesting as they decided to just take on payments completely. That was a really interesting move.

That's why I said free market (as per the colloquial definition) rather than a perfect market, which is the platonic ideal that real-world markets approximate to varying degrees. They certainly aren't magic and certainly get oversold by some, but they are how we allow (many) prices to be set in the US and are usually much better than the alternatives.

Customers of payment processors have plenty of choice: a business, such as Amazon, can choose whomever it wishes. (Of course customers of Amazon don't have visibility of processor, neither to they choose which services Amazon uses for cardboard recycling nor internet connectivity)

This is so blind. There's a market in which there are services like Dwolla that require a delay and set-up with your bank and have low fees by avoiding credit cards altogether (incidentally, I think that sort of service is best option we have), questionable legal and practical issues for Bitcoin, and then a whole bunch of services that charge exactly the same random rate. And you say it has some sort of positive quality as a free market.

What are you saying? That choosing among a bunch of services that offer basically the same system at the same rate is empowering to customers??

This sounds like the same old useless argument that some surface-level choice automatically means everything is justified. Choice in itself is neutral. It's not a great thing just for its own sake. It's about what the choices actually are.

1. The customers of credit processing are businesses (merchants), not people buying stuff from those businesses

2. There is no single rate, especially once different fee structures are accounted for: https://www.sba.gov/blogs/best-credit-card-processing-small-...

http://www.forbes.com/2007/02/20/visa-americanexpress-global...

3. Having dozens of companies to choose between ranging from simple-yet-expensive to complicated-but-potentially-cheaper seems like the ideal situation to be in. This seems like a functional market to me.

True, but it is a LITTLE suspicious that they all charge exactly the same amount despite competition in the space.

They can only go so low. Here's a pdf of Visa's interchange rates: http://usa.visa.com/download/merchants/visa-usa-interchange-... . (Mastercard is similar, and Amex is even more expensive.)

It's 10 dense pages of tables, but it essentially sets a lower bound on the pricing you can get from one of the companies discussed in the article. Everyone would love to see the card networks lower (and simplify) their fees, but that's not what's being railed against in the article.

The European Commission is planning to cap (VISA, Mastercard etc) card fees to 0.2% of the transaction.

http://www.businessweek.com/news/2014-10-31/eu-bid-to-limit-...

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