They tax our entire economy at X rate, while maintaining their infrastructure only requires Y cost ... and X is significantly higher than Y.
There, I saved you from reading the article, but if want even more of a TLDR, here's the actual article:
> A cardholder pays for a product at a merchant for $100.00.
> The merchant pays 2.5% ($2.50) of the transaction to their payment processor or merchant acquirer. The 2.5% is the merchant discount rate or MDR.
> 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
> The issuing bank keeps 2% ($2.00)!
In other words, they get 2% of every transaction ... and it does not require anything close to that to maintain their network.
> 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.
Credit card companies are mostly parasitic middle men but I have a credit card that I use for most payments and pay off the balance every month and effectively get 2% cashback with no interest costs.
That 0.35% feels more reasonable in 1976 or even maybe 2001 than it does today because technology changed so much. But maybe I'm wrong about that
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.
Goods (and services) are priced at what the customer is willing to pay. In this case, the alternative is cash or cheques, both have much higher loss rates. That’s why vendors are eager to take visa over cash.
No, the alternatives are any number of other solutions that are not given a look-in to the very lucrative duopoly. The network effects are prohibitive for upstarts.
I remember reading a comment here a while back about merchants being offered a discount on the processing fee if they also transmitted detailed data about the purchase (essentially the data that would be on the receipt). That data could then be resold on to advertisers. Does anyone remember this or have links to more data? (Not having much luck with search, maybe I'm hallucinating the whole thing.)
I would love if it was transmitted to the bank for my own use so I can easily remember what I purchased or run budgeting software against it! Obviously wouldn't be pumped about it being resold tho.
It's crazy it is resold but we don't even get it for our own use. Budgeting with credit card statements would instantly become so much more useful with less effort.
Flights are one of the very few cases where this happens automatically though the card providers systems. It's called L2 data, and it's sent a little while after the transaction goes through.
Airlines are just about the only business that have the ability to charge credit cards without real time authorization by the network. This is for things like buying a drink while in flight. I wouldn't be surprised if this was all part of the negotiation.
Importantly, there is only an incentive for L2/L3 data on business/corporate cards, which have an inflated interchange rate above personal cards anyway.
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.
Prepaid cards are great for the vendor because they have breakage (the unspent amount before expiry). I doubt the data is worth much relative to that. If anything, they have much less of a tie to the individual.
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.
Also anyone handling cash is supposed to wash their hands before handling food, unless perhaps they're using tongs or something. Ideally an establishment dedicates one person to the register, but with the cost of labor that can be expensive without enough sales volume.
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.
Merchants aren't going cash only to sell your data, they're doing it because it's expensive to handle cash and makes their taxes a whole lot more troublesome too.
I don't think this is the reason, cash will always have no fees. In some senses it can have negative fees if you're not very diligent with your tax reporting *wink wink*.
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.
the main purpose of that data is for fraud detection, anything downstream (i.e. selling it to advertisers) is just the cherry on top. Merchants are always financially incentivized both implicitly and explicitly to do anything that would reduce fraud and increase the rate of successful authorizations.
In my opinion, the only solution is everyone (individuals as well as corporations) gets a direct account with the federal reserve as long as you can associate a taxpayer identification with the account. Using it is voluntary but it is free of cost, paid for by taxes, and moving money to and from accounts is free of cost. Depositors would get the same overnight interest rate that banks do, and this interest is added every day. I think if we could make this happen, the chokehold of Mastercard and Visa can be greatly diminished. The disintermediation of commercial banks, the loss of credit card perks, and the added cost of customer service should be an acceptable cost of removing the parasites visa and master card from our economy.
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.
So the article shows how visa and mastercard are, by far, not the ones taking the largest fee, and the solution is to get rid of them?
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
> So the article shows how visa and mastercard are, by far, not the ones taking the largest fee
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.
Visa and Mastercard are the ones setting the rules. They are the ones who decided that the fee can't be added on to the purchase price. If your credit card added 1% to every transaction from your perspective, but the competing bank's card only added 0.3%, you would have competition pressure.
A few years ago congress had a nice solution via a market mechanisms, have sufficiently large banks be required to have their cards support at least 2 card networks, via which the merchant may at at swipe time decide which network to run against. Unfortunately like any good idea, it died in congress.
Travel and tourism is about 9% of the world economy, and by some measures considered the largest economic sector in the world. Visa and Mastercard will continue to be dominant.
> The answer to that is to "donate" to about 270 congress critters.
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.
Don’t forget arbitrage, which is the withholding of transferred funds for 7 days while the capital remains in visa’s accounts for “investing” / speculation.
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
>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.
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.
Jokes on you. Merchants prefer credit cards because there is less loss than cash. 2.5% is nothing compared to 5-10% loss at the register. Plus easier and more accurate accounting.
While cc banks are in these times starting to side more with vendors on charge disputes, its still far more recourse than bank drafts offer you in a transactional dispute
Clankers found me one study [1] that suggests total handling costs may actually be this bad, but are highly business dependent e.g. restaurants are worse than grocery stores
I'm just seeing what looks like an attempt to sell me a PDF.
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?
Employee theft. Store manager theft. Robberies. Counterfeits. Wages paid to line workers and store managers to count cash at each transaction and at the end of each day. Wages paid for someone to go to the bank, or paying an armored car service. The bank has to count and secure the cash so they charge merchants a percentage. Buying safes and pointing cameras down at each register.
This. My extended familys shop really benefitted from moving away from cash. Now the only source of cash is people who are paying from their black money stashes.
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.
You know they count the till against the reciepts right? And frequently have cameras over the register drawer pointed at the employee? And send people to jail who try to do this?
Some businesses pass you the credit card fees if they offer other payment methods. You'll even hear about a discount around VAT/2 if you pay with cash sometimes.
I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.
I've seen cards with 1% chargeback in the EU though. How does that work?
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?)
Yes that intuition is correct, though the reality is much more complicated. The actual share to the bank is roughly proportional to the risk of the transaction/ tied to the type of credit card
VisaNet & friends make the modern consumer world go round. The fees they extract are a drop in the bucket compared to the economic activity that they enable with their networks. Many businesses simply couldn't exist without something approximating this.
Yes. As a merchant it's pretty cool that the money just shows up and I don't have to chase down as much bad debt. The processing costs easily pay for themselves.
You are literally linking to a page published by Visa's Investors Relations Department.
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 like how providing an incredibly efficient payment network is framed as holding progress back.
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 100% agree that their business is operated extremely well and delivers lots of value.
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.
“It works extremely well” doesn’t establish “its prices and restrictions are justified”. much better, less parasitic systems are possible, look at brazil and PIX.
"These networks would be usurped if someone could actually come up with a better system" the problem is the network effects with payments is so strong that this is wrong. to explain it simply, Network effects and customer lock-in mean the best system doesn’t automatically win.
It should be said that being on a US sanctions list doesn't appear to carry the same weight it once did. A Japanese citizen was added to one this month and her bank was able to effectively ignore it, not sure about her options where credit cards are concerned but there are local alternatives which don't rely on US payment networks.
It seems Visa revenue is $40B/year. You shouldn't compare that to the amount of economic activity they enable - you should compare it to how much it could cost to run a system like theirs.
Europeans really need to stop handing their money over to Trump-Visa and Trump-Card here. Canadians learned that lesson already. Why do european politicians not learn anything? Leyen even signed a surrender treaty where european taxpayers lose money that goes into the USA. I say stop it with the proxy-control from Washington.
As someone from an EU country: the only place where I use visa/MasterCard is at Amazon. Everything else I use my country's payment system, which is now joining with Italy's own and probably more in the coming years.
Aside from the technical aspect I strongly encourage everyone to also read about VISA’s founder Dee Hock, still a very underrated figure in leadership and finance.
I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
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.
Agreed. The pool hall nearby has a game of pool for $2. But if you use a credit card the minimum purchase is $6 (three games) due to fees. It works, but I thought it was a gimmick to trap people into playing more pool until I saw your comment here and realized it was from fees.
Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
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.
Contractors, but also cosmetic health work. Invisalign, veneers, plastic surgery, etc. Probably most big-ticket items or services that you're not buying from a megacorp.
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.
> Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
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.
I live in a city with a population of ~ 25,000, and we have I think 10 bank branches, 1 credit union branch, a different credit union ATM (they closed their branch but left an ATM), and a gas station ATM. We've got Chase, BofA, Wells Fargo, the other 7 are more of local or regional banks.
Serial number scanning is a common feature of electronic cash counters (also networking!) I'm pretty sure all incoming serial numbers are scanned and checked against a database to find stolen banknotes. I don't know if any banks are tracking outgoing serial numbers, but it would be pretty trivial to implement. I've noticed when I go in and withdraw cash from a human teller that the cash no longer comes from a drawer, but rather is dispensed by an automatic cash handling machine and then handed to me.
Many more restaurants and grocery stores don’t, and then it’s 2-5% of cashback vs. 0% cash discount. Doesn’t sound like a rounding error to me.
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.
>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.
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.
What's really fun is when you're reselling something like Microsoft 365 and both the credit card companies and the state (through sales tax) make more than you do on each sale.
I used to think "I should be nice to merchants" and pay everything in cash.
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.
> 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.
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
> 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.
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?
I own a business that does about $10-$15k mo USD in cash and card transactions and only some of this is true.
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 cars 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.
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IMO, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
I know, it sucks. I didn't intend to do cash before I started my business because it seemed like a pain but now that I've figured it out I'm really glad I did.
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.
I don't get this. Use cash like me and a bunch of us if you don't want to play the game. Or a debit card. Otherwise it's just an extra game. Extra games are choice. Choice is good.
It boggles my mind that the government has privatized currency to these people.
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.
Each of those networks carry a lot, a lot of ancient stuff. Gov is better off building a brand new network from scratch and promote it as a standard for banks to join.
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?
End-users don't have much agency here, network needs banks.
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.
My experiences with the DMV have actually been pretty decent. I think a lot of their negative reputation is from how it used to be, but that they have improved substantially since then?
DMV is a state level agency and varies a lot depending on where you are. It's partially privatized here in Oklahoma and mostly painless (you only need the actual DMV for driver's tests, CDL background checks, etc.) but when I lived on the Illinois side of St. Louis I routinely heard of people spending hours in line.
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.
Taking current political climate into account, Lula is too popular to straight up kidnap like the Venezuelan president, and the American-backed candidate isn't pooling incredibly well.
PayShap in South Africa, not sure if it is being attacked yet. I use it a couple of times a week. It's awesome & better than EFT's, enables cheap instant transfer even between banks. It's not a third party private company either, its offered by the reserve bank / bankserv.
I think it is to reduce the amount of cash in circulation, get visible on small transfers and to relieve the EFT clearing houses.
I don't know if you're aware, but there was a whole lot of controversy around Central Bank Digital Currencies a few years ago. Mainly because the government can instantly see every transaction you do and will use it to decide if you're a terrorist or not, and they have a terrorist catching quota. They can also instantly block your account. And if such system is available, the government will phase out cash.
> but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
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.
> Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
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.
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.
In my case, it's literally free money. I travel a lot for work. I pay for everything with my card, and I'm reimbursed by the company. I rack up points, and whenever I travel for pleasure or as an independent contractor, hotels are free. I'd get free airfare like my coworkers do if I didn't avoid flying and drive everywhere.
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.
If we look at this in a non US-centric view, then many other areas have solved this, partially since decades.
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.
Many small business owners are idiots and obsess over tiny sums while being blind to large costs. And they loose far more customers by not accepting payment methods than they save in fees. In your own example it's only €41 per month that they save by turning away who knows how many customers.
Another example is small B&Bs who happily pay 15% or more to third parties like booking.com, but think it's outrageous to pay 2-3% in card fees to accept bookings on their own website.
The real shittiness begins when having to deal with them as a business. If you’re classified as high risk, which could be whatever the fuck, you’re deplatformed or need to deal with Byzantine merchants.
In india we use UPI. But people still use cards enough to be in decent enough terms with them for when you want to make a risky purchase and chargeback. In a sense, it's simply insurance. You pay extra 2% everywhere so you can dispute a txn at any point later.
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.
There’s a startup in Switzerland (https://www.pimpay.ch/) trying to offer no per-transaction payments (at the Swiss-level). I wish them good luck but it’s not going to be easy to disrupt the existing players in this field.
This is something governments could fix by running the payments rails.
In my country on my specific credit card, I get back about 1.5% of my spend through the card. Over the last five years I've banked for free, but not just that: I get back about 5x to 8x my bank fees alone. That doesn't count all sorts of promo's/discounts through their partners. As an example, my bank has a deal the past year with one of our major pharmacy chains and I get a ton of discounts when I use my card there (they ask at tills if I'm paying with the card), that is on top of normal in-store promos. So the "game" is very much worth it to play in my situation. Funny enough, they charge a flat fee for international transactions and 0% currency conversions, and they use MasterCard, which means free travel insurance. Its an amazing bank. Typically the bank is known to target rural/informal to middle class customers, but they have quite a few wealthier clients which feels like the best kept secret.
They wouldn't be charged 3-5% if Visa and Mastercard weren't a duopoly. In countries where they aren't there are 10-20 competitors that charge way way less.
Well I don't really know what they do, but what I know is that Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.
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.
> Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.
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.
USA is currently trying to bully Brazil who introduced their own PIX system.
I think USA has been behind the visa and Mastercard dominance as it gives them nearly every financial transaction globally and their intelligence has that data in realtime.
Not to mention the tax take and ensuring max use of US dollar as reserve currency
Has the characteristics to implement the digital Euro. Plus guarantees anonymity of buyers. And should be extremely cheap to operate. But is not under bank’s control.
Some light self-promotion but also longer term thoughts:
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.
The problem is that bitcoin (and similar) are so computationally intense to run, that the transaction cost is much higher than Visa's.
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.
guy who doesn't know what peer-to-peer technology is, laughs at man who does!
please stop using the internet! it might be slow and expensive to run! it requires insanely big cell towers and submarine cables! it won't scale!!11!! kind of guy
Bitcoin and similar are computationally intensive to run because of a thing called decentralization.
Visa and Mastercard don't need consensus to perform payments, but they for sure don't have a single server running, I am sure they have more servers than bitcoin nodes, without counting on stripe, paypal, ... and other payment providers IN THE WORLD :)
There is something called lightning, which is p2p payments through bitcoin!
> 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.
call the economists! a currency needs a government! But only from 1971 onwards, before that people didn't have currencies!
Oh, you don't want to use the US dollar? the best currency ever!? I guess we'll have to bomb your country and neighboring ones to change your mind.
> to manage its stability
aka lose 2-4% of purchasing power per year. Thank you central bank! you saved us!
> Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin
Oh no! The horror! A currency that can also go up!!! I guess we need a central bank for oil! to keep the price of oil stable! And food too!
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.
Between individuals it is free. For commercial transactions, there is a fee between 0.22% and 0.33% per transaction, which is actually ~2x the fee of the Visa network (0.13%)! Visa is extremely efficient at moving money anywhere in the world.
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.
Credit cards are the OG of rent seeking for the 21'st century. The reconized upfront that no one would pay their ridiculous middleman fees so they backdoor-ed the fee with the merchants and had them pass it on in price. Its on of the most insidious extraction engines ever made, Jesus would definitely flip their tables lol.
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.
Networks like visa and Mastercard don’t seem evil. If you’ve ever had to dispute a charge and got your money back easily or relied on the fact that even if their computers are down they’ll still take the risk and allow you to take money out of your account you’d find the fees they charge pretty minimal. Now the issuer bank… that’s where most of the fee and why most banks now have reward cards because the issuing bank can ask for whatever additional fees on top of what visa/mastercard does.
How does every form of evil have some sort of apologist on the internet. I was near certian that even before AI there were very active automated or low paid workers astroturfing for companies anytime malfeasance is brought to light. In the age of LLM's I now know for a fact that its happening. I guess I found one.
this article doesn’t do a good job of simplifying. the vast majority of Visa’s revenue comes from one thing called the ISO 8601 / ISO 20022 message, which is the name for a Visa’s authorization. the core service is transmitting this message between an issuer (cardholder bank) and an acquirer (merchant bank). all other revenue streams are basically a microservice on top of this core message transmission service.
243 comments
[ 0.25 ms ] story [ 51.9 ms ] threadThere, I saved you from reading the article, but if want even more of a TLDR, here's the actual article:
> A cardholder pays for a product at a merchant for $100.00.
> The merchant pays 2.5% ($2.50) of the transaction to their payment processor or merchant acquirer. The 2.5% is the merchant discount rate or MDR.
> 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
> The issuing bank keeps 2% ($2.00)!
In other words, they get 2% 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 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.
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.
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'
> 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.
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.
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.
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.
You can’t, because Uncle Sam will come after you.
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.
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.
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.
Bad service = card always.
https://gocardless.com/
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?
> 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.
Cost of doing business
I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.
That's because they do VAT (and Corporate tax) fraud.
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...
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.
Amazon Germany to Accept Wero - https://news.ycombinator.com/item?id=49175644 - August 2026 (14 comments)
https://www.mobiflip.de/amazon-deutschland-wero-kommt/ (German)
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.
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
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.
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.
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.
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.
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.
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.
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
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?
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
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 cars 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.
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IMO, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
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.
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.
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.
Visa and Mastercard are a cancer.
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.
I think it is to reduce the amount of cash in circulation, get visible on small transfers and to relieve the EFT clearing houses.
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.
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.
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.
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.
Another example is small B&Bs who happily pay 15% or more to third parties like booking.com, but think it's outrageous to pay 2-3% in card fees to accept bookings on their own website.
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.
This is something governments could fix by running the payments rails.
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.
I don't think there ever was another business model? Nobody has ever got true microtransactions for the web to work.
Even the old days of premium rate telephone numbers and paying for ringtones weren't particularly "micro".
I think USA has been behind the visa and Mastercard dominance as it gives them nearly every financial transaction globally and their intelligence has that data in realtime.
Not to mention the tax take and ensuring max use of US dollar as reserve currency
No, that's not right. The CB interchange fees are 0.2% + 0.0011€ network fee.
Therefore for 1€ : 0.002 + 0.0011 = 0.0031€, not 0.23€
So you have 0.2269€ of fees coming out of left field, with someone else making a massive profit.
You can apply to a fund to implement this system.
https://nlnet.nl/taler/
which is also why crypto bros get confused.
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
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.
please stop using the internet! it might be slow and expensive to run! it requires insanely big cell towers and submarine cables! it won't scale!!11!! kind of guy
But to be clear, all payment innovations in crypto happen on EVMs and L2s. And in 2026, stuff is extremely scaleable and computationally cheap.
There is something called lightning, which is p2p payments through bitcoin!
> 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.
call the economists! a currency needs a government! But only from 1971 onwards, before that people didn't have currencies! Oh, you don't want to use the US dollar? the best currency ever!? I guess we'll have to bomb your country and neighboring ones to change your mind.
> to manage its stability
aka lose 2-4% of purchasing power per year. Thank you central bank! you saved us!
> Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin
Oh no! The horror! A currency that can also go up!!! I guess we need a central bank for oil! to keep the price of oil stable! And food too!
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.
And is helping fry the planet.
No thanks.
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.
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.
OPERATING MARGIN (FY 2024 / 2025)
Payment Networks: Visa Inc. (V) 67.2%
Mastercard (MA) 57.8%
Major Card Issuer Banks:
JPMorgan Chase 33.5%
Capital One (COF) 24.1%
Bank of America (BAC)26.8%
ISO 20022 looks more like it.
* https://tautology.town/2026/02/14/learning-charcoal-grilling...
* https://tautology.town/2026/04/03/ten-times.html