

Ask HN: Why don't we hear about startups going against Visa and Mastercard? - yalogin

With network connectivity almost every where and cheap now and the proliferation of smartphones why are there no attempts (if any) to go directly against Visa and MC? Is there really a need for the intermediate parties (payment processing systems) to exist? Visa will not let go off that model as it built that ecosystem over many years. So it really cannot compete on price if some one really cut all the middle men and comes up with a payment system + processing system. I am surprised that even the highly successful Paypal just feeds off of Visa  and MC. I know the existing hardware installed at all the stores is a big barrier to entry but still.
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pg
There's a chicken and egg problem. You can't get buyers to use it till
merchants accept it, and vice versa.

This could be a good end goal of a startup, but it can't be what they do
initially.

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netcan
Any ideas for a starting point that could lead to that end?

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pg
There are two ways to get a giant pool of people using your payment system:
start with payments and then get giant, or start with a giant pool of users
and then add payments.

In the first case you'd have to start with a tiny, specialized payments market
that you could then expand. The second case would be Facebook creating their
own credit card system. Which they could probably do.

I'd recommend starting with a specialized payments market. That's how credit
cards themselves got started. And you can't create Facebooks for the asking.

~~~
RealGeek
Do you think Square could take on Visa & MasterCard if they get enough
traction?

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willheim
Square was my first thought, too. Yes, they could most certainly take on
MC/Visa/Amex/etc. Maybe that is why Visa invested in Square? You have to get
the POS units into retailer's hands. Then, at the same time, you have to get
consumers using it. Where square differentiates themselves from the
competition is that they make it very easy for anyone to become a POS node.

Now, the difference between Square and the CC companies is that square is
really a gateway to those CC systems and not a credit provider themsleves...
BUT once they have traction with POS merchants and acceptance by consumers
could they start their own credit department? Sure. Would they want to? That
is another debate. I'd wager it's much easier and still very profitable to be
a gateway taking a small slice off each transaction than it is to be the
credit provider.

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tokenadult
Besides the issue pg mentioned, this space is highly regulated (and perhaps
likely to become more regulated), so regulatory compliance as much as meeting
technical requirements is a big part of the problem for any new startup.

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ncash
<https://www.dwolla.com/>

I know the guys who put Dwolla together. It shows a lot of promise, and is a
huge boon to merchants because of the extremely low transaction fees (flat
$0.25 per transaction vs Paypal's 2.9% + $0.30 per transaction).

However, as pg said, it is hard to encourage adoption when buyers only use it
if merchants support it and vice versa.

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triviatise
Paypal is one of the few that is in a position to do it. With direct bank
account debit they do have one option. As paypal gets used more and more
online, paypal will be able to get retail merchants to accept paypal payments.
The timeline to effect change like this is extraordinarily long. Think about
how hard it is for AMEX to be accepted everywhere and the merchants already
have the hardware.

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stock_toaster
I believe one strike against AMEX is their higher merchant fees, as compared
to the other card vendors.

I recall when I was young that sears started discover card, and it wasn't
terribly long from the first time I heard of it to the first time I saw logos
on windows and people accepting it.

At the time discover had no annual fees, and 'cash back' which I recall both
being novel at the time (I was young though, so I don't recall too
specifically). I think consumer demand helped push the vendor market, as well
as Sears itself.

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tudorizer
The closest example I can think of is Square and look how long it took them.

