
Visa is planning the biggest changes to merchant fees in a decade - laurex
https://www.bloomberg.com/news/articles/2020-02-04/visa-is-planning-the-biggest-changes-to-swipe-fees-in-a-decade
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pawelos
Meanwhile in EU the interchange fee is 0.3% on credit and 0.2% on debit cards:
[https://www.visa.co.uk/dam/VCOM/regional/ve/unitedkingdom/PD...](https://www.visa.co.uk/dam/VCOM/regional/ve/unitedkingdom/PDF/fees-
and-interchange/Intra-Europe-EEA-December-2019.pdf)

~~~
bufferoverflow
Still ridiculous, considering it's just updating balances in a few rows of a
database.

Cryptocurrencies, except BTC and a couple of others, are doing it right. A
transfer should cost a fraction of a cent.

~~~
gregmac
I'm out of the loop on this stuff, but are others doing things to prevent the
situation Bitcoin had a couple years ago, when it hit $37 per transaction?

That seemed to happen due to a massive price and volume increase, so is hard
to design for. At the same time, at peak, it was still doing a tiny fraction
of the volume that any of the credit card networks do.

~~~
leppr
Blockchain scaling is still a very active area of research, and anyone (like
GP) telling you there's a battle-tested solution available today to replace
Visa is lying to you.

On the precise issue of transaction cost predictability, I think most
solutions would revolve around creating a market for the ability to execute
future transactions. There's a hackish project on Ethereum doing just that:
[https://gastoken.io/](https://gastoken.io/)

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ggcdn
I’m really surprised that the major credit card companies are not jumping into
the mobile payment arena(similar to WeChat and Alipay). I think this is the
future of consumer transactions.

I spent three months in China, and had 1 opportunity to use my credit card:
booking a flight home. Everywhere else, I was out of luck. That forced me to
use WeChat wallet and Alipay, and I got to say that the experience was really
good. There’s so little friction to spending money and can be used for
basically everything in China.

It must be way lower fees for everyone involved as well. I only need to do a
single bank transaction for the month(loading my wallet) and then after that
it’s just swapping credits. Perhaps that’s why cc companies are reluctant.

~~~
eatbitseveryday
I was under the assumption WeChat and Alipay use in China for payments were
restricted to those with PRC national ID cards (i.e., not foreigners).

~~~
ggcdn
I think it was in the beginning, and its certainly easier to set up for
Chinese citizens. The big hurdle is you needed a Chinese bank account. Alipay
now has a Tourpass which is specifically made for foreigners.

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christophilus
> For banks, the $91.2 billion in fees they earn on credit-card portfolios is
> now more than the interest they charge on the loans

That really surprises me, given how high CC interest rates are and how many
people carry a balance.

~~~
dylan604
That was surprising to me as well. Then again, if there is a per transaction
fee multiplied by the amount of credit card transactions per day, I could see
where those add up quick. A cursory search online stated over 100 billion
transactions annually. So I could see where the fees are making more money
than interest.

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smohnot
A lot of folks don’t know that merchants pay more for CNP transactions. Why?
Well it’s simple, there is no alternative to cards for an online transaction,
the issuers have power. people think it’s due to fraud... there is a lot more
fraud with CNP transactions but not nearly enough to account for the 60 bp
difference in rates.

~~~
wtmt
> A lot of folks don’t know that merchants pay more for CNP transactions. Why?
> Well it’s simple, there is no alternative to cards for an online
> transaction, the issuers have power.

That may be true in many countries, but in India, there are cardless (non-
credit/non-debit card) online payments available that are used a lot more than
card based payments and are all instantaneous (similar to cards):

* Netbanking (where you're redirected to your bank's site and login to approve a specific payment)

* UPI (Unified Payment Interface), a private consortium [1] managed payment system where anyone can create a user@paymentprovider ID and exchange that as the receiver address instead of complex bank account numbers, branch details, etc. This also allows payment requests from merchants that one can login and approve.

* IMPS (Immediate Payment System), another service by the same private consortium. [1]

* Rupay cards, a local payment network (now recognized in a few other countries) by the same private consortium [1] that's a replacement for Mastercard/Visa/Amex networks.

* Digital wallets by payment providers and "payment banks" that work like wallets and/or allow direct transfers from one's linked bank account, like Paytm, Amazon Pay, Amazon Pay UPI, Google Pay, PhonePe, and many, many more.

* Bank transfers that may take an hour or several minutes, as opposed to the instantaneous ones above, with systems like NEFT (National Electronic Funds Transfer, a batched inter-bank payments settlement system) and RTGS (Real Time Gross Settlement, a real time inter-bank settlement system).

Though digital payments are still not huge in percentage terms, the ones above
likely handle a lot more volume than Visa and Mastercard do. The government
has also pushed for zero MDR (Merchant Discount Rate) on certain payment and
transfer options, and made them more attractive to merchants.

The U.S. is comparatively very backward in payment systems, costs and payment
speeds.

[1]: The private consortium is called NPCI, which stands for National Payments
Corporation of India.

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wtmt
The TL;DR I got from this article:

* Fees will go up for card not present transactions (online and phone) and fall a bit for card present transactions.

* Overall, Visa is increasing fees to make more money than before since there aren’t any other details provided.

My take is that if Mastercard plays it right, this is a good time to capture a
higher market share at Visa’s expense (though it wouldn’t come anywhere close
to toppling Visa’s lead).

~~~
lotsofpulp
I have yet to see a merchant not accept Visa and accept Mastercard. I'm
betting all the networks will increase their fees to raise revenue.

~~~
dundercoder
Kroger did that very thing last year it was messy.

~~~
jankassens
And the published fees for large supermarkets are going down. Probably because
they have the leverage and could even shape consumer behavior by making them
used to some alternative.

------
absurdmind
Less than a month has passed since Visa acquired Plaid[1] and now we know the
reason for that $5.3B price tag.

[1] [https://techcrunch.com/2020/01/13/visa-is-acquiring-plaid-
fo...](https://techcrunch.com/2020/01/13/visa-is-acquiring-plaid-
for-5-3-billion-2x-its-final-private-valuation/)

------
throw0101a
In case of paywall:

* [https://outline.com/P2kyXX](https://outline.com/P2kyXX)

------
thunga
Pay later companies have started disrupting this space over the last few yrs

~~~
pimmen
The Swedish company Klarna is a good example. It’s now so common among Swedish
consumers to have a Klarna account that it’s probably the most frictionless
way for customers to pay online.

I have a colleague who worked there like five years ago. She bought as much
stock as she could. Once it IPO or gets acquired I suspect she’ll get a hefty
contribution to her retirement.

~~~
benhurmarcel
It's a shame we don't yet have a European-wide equivalent.

------
nabla9
> persuade more people to abandon checks

What's the problem with US payment system? People still use checks?

I have seen those only in movies. I think they were out in the 80s in Finland.

~~~
froindt
We have "rewards" on our credit cards. Rewards aren't free, so they increase
the fees.

>For banks, the $91.2 billion in fees they earn on credit-card portfolios is
now more than the interest they charge on the loans.

The fees are ridiculous. Profit margins at restaurants are often 3-5% (per
Google). There is still a cost to handling cash, but if cash cost ~1% all-in,
their profits would go up 20-30%, just like that, assuming consumption stayed
the same.

Fast food venues didn't accept credit cards for a long time, but eventually
found people spent more paying with a card than cash. A $300 TV and a $5
hamburger "feel" exactly the same with cards, which certainly doesn't help
consumerism in the US.

As an example, when I pay my property taxes, I can either pay by sending a
check in the mail, doing an electronic check (ACH transfer that takes 2-3
business days to clear) and paying $0.25, or pay a 2% transaction fee. Stamps
are $0.50, eventually I'll need to reorder checks (at a cost), so I do the ACH
transfer.

~~~
awinder
I’ve been all in on using my banks bill pay system for a number of years now
for property tax / water bill / etc. Stamps & check books cost money, but
scheduling someone else to cut the check, stamp and envelope it, and stick it
in the mail on a certain date is free. It boggles the mind.

~~~
eigenvector
Your bank's bill pay involves someone sending a physical check?

In Canada, we have "bill pay" for utility, property tax, credit card, etc. but
all that happens is your bank transfers money to the biller's account. The
biller pays a bit for this service but evidently much less than the cost of
handling physical checks as I've never seen a surcharge for it. Even the small
town of 3,000 I live in is set up to receive property tax and water payments
through this system.

~~~
Merad
In the early 2010s I worked for Fiserv, who at the time provided "online bill
pay" services to about 80% of US banks (I don't recall if they're in Canada or
not). The overwhelming majority of the bank customers using that service held
beliefs similar to what you expressed... it's an online payment through my
bank, why on earth would it be a paper check?? They were wrong. The really fun
thing about that system was that the customer had absolutely no way to tell
what kind of payment the system was going to send to a given payee. A payment
that processed electronically for years could suddenly go as a physical check
for any number of reasons. Maybe the customer changed something that was
slightly incorrect... maybe they should have changed something but didn't...
maybe the system just had a hiccup that day.

Regardless of who makes your bill pay service or exactly how it works, my main
advice if you use any bill pay service is to ready the fine print very closely
and be sure you understand what you have to do to be covered (late fee
reimbursement, etc) if a payment does get screwed up.

~~~
gowld
Don't read the fine print, it's always bad ("we'll charge a fee if we want")
and you can't avoid it (no free market for competitors) and knowing it only
increases your risk liability.

------
exabrial
Are there any alternatives to Visa and MasterCard?

It's 2020, I'd love to be able to pay for a transaction using a secret key to
sign an authorization proving I was there.

Instead, credit card companies force us plain text numbers and somehow blame
us when it gets stolen.

~~~
crazygringo
Isn't that what a chip does, which basically all modern credit cards have in
the US now?

And all my major credit cards also allow me to generate one-time use numbers
to use online, which I need to sign in to generate using 2FA.

Finally, I've never been "blamed" for fraudalent transactions. They've
happened but I've never had to pay, nor do I know anybody who has.

So really not sure what you're upset about?

------
paulcarroty
Revolut have free transfers between two users:
[https://www.revolut.com/legal/fees](https://www.revolut.com/legal/fees)

~~~
toomuchtodo
Most major banks in the US participate in Zelle, which enables free money
transfers between consumer bank accounts. You can even setup unique Zelle
users for your accounts at different financial institutions, so you can
transfer your own funds between accounts at different financial institutions
instantly and at no cost.

~~~
random3
You're limited to $3000/day with Zelle and forced to use the much slower ACH
or otherwise pay ~$25 for a wire transfer.

~~~
toomuchtodo
For transactions over those limits, you can break the payments up over several
days. Wires are infrequent enough to disregard the fee (real estate
transactions or similar).

I don’t know many folks moving more than $3k/day to be honest. I don’t
disagree though that Fed ACH modernization efforts need to pick up the pace,
as Zelle is a shim until federal payment infra is up to par with Europe.

