Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
Personally I "like" or prefer V-pay because it made payment in the EU more easily for me without the need of a credit card even 8 years ago. Since the pandemic, I only pay for a (real) credit card (with daily billing) because some goods or services can only be paid with a "real" card, like more expensive cars at a car renting company or sometimes hotel rooms and the like.
In general I try to pay with cash so nobody needs to pay extra fees. But more and more smaller businesses prefer electronic payments. Then I use the banking card with V-pay and to state it again, the real visa card is only used when no other options are available.
Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.
Or is it more binary that you have to decide, you either handle any cash and have the cost associated with it, or you refuse to take cash at all? If the latter is the case, then avoiding cash altogether seems somewhat unrealistic where I am from. And if it doesn't scale then it makes a lot of sense cost-wise to try to do as many of your transactions with cash as possible.
The EU limits for card fees prevent this in Europe, which is very good.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
one cash, one credit?
the credit payer is clearly paying less, with the difference paid by increased prices overall. That is the cash purchaser paying the credit one
Similarly, we do not say that October shoppers transfer wealth to Black Friday shoppers, even though the only tangible difference from your scenario is an irrelevant temporal one.
It tries to argue that higher reward rates are necessary to attrach customers that pay a lot (for credit card companies) and that lower income people are generally subsidized by taxes (obvious but unrelated), but at no point (until where I read) it seems to address the issue of merchants having to generally increase prices due to these cards.
Pretty flimsy argument to begin with. Because the rich then argue to lower their taxes and/or simply not pay them and the whole system falls apart. Not to mention that lower income people paying more to keep afloat debt than taxes (which at worst is a much better interest deal for an installment plan) is a much worse model for society.
What that article explains, is that the system of credit card fees and rewards that is used in USA is extraordinarily complicated, variable and obfuscated in comparison with other countries, so it is extremely difficult to discover who gains most and who loses most.
So the conclusion is more like "there is insufficient evidence because we cannot access all the required financial information" for the claims of the other article and the refutation itself presents no evidence that the claims of wealth redistribution are incorrect.
Are you saying it is intentional? Is it not more simply explained as simple greed by two companies colluding to keep competitors out of their market?
Pix, UPI, and a few more
Do you mean a higher corporate tax paid by companies like VISA and Mastercard?
Either way, the solution is already on the horizon: Digital Euro.
Now, if you DO manage to that threshold... you still want to delay finances. Because installments now become ways to give your money more time to make money and offset whatever you are paying for. The models and incentives are completely at odds.
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
I too have a real credit card to be able to rent for instance "bigger" cars like even an Audi A6.
Most often hotels also block 500 Eur, or they state upfront that you need a proper/real credit card and not just a debit card.
That's for me the only reason I have VISA and use it like 3 or 4 times a year...
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
That said as a French person with a ssn living in Asia, I don't have a french credit card because it's so expensive and foreign conversion fees are very high, whereas I use a us card because the currency conversion rate is very close to the market rate and it costs a lot less to maintain the account.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
https://support.toasttab.com/en/article/Are-customers-charge...
There’s a whole industry of mid-sized banks just below that which are offering their services as sponsor banks to fintechs that want to earn the orders of magnitudes higher interchange rates while still getting debit acceptance/less surcharges and being allowed to offer a debit product.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
eCheck is considered a check.
https://www.congress.gov/crs-product/R41913
https://www.ftc.gov/business-guidance/resources/new-rules-el...
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
You don’t even pay for the fraudulent credit card transactions in the first place! There’s no money for them to return!
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
> Bank official: Sit down Mr. Coleman, I'm, I'm afraid I've got bad news about your account.
> Mr. Coleman: Really?
> Bank official: I'm very sorry to say that someone's stolen your identity.
> Mr. Coleman: Oh God! Do you know who it was?
> Bank official: Well -- they said they were you, but uh--
> Mr. Coleman: Of course. So, um, what happened?
> Bank official: Well it was on the bank website, someone logged in, and committed identity theft electronically.
> Mr. Coleman: I see. Did they take anything else?
> Bank official: Uh, no.
> Mr. Coleman: Oh good, so all the money's still there...
> Bank official: What?
> Mr. Coleman: Well: it's just my identity that's gone -- none of your money?
> Bank official: Well no, they did -- they, they, emptied your account. It's identity theft, they took all the money.
> Mr. Coleman: That sounds more like a bank robbery.
[continued] -- see https://www.youtube.com/watch?v=CS9ptA3Ya9E for the full skit.
Just as a handy thing to chuckle over and then link others to, if the topic comes up again.
But in the case of debit card, the card ties the money to your account. It is actually that.
It's as if someone would steal from a personal safe at the bank.
Practically, Reg E is essentially as strong as Reg Z.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Much better way to pay online.
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
This is something governments could fix by running the payments rails.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
That's the banks (lenders), not the payment networks.
>Crazy-person-but-actually-really practical-idea: Nationalize one if these networks. Maybe Discover.
The central planners want to. It's called FedNow.
There are plenty of great examples from this century all over the world.
Even Iran has a better payment infra than the US.
That is a big claim. What would prevent someone from setting up something equally as good in the US, aside from the network effect and users unwilling to try something new for uncertain gain?
In Iran, they simply don't have much choice, so banks use the only network available to them. It just happens to have been built in this century, so it's not as archaic as Visa.
Here in the US, I guess only regulators could realistically create a new network and have enough power to convince banks to adopt it.
Nothing, of course, stops anyone from creating a new network. But the network effect is THE driving force here, it's not a minor factor.
Normally I'm not a huge fan of privatization but the way it's done here works great. The fees are set by the state and the agency gets a percentage, so if an area is underserved someone just opens another one.
Visa and Mastercard are a cancer.
For example, in Germany we used to have a bank card, "EC Karte", it is now called "Girocard".
So, if you are a shop and accept Girocard, you pay 0.2% of the transaction plus a fix 0.05 - 0.10 €.
And in Germany virtually everyone has a Girocard, it's part of getting a bank account. The cards are free to the customers.
So assume you're a small Café with 8000€ per months, 70% via Girocard and 30% via credit cards. Then you'd pay ~ 17€ per month for Girocard, but 95€ if you use "blended sum" - a contract with a payment provider to accept all cards. But you don't have bureaucracy. With you do an extra contract with a credit card only provider it's still 41€ for just the 30% of your monthly business.
That creates the effect that in Germany lots of shops don't accept credit cards. The market speaks.
I know that other countries also have payment methods, e.g. Netherland or China. It's just the US banking system that is decades behind what is possible.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
But cost for cash is comparable to card payment if looked at seriously
* You need working time to count it
* You need working time to bring to bank (or request pickup, which costs)
* The bank will charge the deposit
* The bank will charge for the change you need
* In the shop the cash has to be protected (safe? Protection against robbery)
* This requires procedures for shift change etc (thus training time and prolonging working time)
* There is a risk of fraud (counterfeit, swap tricks etc.)
* Employees might have sticky fingers
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IME, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
I bought a cheap cash and coin counter for about $400 on Amazon, which means it takes me about 2m to count whenever I need to balance the register.
For reference, with my POS I pay about $400 per MONTH in card fees (square).
It does take time to bring it to the bank, maybe 5-10m a week for me.
My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Counterfeits aren't generally an issue for small bills in practice; for $20+ we use a 50c testing pen that takes about 2s per transaction.
Sticky fingers are easily caught by balancing the register after each shift which is again about a 2m operation with cash and coin counters.
Overall I would be taking home about $500 more a month if all my customers paid cash, which is a big deal for a low margin business.
I love being able to transact without the payment processors knowing anything about my customers, and they appreciate it, too. My cash payers are usually very grateful.
Some smaller banks in Australia do but the big ones all have cash and coin ATMs which are free for account holders.
Card only business can definitely evade tax too and many do.
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
The system is broken. No one with the power to fix it has any incentive to do so. Might as well get what you can.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
There are a lot of good reasons to dislike the market structure and game theory of card payments in the US, but please don’t accuse consumers of being short-sighted or irrational.
The only way to break the cycle of self-reinforcing incentives would be swift regulatory action. Absent that, playing the game is the rational move at the individual level for both merchants and consumers.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
> The site was officially launched on December 23, 1998.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
I will admit that sometimes I do have fun playing the game (certainly a lot more when I was younger), but not often anymore. I feel like I "have" to do it, because there's no such thing as a free lunch, and as such stores price in the fees and so I might as well get it back in the form of traveling, but it is very weird that we just expect credit cards to do that.
Personally I make very few risky + expensive purchases, so my CC usage is non existent. I am comfortable enough to not really care if a random shady hobby electronics website fleeces me 500rs.
Another use is that sometimes you get CC offers on Amazon: "use $BANK $TIER CC to get extra 7k off" which are useful enough to justify paying extra everywhere else if you do your big shopping though Amazon festival deals. E.g you can get a 55k iphone for 45k.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
Some people are dumb and think tax refunds are free money when in reality they’re an interest-free loan to the IRS.
Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
A person who wants to fund a vacation with rewards can simply redeem the rewards for a statement credit while simultaneously transferring that amount of cash to a HYSA or similar.
Uhh I have no credit cards where redeeming for credit is the optimal play. Every single one has 'offers' that give a further multiplier on the dollar amount of the points. Eg redeem $80 of points for a $100 home depot gift card.
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
I felt like if I didnt spend $1 on something that was the equivalent of me spending $50 to get those same credit card points
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?
I just hope these leeches on society will sone go bankrupt.
All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?
This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.
I thought in the EU the maximum interchange fee for consumer credit cards is capped at 0.3% of the transaction value.
I don't want to put responsability on anyone, I don't know who takes what in the chain, but I see the fees in practice.
I took the cheapest PSP I could find in Europe... Stripe is way more expensive, taking 25 cents of fixed fee !
Simple Rest API, with Redoc https://docs.stancer.com/api/redoc.html.
Are you sure of these values? Because that's different from what I was told, which was that CB was cheaper for transactions of more than 10 €, because their fees were fixed, not rates like Visa and Mastercard.
From what I've just read (not counting the possible extra tax by the bank of the seller):
CB: 0.20% + 0.00117 € ⇒ 0.00317 € for 1 €, 0.20117 for 100 €
Visa: 0.20% + (0.01% to 0.014%) ⇒ up to 0.00214 € for 1 €, 0.214 € for 100 €
Mastercard: 0.20% + (0.15 to 0.17%)
The 0.20% is for the "interchange" described in the article. So it applies only when the seller and the buyer do not have the same bank. The maximal rate is fixed by the UE, and AFAIK everyone use the max value.
Yes perfectly sure, just checked. I'm not saying these are visa fees vs CB fees. Lots of actors in the chain. But that's what I'm paying for each card type.
It's only available in the US, many countries have lower interchange fees and prohibit sending this data.
This is not a scheme to get enhanced targeting data for personal transactions.
Ive heard of casinos trying to pay out winnings using some kind of prepaid card, where theyd also get info about how people spent their casino winnings. Lots of ways to leverage that data.
They primarily don’t deal with cash because cash is a pain. It needs to be physically taken to a bank and protected from theft by both staff and random robbers with guns, it needs to be counted all the time, and you need to maintain the right denominations to make change.
I have reservations about businesses getting rid of cash, especially if they’re turning away people who don’t have alternative ways to pay, but I certainly understand why they do it.
It’s also always awkward when a coffee shop is like 95% credit, and you try to hand them cash and they look at you like you’re Rip Van Winkle.
Another advantage of credit cards is you normally don’t have to touch anything customers bring into the store, since they can tap their own cards. You probably still should wear gloves to handle food and take them off or switch them to work the computer.
I think the key word is debt when bills state "for all debts, public and private." (And a couple more categories under the law. [0])
At the moment you're asking for the drink, you are not in debt to the coffee shop, they're setting a precondition on an exchange. [1] Now, you might have a case if they let you run up a tab...
[0] https://www.law.cornell.edu/uscode/text/31/5103
[1] Yes, there are a positive number of milliseconds where somebody owes somebody something, but pedantic software intuitions don't always apply to law, and overall that's a good thing.
> This note is legal tender for all debts, public and private.
See also USC §5103:
> United States coins and currency [...] are legal tender for all debts, public charges, taxes, and dues.
Thus a private person is only obligated to accept cash as repayment for a debt, not for purchases.
Companies simply get ahead of that law by refusing to provide the service or good.
Works in retail bc at the till they can just say 'no cash no business deal'
Doesn't work in other ventures so easily.
It is along the lines of 'we reserve the right to refuse business to anyone'
Not accepting cash is probably more to do with not wanting to deal with it, not needing to trust employees with it, keeping poor people out, and preventing robbery.
Credit card companies and banks know basically squat about your purchase except in certain circumstances (buying gas or flights causes more data to follow, called L2 or L3 data), or if they work with a data enrichment provider. There is a lot of action in this space right now, but the banks are hardly equipped to handle more data even if it became available.
It's not really that hard to see why a business charging $5-20 per transaction from people who all have phones and credit cards anyway might choose not to accept cash.
surely a million times less expensive than a subscription to a POS....this is not a strong argument.
I'd say employee theft is the only reason a coffee shop would be "no-cash", and fear of robbery in a few places.
The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.
I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.
Where did you get this number from?
[1] https://www.ihlservices.com/product/the-cost-of-cash-handlin...
What actually is the source of such costs? The cashier still has to be paid even if the customer is using a card. Presumably there isn't anywhere near that much theft from registers, or people messing up giving change?
"Does IHL Group have any connections to merchant providers?"
> IHL Group sells market intelligence, vendor directories, and lead generation data to the electronic payment industry.
Cash handling costs is a real issue though. Not counting under-reporting income, credit cards cost the most at US intercharge levels of 1-3%. Then the all-in cost of cash handling. The lowest cost method is debit.
BTW, I used to handle around $7M/year in credit card transaction in the USA, and if you got actual hand-written partial numbers on a signed contract, then we could avoid nearly 100% of charge backs, as we always delivered on our end. I think in 14 years, we had around 10 charge back attempts, and our merchant provider loved us. The only time I ever magically lost a charge back was to a Visa executive for ~$10k, and our merchant provider just shrugged. Whatayagonnado?
Bad service = card always.
Tax fraud, essentially.
E.g. you go to the Minnesota State Fair, merchants may offer to not charge sales tax if you pay cash. It is shockingly brazen sometimes.
> How could a business possibly operate in this reality?
Extremely lax enforcement on the part of the specific US state's department of revenue
* https://tautology.town/2026/02/14/learning-charcoal-grilling...
Credit and debit card transactions have higher fees because unlike Pix, there is chargeback risk, and the the merchant and acquiring banks party to the transaction are compensated for the risk they assume in those transactions. Pix on the other hand is digital cash. When you spend it, it's gone. Unlike with chargebacks and disputes, there is no reliable mechanism to recover funds for goods not delivered.
With Visa and Mastercard there are usually many additional actors that also take their share and drive the final fee up.
https://investor.visa.com/news/news-details/2016/Visa-Commis...
The problem is that like all cartels, they hold progress back. Things could be even more efficient than the current state of affairs. For example we could have open standards with thousands of local players, much faster settlement times etc...
There are also aspects such as the fact that due to this concentration of power, the whole world is subject to US sanctions, such that a EU citizen sanctioned by the US is effectively cut off from civilization.
I'd frame it as making the standards for competition very high.
I don't see people getting super ideological about their inability to create monocrystaline turbine blades or 2nm semiconductors in their garages. Why payment networks? Because computers? The overall network is way more complicated than a specific technological system or clever open standards document.
These networks would be usurped if someone could actually come up with a better system. The economy insists upon it constantly.
I am just saying that in my opinion, society would be even better off if this industry wasn't controlled by a cartel and i pointed 2 examples of how.
One difference between this and turbines, is that payment networks are sitting at the heart of the economy of countless countries. Turbines have a very different risk profile, much more modest and localized.
Russia was for example cut off from high-tech maintenance contracts but has been able to deal with it by manufacturing their own replacement part + there are maintenance cycles and spare parts so any disruption in service is not immediate unlike payments.
I mean, as opposed to what? You could apply this to any infrastructure cartel like with AT&T in the 90s or Comcast or 100s of historical examples. The alternative to a bridge troll is not ”no bridge”.
Is this why the best cash back credit cards give 2%?
And it wasn't just a temporary marketing promotion. I've used such a card for many years.
(It was issues by a big bank that had almost no presence in my country... so maybe they were eating the cost just to build up a bigger presence and potentially enter the country?)
https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...
2% seems to be a local maximum of cashback cards. There's a lot of 2% cards, and only a handful above that.
Makes sense?
You can apply to a fund to implement this system.
Now they do all kinds of accounting tricks to pretend that they have thin profit margins because they split up every part of the business into hundreds of 1-3% chunks of the profit. To sidestep regulation that already barely exists.
most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.
This is an important question- most of the costs of a credit card providers come from dealing with fraud and chargebacks. That's partially because, under US law, credit card companies have to eat fraudulent charges if they can't get the person or company that did the fraud to do so. (Funnily enough, this is one of two places where protections for average people in the US are significantly better than protections for average people in Europe).
But credit card companies can keep their costs low by making a business decision not to renew the accounts of frequent chargeback-ers or chargeback-ees (even if they never officially found those individuals at fault). If the government had to make a payment system for everyone and take on all responsibility for all fraud, that would create an incentive with massive second-order effects.
The article did an awesome job explaining what are the parties involved and you choose to use a generic term instead.
> dealing with fraud and chargebacks
A lot of that is offloaded to the merchant, which instead has to pay them on top of what they already pay to the issuer bank.
There is no reason why fraud and contract violation must be handled by unelected and unaccountable payment processor, when the government has already set up a consumer protection system for disputes related to cash payments. The payment processor is best left as a dumb pipe that does what parties and (in case of disputes) courts tell it to do.
Because that would break the subscription-based billing model for a lot of businesses.
Making a purchase is (still) voluntary for the customer.
For everyday purchases at physical stores, cards are convenient. You just swipe and maybe put your PIN. But other digital payment methods or cash can be just as convenient. You're never going to chargeback a coffee, a sandwich, or your groceries.
But for distance purchases such as online shopping, hotel bookings, flight reservations and such, trust is the most important factor, not convenience. Cards have fraud protection. Other payment systems do not. These "unelected and unaccountable" people can actually help you if you've been the victim of wire fraud. Much faster and much less of a hassle than going through the courts. And if they don't help you, you haven't in any way, shape or form abstained from your right to justice through a court of law.
If customers can have that security and ease of mind, then they are much more likely to make a distance purchase. Which means that the vendor can sell their product. If the customer can't have that ease of mind, then the vendor will not make a sale.
So vendors who want to make sales will gladly accept cards. Anybody foolish enough to try to sell without making it easy for the customer to pay in their preferred way will go out of business.
Another point worth mentioning is that cards work instantly across pretty much all currencies in the world. You can go from anywhere to anywhere and pay with your card and currency exchange is done automatically. And in the past 10 years, cards have given very good exchange rates.
This is only in US and it is needed in US, because US has very limited consumer rights regulation. EU has much stronger consumer rights (mandatory 14-day return windows for any reason, easy cancellation for subscriptions, mandatory 2-year warranties).
So the things that the (private) credit-card companies protect you from in US (via chargeback support and fraud detection) are things that laws protect you from in EU.
Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc.
How is the central bank going to offer the same variety of products described in the article? I.e..
> Interchange fees vary dramatically based on the kind of card, category of spend, and even the metadata attached to a transaction. The network’s goal is to set fees that incentivize desired behaviors on their network, including using more secure payment methods (lowering interchange fees for merchants), or for companies to do more business spending (higher interchange fees on commercial credit cards).
Your scheme sounds like all these crypto guys who think they can replace credit cards with bitcoin transactions, as if they were the same thing
But they set the interchange rates and disallow (or at least have until recently, in the US) merchants to discriminate against cards based on rate or type via their “honor all cards” rules.
They are absolutely propping up and benefiting from the high fees.
Brazil's Pix costs ~$10M/year to run: https://whatispix.com/
This is much cheaper than the entire credit card ecosystem skimming ~3% off of the economy. Efficiency!
FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments)
Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
Walmart Plans Instant Bank Payments, Cutting Out Card Networks - https://news.ycombinator.com/item?id=41593450 - September 2024 (3 comments)
https://news.ycombinator.com/item?id=49433164 (citations)
(as of this comment, there are 100+ instant payment systems live across the world; we should assume that all countries will eventually have an instant payment system, or integrate with someone else's)
https://www.pymnts.com/wp-content/uploads/2026/09/PYMNTS-Int... [pdf] (September 2026 revision)
Take SEPA Instant, for example. It’s great for many things, but effectively nobody pays using it in stores or even online.
It actually supports my point: FedNow could be SEPA Instant (if it were to be widely supported and available to retail bank customers), but it’s definitely not UPI, Pix, Wero etc.
My link mentions how Wero, replacement for US credit card rails in Europe, is being built on top of SEPA Instant. An adoption tracker is included, to show uptake progress. ~35% of tracked banks in scope in Europe for Wero have adopted it, as of this comment. They are actively building to get off of US credit card rail infrastructure.
In the US, similarly, it will take time to move off credit card rails, but we’ll get there. As mentioned, Walmart is already running live trials for pay by bank. I agree it is not fully operationalized yet, but it will be eventually. The most important primitive already exists (FedNow rails). Everything else is app experience and consumer training (for payment requests and transfers).
I see the pattern between the EU and US credit card -> instant payment transformation journeys, but maybe you don’t. Pix and UPI have shown how easy it is.
(Almost every deposit institution in the US currently has access to FedNow, per the Federal Reserve’s latest participant report, and through those deposit institutions and service providers, their customers)
Banks earn money on card payments and pay (or potentially even lose, due to fraud liability) money on ACH and FedNow. The card networks compete with each other exclusively on the issuer side for structural reasons (a merchant generally has to accept whatever the cardholder pulls out of their wallet or risks losing the purchase) and can for this discussion be considered aligned with the banks.
Cardholders get (often opaquely valued, sometimes even gambling adjacent) points and perceive credit cards as having better dispute rights for them, so they also prefer them over anything else, including cash and bank transfers, and any legal action against cards will face immediate popular backlash. (I can hear the "mile optimization" influencers screaming bloody murder just thinking about it.)
Merchants are the only stakeholder heavily lobbying congress for literally anything cheaper, but so far it hasn't made a real dent, despite decades of trying. I think the Durbin amendment can be considered a failure, all things considered; not many stores offer discounts on debit cards or surcharges on credit cards specifically, and those that do seem to often just make a completely disproportionate money grab of 4% or more, vastly beyond their actual costs. Besides that, the "small issuer exemption" ends up benefiting large fintech players at least as much as the actual local and community banks it was intended to serve.
Please tell your user that this SLA is much too high for many purposes. A cafe or such would lose a ton of money if every transaction took 20 seconds longer to conduct.
Not too far off. You gotta ask why such a lucrative business has a near monopoly, and the answer is not that potential competitors don't notice their profit margin.
A large part of the promise of crypto and stablecoins was to displace Visa and Mastercard rent-seeking. This didn't seem to happen. Most modern neobanks, our own included (https://peanut.me), actually seem to EMBRACE Visa and Mastercard. Almost all offer an actual Fiat card within their app, instead of boldly saying "No, pay with crypto, the future of money!"
This is somewhat disappointing in the short term, but longterm i believe it offers a clear transitory path to full decentralized money adoption. Already today we're seeing a growth in direct peer to peer payments in peanut, and merchants slowly starting to adopt it as well. I imagine the same is happening across the industry. In a competitive economy, the better currency (read: crypto, stablecoins) wins and eventually absorbs adoption.
my 2 cents
It’s slow and expensive and doesn’t scale.
The real answer is an alternative that relies on a centralised provider - or set of them - who use traditional databases and the like, but do things in a modern efficient way and don’t charge the same fees as the current card providers do.
This is 2020 speak. In 2026, crypto scales and its extremely cheap. it costs less than a hundredth of a cent to do a transfer today.
Furthermore, a currency needs a government (or similar kind of body) to manage its stability, by printing (and buying) money. Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin.
But to be clear, all payment innovations in crypto happen on EVMs and L2s. And in 2026, stuff is extremely scaleable and computationally cheap.
It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
Or treasuries.
Its actually a minor part of rheir business.
And frankly who cares given that its a sustainable system. I pay on credit and then someone else pays. I dont give a shit of they are betting on how many times Al Roker says Trump on New Years Eve.
From the actual article:
> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8
In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.
If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much. Payment is a highly competitive business. We witnessed so many payment companies went under or were bought out, but these two stay for years and are still profitable.
The truth is their moat is considered very durable and hard to build. A global n banks to n banks payment network is not as simple as how people thought.
If they have the US government behind them its much easier
https://thepaypers.com/payments/expert-views/pix-hits-a-wall...
If you're an American that 2% is a much bigger problem for your society. That's a direct funnel from the poor to the wealthy, it's not as a obvious a problem as "Trump gave the ultra-rich a tax cut" but it might structurally be more significant.
Ripping off other people is the American way.
which is also why crypto bros get confused.
They are actively being unified into a cross-border payment network.
Of all the things to complain, this is the one where they are actually doing something…
European Parliament committee backs digital euro - https://news.ycombinator.com/item?id=48645468 - June 2026 (2 comments)
Gov.uk has replaced Stripe with Dutch provider Adyen - https://news.ycombinator.com/item?id=48415217 - June 2026 (235 comments)
Goodbye Visa and Mastercard: 130M Europeans switching to sovereign payment - https://news.ycombinator.com/item?id=48207004 - May 2026 (777 comments)
Wero – Digital payment wallet, made in Europe - https://news.ycombinator.com/item?id=47038965 - February 2026 (132 comments)
Europe's Banks Launch Wero Payments to Dislodge Visa, Mastercard - https://news.ycombinator.com/item?id=41666833 - September 2024 (88 comments)
Unofficial Wero Adoption Tracker - https://www.werotracker.eu/
You're welcome!
ISO 20022 looks more like it.