
Forget Google, time to end the Visa-MasterCard duopoly - CM30
https://medium.com/@CM30/the-unknown-duopoly-that-needs-breaking-up-more-than-google-f7b2c8876ea7
======
tiffanyh
I am reading so much incorrect information in this thread it’s maddening.

The card network (Visa, Mastercard, etc) do NOT make money on Interchange.

It’s hard to have a healthy dialogue on this topic if folks don’t understand
the basics of how the card networks generate revenue.

Below is a decent primer.

[https://www.investopedia.com/articles/markets/032615/how-
mas...](https://www.investopedia.com/articles/markets/032615/how-mastercard-
makes-its-money-ma.asp)

~~~
jedberg
I mean, technically no they don't. But that's just being pedantic. They charge
the bank based on gross dollar volume, and the bank gets the money to pay for
that from... interchange fees. The more volume the bank does, the more they
pay and the more they get from interchange fees.

Interchange fee pricing is set based on how much mastercard charges the banks,
so while technically true, the interchange fees are basically set by
mastercard's pricing.

~~~
ComputerGuru
Interchange fee pricing is set based on how much MasterCard charges the bank

That’s not true though, or at least is a massive oversimplification. In the
US, interchange fees are extremely inflated to allow banks to recuperate the
rewards they give out to distinguish their card offerings from one another.
The 2% cashback has to come from somewhere.

~~~
jariel
"The 2% cashback has to come from somewhere."

Yes, but in reality, the program comes from an upside down approach to
overcoming the obviously anti-competitive practices that VISA/MC use to forbid
retailers from offering discounts for _not_ using VISA etc..

You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody
ever advertises that?) Because VISA doesn't allow it.

You also can't say "$1.99 + 20 cents processing charge" \- no, the price must
be listed including charges. (Notice that nobody every does this?)

But you _can_ possibly find ways to give points, or 'cash-back'.

Until now ... [1]

VISA is now saying that even such 'cash back' rewards programs are a violation
of its rules.

Have a look at the press release - it's positively Orwellian:

"In order to maintain a level playing field" -> "In order to avoid all
transparency and maintain our hidden monopoly" we require that nobody can take
steps which highlight the how our transaction fees are embedded in the price.

These are pretty blatant anti-competitive practices and taking them on is
tantamount to taking on the entire banking system. It's not going to happen.

There would need to be an 'outside disruptor' like the Word Processor to the
Typewriter kind of thing.

[1] [https://www.pymnts.com/visa/2018/non-compliant-cash-
discount...](https://www.pymnts.com/visa/2018/non-compliant-cash-discount-
card-fees/)

~~~
cynix
> You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody
> ever advertises that?) Because VISA doesn't allow it.

> You also can't say "$1.99 + 20 cents processing charge" \- no, the price
> must be listed including charges. (Notice that nobody every does this?)

We see these a lot in Australia. I wish they'd enforce the same pricing here
for cash and card — I don't like to carry cash around, and I hate it that I
have to pay a surcharge when paying by card.

~~~
shkkmo
> I don't like to carry cash around, and I hate it that I have to pay a
> surcharge when paying by card.

So you think your use of a credit card should be subsidized by people who pay
in cash?

~~~
chongli
People who pay in cash are subsidizing the store’s costs to handle cash.
Paying employees to count the cash (usually after closing), putting it in the
safe, distributing the cash to cash registers, refilling when they run out of
change, paying for the security service (Brinks etc) to deliver cash to/from
the bank, insurance against robbery...

Cash is not free for a store to handle. Stores pay transaction fees on credit
cards, sure, but they save on all the costs of cash. A hypothetical store that
takes credit cards only would not have any of these costs and their
vulnerability to robbery/theft would be limited to merchandise and capital
only, saving the cost of insurance against theft of cash. For some types of
businesses (services rather than retailers), this makes their office a pretty
unattractive target for burglars and eliminates employee theft of cash.

~~~
stale2002
This is an interesting argument, but it is not backed up by actual store
behavior.

Stores generally try to give extra charges for using credit cards, not the
other way around.

It seems like the fair thing to do, should be to allow a store to do whatever
it wants, and make these credit card requirements illegal.

So, it would be allowed for stored to charge extra for either cash or credit,
whatever they choose, and the credit card companies would be forbidden from
stopping this.

~~~
vanviegen
That seems to be what we have in The Netherlands.

It's common for online stores to charge a few percent extra for credit card
payment (the base price usually applies for the most common form of online
payment, iDEAL, which is cheaper, I guess because the banks cut out Visa/MC).

On the other end of the spectrum, there are some physical stores and
restaurants (usually chains) that don't accept cash. They're allowed to do
that, given that they state so very clearly upfront.

------
crazygringo
I don't get it -- Amex and Discover are still providing healthy competition,
so the "duopoly" the author complains about seems to be largely irrelevant.
Competition between cards is _thriving_ and consumers benefit -- witness the
miniscule transaction fee the credit card companies keep after paying your
rewards back of 2% to 5%, when you pay your bill on time.

The article's main point is that such large companies are a cybersecurity
risk, and that the government should regulate/nationalize/globalize payment
infrastructure.

Unfortunately, experience tends to show that governments would be far _worse_
at providing secure, low-cost payment services. Also, credit cards already
_are_ highly regulated when it comes to consumer protections.

So, this article is just not making a lot of sense to me.

~~~
pradn
CC rewards seem like a indirect regressive tax. Wealthier consumers who can
afford to pay on time and have better credit ratings are subsidized by poor
consumers who actually use the "credit" part of "credit card".

~~~
notyourwork
If people didn't spend money they don't have the problem you describe
dissolves. No one has to use credit cards and being financially literate is an
individual responsibility.

~~~
komali2
> financially literate is an individual responsibility.

Is being able to read and write an "individual responsibility?" How about the
ability to communicate in a language at all? What about any other basic core
skill that would make a person capable of learning more things to make them
"productive?"

"Individual responsibility" as it pertains to these topics is at best a
misnomer, if it even names an existent thing at all.

Surely you don't think it's ok for, say, a Company Town to exist? Can you
extrapolate from there why it's not ok for credit card companies to bamboozle
less educated Americans for money?

~~~
notyourwork
I would encourage you to frame your disagreement with statements and facts.
Asking questions expecting the reader to draw the same conclusion as you isn't
a useful discussion mechanism. Especially when the reader doesn't agree with
you.

~~~
komali2
I'm not sure what the relevant facts would be around an extremely value based
argument of who is responsible for educating a society.

I guess we could look at the general fact that education is one of the better
investments to increase a nation's GDP, bit I'm more concerned with the ethics
than the money.

------
taurath
Having worked in fintech, they're essentially the gatekeepers of any new
technology. Have a great idea for a value add in the payment processing
gateway? They will not let you on any platform for 4 years while they launch a
(poor) competitor at scale.

~~~
rbrtl
Sometimes the turn around is quicker, because rather than building their poor
competitor they just buy one.

------
cactus2093
You can’t talk about credit cards in isolation without considering the rest of
the consumer finance sector in the US.

A big part of the reasons credit cards rose to such prominence is that the
banking and payment rails are so incredibly stupidly designed. The check
system and ACH which is the highest volume way that money is sent between
people with different banks requires you to give out the secret key every time
you make a payment. Plus it takes at least 1-2 days to clear which makes fraud
more difficult to deal with.

Interestingly the credit card system also suffers from the first part, your
number is printed right there on your card. But they’ve managed to find and/or
strong arm ways to reduce fraud on their network, and as a consumer I’m not
liable for paying it which is a huge benefit.

The author really lost me at the end though, I don’t see how regulation
magically solves everything and they didn’t explain it at all. There is
already a ton of regulation in the payment industry. And this comically flimsy
underlying system could easily be improved by existing regulators, how about
starting with small steps and seeing how that goes? Instead of advocating for
throwing out the entire payment system all at once under the very flimsy
assumption that the government will do it better.

~~~
vinniejames
"not liable for paying it," but you're still paying it at the end of the day
via fees and increased merchant prices

~~~
ferzul
if the merchant doesn't charge a creditcard surcharge, and using a credit card
is worth 1€ to me, and costs 1.01€/transaction to the merchant. but only 90%
of transactions are by credit card. well, then i am better off paying by
credit card, since 10% of transactions are subsidising my 1€.

(strangely, in australia, card surcharges became normalised just before cash
payments fell off a cliff. credit card transactions have also declined; it's
visa/mc debit that have skyrocketed.)

~~~
sukilot
A credit card costs about 3% not 1%. A credit card is a prisoner's dilemma
problem where once anyone uses it, the others are pressured to use it also to
cut their losses.

------
logicalmonster
I’d love to see some action here but I’m skeptical. It seems like attacking
payment processors is the main avenue that the thought-crime-police use to
attack alt-tech sites that don’t play ball with censoring. If there was any
mass protest movement to push change here, the media would absolutely flood
the public with scare stories about (insert evil monsters here) using payment
networks to finance (evil activity here) and undermine the protest movement.
It doesn’t help that so many politicians are old lawyers and activists who
generally don’t have the technical knowledge to wade through the BS.

~~~
derefr
I feel like it'd be fine if every single payment processor were individually
part of the surveillance-industrial complex, as long as there were _enough_
players in the space that one could get running a service by hopping around
between them. For grey-market businesses to succeed, they don't really need
air-tight legal protection; they just need their actions to be _illegible_.

This is basically the situation VPN service providers are in. Yes, in theory,
any given provider could be beholden to the state. However, when a new VPN
provider can spring up so easily (spin up some DigitalOcean instances, stand
up a WordPress/Shopify e-commerce frontend), it's unlikely that any given
_new_ player in the space has been _gotten to yet_ by the state (unless, of
course, it's a new marque of an existing company, set up specifically to serve
as a honeypot for switchers.)

------
tappio
This is a very us centric view. Most of the europe is so much ahead of US in
payments that it is funny. There are dozens of alternative payment methods in
the Europe. Especially in the Nordics card payments are on a big decline.
There are basically two "tracks" to move money - card networks and bank to
bank. Most new payment methods use bank transfer as the method of moving
money. In the Nordics, every country has a mobile payments system where your
bank account is attached to your phone number, any anyone can issue a payment
to your phone number and you receive it to your bank account. You can use this
also in brick and mortar stores etc. Not to talk about all the bill-payment
based companies like Klarna... And how about China? They don't use cards
either, just look at Alipay.

~~~
mrweasel
Just to clarify, the Danish mobile payment system (cleverly named: MobilePay)
is based on debit cards, not bank to bank transfer.

The system that was designed to do bank to bank, without the card systems
being involved failed horribly. It was late to market and the launch has
horrible mismanaged and covered in unnecessary secrecy. MobilePay had already
launched and crabbed a large share of the market, the secrecy was completely
pointless and I believe it was partly to blame for the massive failure of the
solution.

~~~
runeks
> Just to clarify, the Danish mobile payment system (cleverly named:
> MobilePay) is based on debit cards, not bank to bank transfer.

This is incorrect. MobilePay _started out_ as a layer on top of Dankort
(Danish debit card), but after gaining sufficient volume they made a deal with
all Danish banks to enable direct bank-to-bank transfers (without using the
Dankort infrastructure).

The only difference between Swipp and MobilePay is that Swipp _started out_
only supporting bank-to-bank transfers (thus only supporting a few banks)
while MobilePay started out using Dankort (thus supporting _all_ banks). And,
as soon as MobilePay had sufficient volume, all banks were interested in
circumventing the Dankort network.

------
badrabbit
Would be happy to buy a usable cryptocoin card. I was thinking about interest-
free crypto-loans where the debtor would speculate on the value of the
currency at the time it will paid off (like options trading). If you loan
100btc you would loan with the speculation that for example it would be 10%
more valuable in a year. If in a year your speculation is correct, you break
even, if the price is 10% lower, the debtee still has to pay using your
speculated valuation, if the price is 10% higher you lost potential money you
coulf have gained had you hold onto it. Either way, you have insurance against
loss the debtee takes on risk but they don't get endlessly canibalized by
interest payment. Escrow or credit rating is something I have not figured out.

Regardless, an acual card and a payment processing network would cost billions
to deploy.

~~~
milkytron
That seems extremely risky.

~~~
badrabbit
You will still have credit checks and collaterals as usual. The person taking
on the loan absorbs all risk in exchange for not having a interest accumulate.
Think of it this way, with APR loan, how much you pay at the end depends on
how the interrst rate is adjusted and how long it takes you to pay off. With
my approach you might end up owing a lot of money but it will never depend on
how fast you can pay it off. It will not canibalize your cash flow like an
interest debt. The debtor gets free loss insurance and debtee gets freedom
from interest and the total cost depends on the currency value at the time of
first payment. Also,the total cost will not be a surprise to anyone, the
person taking on the loan knows how much they have to pay back. Ideally if you
don't have credit, you will need to place in escrow some amount of the base
loan and take on more risk in terms of paying at a higher valuation should the
currency value be higher at the time of payment(which all goes away with
collateral or good credit score)

Anyway, I was just thinking out loud my idea. I hate interest and mandatory
insurance alike.

------
ajb
Coincidentally I just read a post from a business that's finding ordinary bank
transfers getting more traction from customers than they expected:

[https://www.revk.uk/2020/06/beyond-credit-cards-is-this-
way-...](https://www.revk.uk/2020/06/beyond-credit-cards-is-this-way-
forward.html?m=1)

~~~
jpkoning
This is good news on the competition front.

The traditional problem with bank-to-bank transfers in a retail, or point-of-
sale, setting has been speed. Cheque was about the fastest that could be
mustered.

But with developments like UK Faster Payments (which is mentioned in your
link) bank-to-bank transfers are getting faster, in some cases instant. And so
usability at the point-of-sale is now on par with cards.

In Holland, iDEAL is used a lot for retail purchases. It's an instant bank-to-
bank payment option that competes with the card networks.

The equivalent in Sweden is Swish. It too is moving into point-of-sale
payments.

As for the US, I suspect that at some point Zelle will pivot into retail
point-of-sale payments. At which point the card networks will have a big
competitor.

All of this is good news if you are worried about the card oligopolies!

~~~
daveoc64
I can't really see bank transfers taking of at the point of sale in the UK.
Making a payment with most banking apps is very clunky - especially for the
first time with 2FA.

As a consumer, a credit or debit card gives me a lot of protection. I wouldn't
give that up for anything (oh, and the cashback I get too).

~~~
jiggunjer
But I thought debit card = bank transfer? There is no protection?

~~~
daveoc64
You can still do a chargeback with a debit card in the UK.

If you have a basic consumer dispute about something (such as a retailer not
giving a repair/refund for a faulty item), you should be able to file a
chargeback with the card issuer and get a refund.

In the UK, a credit card is much better though, as for any purchase over £100,
the card issuer is joinly liable with the retailer for any issues.

[https://www.which.co.uk/consumer-
rights/regulation/section-7...](https://www.which.co.uk/consumer-
rights/regulation/section-75-of-the-consumer-credit-act)

------
ur-whale
There is something that I've never managed to put my finger on: most companies
as huge as Google / Apple / FB etc... or even more traditional ones (banks,
oil, etc ...) are sort of "well known" in the sense that they do PR, they have
well known figureheads, etc ...

VISA has always struck me as a very nebulous entity, whose structure,
governance, is not very well know by the general public.

I wonder how they managed to grow so large while managing to keep such a
conspicuously low profile.

edit: and to answer my own question, the wikipedia page is quite informative :
[https://en.wikipedia.org/wiki/Visa_Inc](https://en.wikipedia.org/wiki/Visa_Inc).

~~~
thoraway1010
If you make $10B/year on revenue of $20B/year (great margin at that scale) you
keep quiet I think for good reason :)

------
xfour
While I agree with the sentiment, things have certainly opened up lately quite
a bit with the mainstream-ization of the crypto currencies. One could
conceivably avoid Visa / MC in a way that just wouldn't have been possible
before.

Visa / MC remind me a bit of Ticketmaster in that they've got parties on both
sides defending them because of kickbacks. You charge the merchant the
"interchange fee" plus some amount and that fee goes back to the "card
issuing" bank, so they like the system.

The merchant passes on the cost (generally) to the consumer, so they don't
really notice, and the ease of moving the money in 99% of cases means everyone
is happy.

~~~
PeterisP
I'm not seeing a "mainstream-ization of the crypto currencies". A few years
ago, quite a few local businesses were experimenting with accepting
cryptocurrency payments, and I could buy all kinds of stuff and services using
bitcoin. I could order a pizza with bitcoin, I could buy electronics at a
major retailer, I could buy plane tickets, I could pay for lunch in a local
cafe.

That's not the case any more, by now all these local companies have stopped
accepting bitcoin, because after the first hype, the volume simply was not
there to make it worth their while. Some people (often the same people!)
bought some stuff initially to try it out, but that was it, there was no
sustainable mainstream business. It's still usable for some online services
targeting the tech crowd, especially where anonymity might be a feature, but
for everyday use of paying for physical goods and in-person services there has
been the opposite of "mainstream-ization" in my experience; by now the
mainstream businesses have tried crypto and found it not useful. There's
enough well developed infrastructure and service providers so that mainstream
businesses _could_ easily accept cryptocurrencies if they wanted, but they
don't, because there's no significant customer demand outside specific niche
markets.

~~~
rtpg
Crpyto isn't mainstreaming but you are having a mainstream-ization of non-CC
digital payments.

Venmo is the thing in the US, but China has Alipay/Wepay, SE asia has various
digital payment apps, Japan has had a huge "cashless" push in the past 12
months....

If I were running a retail shop in the US I definitely would accept payment by
Venmo if I could.

~~~
briandear
Apple Pay is the thing. And it makes peer to peer money moving simple while
not violating privacy like Venmo. You can use Apple Cash or a payment card.
It’s all pretty easy — and private. Venmo is a privacy nightmare. You can use
Apple Pay without even having a debit or credit card.

~~~
mc10
Apple Pay doesn't solve anything on the merchant's side. There's just nothing
in the US with the simplicity and affordability as the various payment apps in
Asian countries.

For instance, in China WeChat Pay only charges 0.1% above 10,000 RMB (from
what various articles say). Square is not even in the same category, charging
2.6% + 10¢. And you don't need to buy any equipment to use WeChat Pay; you
just need to pull up a QR code on your phone.

~~~
bitreality
This is all possible because China has standardized bank to bank transactions
across all banks in the country. It sets the tone for secure P2P transactions
at fractions of the cost of a regular Credit Card payment.

This allows people to on-board to WeChat Pay easily through online banking.
They also have way less KYC hurdles, so people can go from signing up to
sending money in minutes.

US online banking is eons behind China, and almost any other country. So many
online banking systems in the US are prone to unauthorized access, which makes
on-boarding and security highly inefficient.

~~~
PeterisP
It's my impression that pretty much all functional countries (e.g. perhaps not
Somalia or during a civil war, but including most less developed countries)
have "standardized bank to bank transactions across all banks in the country".

The big difference is how fast and cheap these standardized bank-to-bank
transactions are; with USA lagging behind in this area somewhat. In USA a wire
transfer is more expensive than a credit card payment, in China, EU, Russia,
etc it's cheaper than a credit card payment.

------
scarlac
It will probably happen, but will take a while. My bet is that this is what
Apple is working on. They will launch a version of Apple Card that is free of
MasterCard.

So far it's been a really long-haul play where Apple has spent a lot of time
establishing deals with banks manually, in order to get a tiny fee, which they
can due to the increased security of their system. This hard work is necessary
in order to create a payment network that can work for everyone.

Eventually, Apple will be in a position to launch their own network, while
increasing fees for themselves and lowering fees for merchants.

As someone who's been a merchant I'm very happy to see this happening,
although it's like watching a tree grow (paint drying would be exciting in
comparison). It's likely Google will follow suit, and depending on Apple's
choice of implementation, we could hope that it will be backed by a stable
cryptocurrency - but that's just a shot in the dark.

------
seibelj
Unpopular opinion here (from my experience), but crypto / blockchain is ever
so slowly and deliberately destroying the moat around payments and the
artificial barriers constructed. Probably 5 more years for some very serious
mainstream business movements into it, and 10 more for non-technical
consumers, but I believe with the rise of stablecoins (USDC) and Ethereum
scaling via proof of stake (ETH2) their days are numbered.

~~~
erostrate
And one year after that we will get self driving cars. And the next one will
definitely be the year of Linux on the desktop :)

Sure, it could happen somewhere down the line but saying that blockchain is
"destroying the moat" today is a big stretch. Blockchain barely just started
to realize that the moat is actually much larger than previously thought. And
that parts of the moat exist for a reason. It's barely starting to understand
the moat, still far from attacking it, let alone destroying it.

Hopefully it will but I'm not holding my breath nor my bitcoins.

------
throwawaysea
This has been a problem for a long time and unfortunately the outrage around
the duopoly died out the last time we confronted it, which was in 2010 when
Visa/Mastercard blocked Wikileaks
([https://www.forbes.com/sites/andygreenberg/2010/12/07/visa-m...](https://www.forbes.com/sites/andygreenberg/2010/12/07/visa-
mastercard-move-to-choke-wikileaks/#187180132cad)).

It is still a problem in 2020. Gab was recently impacted by Visa blacklisting
them ([https://news.gab.com/2020/06/19/gab-blacklisted-by-
visa/](https://news.gab.com/2020/06/19/gab-blacklisted-by-visa/)) and also
drew parallels to the realities of the "social credit score" system used in
China ([https://news.gab.com/2020/06/26/social-credit-score-is-in-
am...](https://news.gab.com/2020/06/26/social-credit-score-is-in-america-visa-
blacklisted-my-business-and-my-family-for-building-gab/)). The vagueness of
Visa's allegations stood out to me as problematic, given the lack of viable
alternatives.

Ultimately, the lack of a provider who acts neutrally is a threat to freedom
of speech and expression for all practical intents and purposes.

~~~
chejazi
It's trickled into other mainstream/downstream services as well like Patreon.
Patreon bans certain creators because they have a "policy" on acceptable
content that is backstopped by visa/mc policies.

------
sm4rk0
Let's end the duopoly, but _please_ don't forget Google (or Facebook, Apple,
Amazon,...)

~~~
seph-reed
"Both" is word that will not make the Newspeak cut.

~~~
vore
Calm down. Evoking HN's favorite specter of 1984 about _payment processors_ is
a bit much, don't you think?

~~~
seph-reed
I was feeling quite calm.

I'm not talking about payment processors so much as the degree to which people
feel "either" when they could feel "both."

Divisiveness is quite rampant, and I think the language we use (or don't use)
has an effect.

ie "Forget Google" -> why not both?

------
Animats
Visa is now a publicly traded company, but it used to be a chaord, owned by
the banks that used it. It's a data network and a standards organization. It
doesn't issue cards or handle the money, it just passes transactions from one
bank to another. The banks settle up separately.

~~~
harry8
[https://www.forbes.com/sites/andygreenberg/2010/12/07/visa-m...](https://www.forbes.com/sites/andygreenberg/2010/12/07/visa-
mastercard-move-to-choke-wikileaks)

Note that this was a policy decision based on whim and a politician lobbying.
No hearing, no evidence, no recourse, no rights and no meaningful alternative.
Also a decision not taken by the banks nor, I believe, were they consulted.

The upopular person's (Wikileaks here) rights are your rights and my rights.
If you think the've done the wrong thing, you're entitled to that opion and
establishing that is literally what courts are for. Much the same way we might
want law and courts involved for suspension of a driving license and not
simply because a politician doesn't like you and lobbies a bit. "Nobody who
drives for UPS can drive on the roads because they love Putin" \--not as
ridiculous a fabricated politician's quote as it should be.

But going back to it being a data network and standards organisation that
describes the classic long-run decreasing average total cost curve of the
natural monopoly which makes privatising it for profit a pure "rent-seeking"
play.

So we can see how egregious the monopoly is two ways there. Practically with
an example and according to classic and relatively uncontroversial
micoreconomic theory.

So what about the classic monopolists' defence, which will come up again here.
Define the market to be bigger and claim it's a small fraction of that bigger
market. Can we just dismiss that as total B.S.? ie "You can also use cash to
buy things." Try running a business or calculate the additional cost of buying
the things you need without using the visa/mastercard network.

Unless you have multiple networks with very low switching costs it's a
disaster. Disclosure: Ajit Pai disagrees with all that totally.

------
jb775
Could Stripe swoop in and make a play to become a third major CC option? I
feel like they have the core infrastructure in place and are still nimble
enough to make it happen if they wanted.

~~~
francislavoie
I feel like if they tried anything, MC/Visa would try to squeeze them until it
becomes unviable. They would still need to support MC/Visa until they get
enough market share to not totally hinder their existing business.

------
partiallypro
I feel like card competition is actually pretty steep. MasterCard and Visa may
have the majority of the market, but there are still Discover and AmEx. I have
been using things like NerdWallet to figure out what is the best card to go
with, it is usually a healthy balance. I think the main thing is that most
Debit cards are Visa or MasterCard...and you are locked in by your bank. Where
as credit & charge cards are a free for all.

When it comes to advertising online though, you have only 2 choices...Google
or Facebook. As a business I can't not go with those two or I'll lose immense
business. I can go with a Visa, Mastercard, Discover, Amex...and it really has
no effect on me outside of the benefits the card gives me. The fees charged to
the banks, etc are essentially the same. So it's really no comparison as to
which is worse for the market itself.

~~~
teej
You’re talking about different things. When you shop credit card offers, you
are comparing issuers (eg Chase vs Capital One). That’s not the same as the
payment processor aka card network (Visa vs MasterCard).

Of course it’s endlessly more complicated then that but it’s important to make
the distinction.

------
RichardHeart
Near the entire economy paying a % rent to these couple companies is unfair.
Cryptocurrency can remove these middlemen, however, they're missing some
important features. 1. Dispute resolution. 2. Recurring billing. When you see
how expensive it is to do #1, credit cards start to look like a wonderful
deal.

Someone is going to say: Micropayments (it's never worked.) Pre-auth'd lower
amounts retailers can pull from you (might work.) Crypto-escrow (Any place
that used to do it has gone out of business I beleive.) Too volatile: (Peer to
Peer stable coins, or "trusted" stable coins protected by laws instead of code
address this.)

Thus, peer to peer open source value transfer is the minimum amount of
middlemen possible, but is crippled by regulatory overhead at the end points,
giving the incumbents entrenched advantage. Caveat: I founded a
cryptocurrency.

------
dannyw
I would rather see Visa, MasterCard, and other big banks regulated and require
them to accept all legal businesses. Fraud can still be blocked but on an
individualised, reasoned level.

No more denying legal pornography businesses, no more denying legal fireworks
stores, etc.

~~~
basicplus2
One option would be for people to start paying each other in gold.

------
random3
Cards still account for less than 18% of US payments (source
[https://go.plaid.com/rs/495-WRE-561/images/Plaid-Modern-
guid...](https://go.plaid.com/rs/495-WRE-561/images/Plaid-Modern-guide-to-
ACH.pdf)).

~~~
Laremere
From your source "More than 82 percent of the value of all U.S. payments goes
through ACH"

Note that it's value, and not number of transactions.

Personally, I have only 4 things pay out of my checking account. Mortgage, HOA
dues, and power are all bills that require checking account transactions for
auto-payment to avoid credit card fees. These are very large transactions
which will greatly skew any measurement by value.

The final thing paid out of my checking account is interesting: the credit
card payment. Since any money I spend with my card necessarily is repaid from
my checking account, that also greatly skews measurement by value.

If I spent 50% on housing, and spent all of the rest of my money on things
with my credit card, then my personal ACH value percentage would be 66%. (1
unit house payment, 1 unit credit card transactions, 1 unit paying credit card
bill)

This isn't even starting with business to business transactions. I'm unsure if
the source is counting it in that metric, but it would further skew any value
measurement. No factory is going to use credit card when buying $100,000 worth
of parts from a supplier.

All those things considered, 82% seems about right, even if you assume
something like 90% of consumer transactions use credit card.

~~~
bretpiatt
> No factory is going to use credit card when buying $100,000 worth of parts
> from a supplier.

I have a business who uses a credit card every month to buy more than $100,000
worth of materials from a supplier.

On the consumption end the card programs are wonderful, great purchase
protection negotiated, delay on actual payment for additional working capital,
and rewards. We basically never have to use cash for employee travel expenses,
all via points.

There is no benefit for me paying my suppliers via ACH, wire, or check.

------
bitreality
A major issue here is that payment processors literally choose which
industries, and which players will succeed. If your industry is deemed high
risk by payment processors, you are fighting a brutal battle to accept
customer payments. If you can't process payments, you don't have a business.
Conversions will drop off a cliff if you try to switch them to niche payment
methods like crypto currency, or even something like Skrill.

Even worse, the payment processors do not apply their own ToS unilaterally.
You'll find some websites will retain processing, while you lose it, even
though the reason is that your business model is high risk. PayPal is
notorious for this. Their ToS will only be enforced in certain countries,
leaving companies in places like China with PayPal processing while your
company is permanently banned from the platform.

It becomes impossible to compete if you are banned from Stripe & PayPal while
your competitors are not. If their own rules are not applied equally across
your industry, they effectively pick the winners. Their platform also favors
long-standing merchants in many ways.

First by providing them an account manager, second by essentially
grandfathering in certain accounts. You'll find it very difficult to process
payments in certain industries on PayPal, likely not even being successful in
on-boarding, while sites operating in the exact same business have functioning
PayPal accounts.

It's incredibly anti-competitive. These processors run such a large scale
monopoly; there are so few comparable alternatives, I've seen so many people
go out of business purely by losing their PayPal.

------
sub7
India figured this out years ago. Launched a domestic government Visa
alternative called RuPay and also launched BHIM - an interface where everyone
gets an email address like payment address and can send/receive directly. Both
have traction.

Sidenote: A bunch of the payment gateways began integrating BHIM and charging
merchants a cut of the sale for what they pay 0 for. Can't see that lasting if
people move off V/M completely.

------
m12k
The experience of receiving credit card payments for a SaaS subscription sucks
badly, even if you disregard the inflated payment processing fee. Banks can
allow the charge to happen the first five months, then on the sixth charge,
randomly turn on a penny and reject the charge with a completely opaque
do_not_honor code, which probably translates to 'our fraud detection algorithm
felt extra paranoid today'. There's a whole industry of companies who help
other companies "poke" their customers when their payments randomly fail, to
prevent churn. This seems ripe for disruption. My dream tool for receiving
payments:

\- Isn't tied to a piece of plastic that expires

\- Front loads the fraud prevention by requiring 2FA to make sure up front
that the buyer actually wants to pay for this.

\- Opt-in, per-transaction chargeback/escrow service (intended for shipment of
physical goods) that you don't pay for if you don't activate. Transactions are
clearly marked whether they include this during checkout. Otherwise
transactions are final

\- For subscriptions, allows you to specify the conditions under which future
charges should also be accepted, and when they should be held and you get
contacted to approve them instead.

\- Basically anywhere the current system can fail/reverse a charge, the
improved system would verify this up ahead, so the payment processor can be
sure the buyer really wants to pay, and the merchant can be sure charges don't
fail unless the buyer runs out of money in their account or actively cancels
the subscription.

\- Charge a much more reasonable processing fee, due to not needing to wade
into disputes and fraud recovery all the time.

~~~
Polylactic_acid
The whole system seems to be designed in such a bad way and relies on a bunch
of heuristics and insurance to make up for easy fraud.

Why is it that to pay for something you give the seller the keys to your
account and they go in and withdraw the money they want instead of the seller
sending you a request and you accepting to send the requested money..

Another plus side of your suggestion is it now becomes trivial to cancel any
subscriptions since you can simply stop allowing the payment to go through
rather than getting the seller to stop taking your money.

~~~
imtringued
I'm still wondering why there is no electronic SEPA mandate. When you want to
authorize e.g. for your landlord to be allowed to withdraw rent payments from
your account the landlord has to physically mail you a SEPA mandate which you
have to sign and mail to your bank.

This may sound like a slightly obsolete but otherwise well thought out system
until you notice that revoking the SEPA mandate requires you to contact the
vendor first which is kind of silly.

~~~
hocuspocus
> I'm still wondering why there is no electronic SEPA mandate.

There is! Nothing forces vendors to collect a paper form and signature. I know
some countries still love paper trails (hello Germany) but even there, you'll
find some businesses that don't do it. When I lived in Berlin and signed up
for my broadband with 1&1, I just had to copy/paste my IBAN into their online
form.

> physically mail you a SEPA mandate which you have to sign and mail to your
> bank.

Nope. The bank is not involved at this stage. Banks authorize direct debits by
default, they don't need to know about the mandate beforehand.

> revoking the SEPA mandate requires you to contact the vendor first which is
> kind of silly.

It's not. It leaves the responsibility with the contracting parties, and keep
banks as a neutral medium. That said, as a customer, you can revert a direct
debit with a single click, and permanently reject further direct debits. It
doesn't have any effect on your contract (and the vendor will send it to debt
collection if it believes you're in the wrong), but you keep full control.

By the way, you can build a fully digitized billing system on top of that
(there's SEPAmail in France for instance), and more and more banks support
instant payments, which I assume can be used to improve the scheme.

------
ggm
It always fascinated me that the process went to a semi regulated user pays
cost recovery competition model, not to a regulated utility model.

At this point, the innovation stream has just about dried up. We're left with
a need for micropayments that don't cost more to process than the value of the
transaction, and almost all innovation has taken place to one side of card
services.

If we fixed international funds transfer we'd probably get some incremental
benefit. KYC is only part of the problem here, I recently did some IBAN
transactions to the UK government from Australia and the expectations of
fixed-field width (send this 15+ char reference string, but the input side has
12 chars for the reference field) were bizarre.

Huge amount of excess profit in TT.

Cheques? dead except for the USA.

Coins are dying of covid.

Remittence processes and the Islamic banking tradition is waiting to be
somewhat unlocked. (trust is not transitive, unless you are a migrant worker
from S.E.Asia and you have to get money back to mom and dad efficiently,
without having any formal ID in the host country because your boss took your
passport)

~~~
arcticbull
> We're left with a need for micropayments that don't cost more to process
> than the value of the transaction.

I disagree completely.

There's no technical or business reason why we couldn't have micropayments
tomorrow. It's been tried many times already. The thing about micropayments is
nobody actually wants them. Each time you make a payment of any magnitude,
your brain has to process a 'purchase' which carries a large mental burden,
and eventually you get decision fatigue.

Micropayments are one of those ideas that people think we want, but in
practice, nobody does.

As a thought exercise, why do you pay Netflix $13/month and deal with sporadic
content disappearances, when you could pay Apple $1.99 for a perpetual license
to whatever piece of content you could ever want? Nobody wants to make that
purchasing decision each and every time they want something. They'd rather pay
for an all you can eat buffet even if it's objectively worse _and_ more
expensive over time.

> If we fixed international funds transfer we'd probably get some incremental
> benefit.

Check out TransferWise! They've done a _ton_ to solve this problem. They even
have a currency agnostic bank account with local banking details in 6+ regions
and supports 50+ currencies. [1] IMO they've largely solved remittences for
the average joe.

If you've got a ton of money to move you can use InteractiveBrokers to
exchange currencies at market rates for $20 per million (!!) in commission.

[1]
[https://transferwise.com/us/borderless/](https://transferwise.com/us/borderless/)

------
intopieces
FTA:

> And it could potentially have been even worse. Had their few competitors
> also gone down, literally all electronic payments would have broken at once.

This... is not true. As noted by another comment here, a vast majority of the
value transferred (82%) is ACH in the US.

------
deadalus
Visa recently banned gab.com from accepting payment over dubious 'hate'
speech.

------
erostrate
How come we haven't had big privacy scandals from Visa/ Mastercard?

Big companies, a rent-like business, no pressure to do things well, own lots
of very sensitive personal data, clients giving the data away without
realizing it, little regulatory oversight on the data front, etc.

I would expect them to sell or leak poorly anonymised personal data, leading
to huge privacy issues.

Why hasn't this happened?

~~~
osamagirl69
Because they know they have a golden goose and are not willing to risk it all
pushing boundaries like the FANG companies are. They also have literally 50
years of experience with their data mining and the only think more powerful
that incompetence is 50 years of bureaucracy....

------
julienb_sea
There is literally direct competition with Amex. Sure not everywhere takes
amex but the majority do, and you can speak with your dollars (and still hold
Visa / MC in case amex fails you). Consumers derive huge benefit from the
safety, consistency and reliability of the networks Visa and MasterCard have
built out, and yes the consolidation is a certain price to pay for that. These
companies invest billions into anti-fraud technology.

But they are at their core public companies that want to maintain their image.
They are reactive to public pressure and political headwinds, and will cover
their bases by running away from thorny messy situations. This crosses the
aisle in every imaginable way - whether its stifling whistleblowers or
stifling supposed hate speech. The reaction to public pressure is not going to
be avoidable with any conceivable system, privately owned or otherwise.

The best defense is competition, and despite this post's assertions, there is
competition in this space.

~~~
wolco
American Express is not the answer. Let's not replace bad for worse.

~~~
Karupan
I use my Amex regularly. Can you explain how it’s worse?

~~~
PeterisP
The problem with VISA-MasterCard duopoly is that in many markets the
intermediaries (banks plus VISA/MC) skim off 2.5% off of the transaction
between the mercant and the customer.

Amex takes much more (~4%?), so the problem is even worse there. Of course,
they can and do bribe the customer with part of that fee so that it seems
attractive, but from the wider perspective it's a _huge_ overhead for no good
reason, and if _every_ transaction was like this (i.e. if Visa-MC was replaced
by Amex) then that would be a big drain on the economy.

------
rvz
Well one of the reasons why they (MasterCard and Visa) backed Libra is because
they were after the potential of cryptocurrencies, but in a controlled
fashion, which Libra was perfect for them, Unlike other alternatives until
they themselves left Libra.

Anything this duopoly can't control is a big no-no to them which is why they
detest Bitcoin and the other alternative cryptocurrencies. Some online
services are beginning to accept cryptocurrencies, which is a start.
Cryptocurrency ATMs are a thing to cash out money, thus one could say that you
might have bypassed them.

A side note, for those offended by master/slave terminology perhaps now you
can ask Mastercard to change their name. Since, its pretty much has somehow
offended somebody out there. /s

~~~
sonicggg
The terminology issue just shows us that people have got way too much spare
time during the pandemic.

~~~
monkeycantype
Terms like master and slave would probably be fine with everybody if we
actually properly addressed the history of slavery and genocide that set our
countries up so comfortably for some of us. I don't think anyone really cares
about a word, they care about a casual flippant reference to something they
care deeply about, an unfair society in which some of us are beneficiaries of
brutality that is not entirely in the past.

------
IvanK_net
The worst part is, that the fee for a card payment is shared between
Visa/MasterCard and your bank.

Bank transfers within a country are often free of charge, but are quite
uncomfortable to make (typing numbers) and usually are not sent immediately
(so that you can not pay this way in a grocery store).

Banks have no interest in making bank transfers easier or faster, or opening
up to cheaper competitors of Visa/MasterCard. Meanwhile, people happily keep
their money in a bank, seeing that all bank services are free and that it "can
not get any better".

I think, if anyone is to replace Visa/MasterCard, they should also make their
own bank (a place where people keep money in a long-term).

~~~
spockz
We have instant transfers between banks here in the Netherlands. It is coming
for the whole EER.

Some payment terminals now can also generate a QR code that you can use to
pay, in addition to the normal debit/credit card payments.

------
jerrysievert
there's a Futurama gag about a 3rd option that's just as apropos as when it
aired:

> Fry: $30? I can't afford that. Unless... Do you take Visa?

> Salesman: Visa hasn't existed for 500 years.

> Fry: American Express?

> Salesman: 600 years.

> Fry: Discover card?

> Salesman: Sorry we don't take Discover.

the good news is that Amex seems to have stepped up while partnering with
Walmart for their BlueBird cards - while not perfect, at least helping to add
more options. and with walmart in the mix it seems to help get a 3rd (Amex)
option accepted more places.

maybe not the perfect solution, but at least a step in the right direction.

------
choiway
Ending the duopoly is easy: create a payment processing system that charges
nothing. However, you start peeling the onion on that and you wonder if it's
just easier to create a new search engine.

------
HeavyStorm
The author clearly has little knowledge on the subject of payments. He's
likely a consumer.

Getting this "duopoly" right is very hard. Payments has a number of actors,
and the label is there to ensure fair play between acquirer and card issuer.

While mastercard and visa controls the market, it's not like there isn't
competition: Amex, discovery, etc., are all labels that compete with the so-
called duopoly.

------
tistoon
Speaking of monopolies: what about the handful guys (there are only 3!) who
manage ALL of our credit scores.. Experian ,TransUnion and Equifax.

------
ssn
I don't understand Hacker News. Tim Bray's post on Break Up Google was buried
and not visible on HN's front page. The next day this on Visa-MasterCard post
shows up on the top with a "forget Google" comment. Why?

Is this a result from the community or the algorithm?

HN seems to have changed a lot in the last few years.

------
coronadisaster
It is kind of crazy that anyone can buy my purchase history... Are there any
way around this besides using cash?

------
CryptoPunk
Aren't they just networks for transmitting credit issuance messages, and a set
of processes for handling disputes?

Anyone familiar with the intricacies of these operations know how amenable
they are to being debundled into discrete components and provided via an
Ethereum-like protocol?

------
dao-
> Like almost complete control over what can be sold online. Ever wonder why
> certain things are difficult to buy via PayPal or other similar systems?

So, why? The article doesn't seem to answer that question. What prevents shops
from supporting alternative payment systems?

------
stiray
What is extremely important here: we will not forget Google (Facebook,
Amazon,...) but just add Visa and Mastercard to the same list. But still
concentrate on Google (...) as large technological corporation have potential
to end up worse.

------
ricksunny
Nicely put. The problem of duopolies isn't limited to the debit-cards space.
Every single industry with a strong US footprint regresses to duopology
structure. The root cause of this phenomenon needs to be identified and
addressed.

------
totetsu
Is the timing of this by chance related to this
[https://news.ycombinator.com/item?id=23671933](https://news.ycombinator.com/item?id=23671933)?
(visa denylisting builder of Gab)

------
moralsupply
> time to end the Visa-MasterCard duopoly

Why? Because monopolies are bad, and we don't like them, no matter if they
provide value to people, if they are not built around government regulations
that stop competition from happening.

~~~
notpushkin
They would have to provide more value for less money, were there some
competition. I don't see a way in which one can compete with those two
(without resorting to aggression) on a global level though.

------
tibu
Immediate wire transfer could exchange it if people wouldn't be so used to the
card. What would be the motivation to do a wire transfer from you account
directly to the merchant instead of tapping your Paypass card...

------
craftydevil
Already India start doing it, its UPI system enable us to avoid cards for all
type of payments with processing fee. Also Rupay backed by GOI enable us to
use those cards in abroad using vast connection.

~~~
rishav_sharan
UPI is godsent. Probably the only good thing to come out of demonetization. I
use it everyday, from buying groceries at roadside stalls to paying for my
life insurance.

I have pretty much stopped using cash altogether and use cards mainly in those
outlets which don't have upi.

------
kidsil
The fastest way to do that is through phone-based payments.

Those protocols are substantially more open than Visa/MasterCard, and
introducing a competition shouldn't require hardware changes for the POS.

------
bibbitybobbity
We shouldn't forget about google. It also needs to be regulated.

This is addressed in the article but the title doesn't reflect this
accurately.

TLDR; Clickbait title :sad face:

------
adultSwim
Let's tackle both. Harmful anti-trust violations are rampant.

------
app4soft
> _Forget Google, time to end the Visa-MasterCard duopoly_

It's bad idea to forget "issue 1" and focusing on "issue 2".

Both issues are major.

------
Ratiofarmings
So instead of sometimes one of the two not being accepted, you want me to
carry 50 different ones and have 2/3 rejected?

No, thank you.

~~~
rbrtl
No... You have the option of any of 50, and they can all be accepted
everywhere; rather than the option of only two if you want a chance of being
accepted. I believe this is already law in the EU anyway, but there are few
competitors to the big two.

~~~
richardwhiuk
What's law? That you have to accept all types of payment? Nope.

If everything has to be accepted everywhere, then there's no differentiation

------
ww520
Amex/Discover, plus PayPal and a host of lessor money transfer apps/companies,
like Venmo and Zelle.

~~~
adjkant
Venmo is owned by Paypal. Zelle is owned by all of the big banks collectively
(Bank of America, Capital One, Wells Fargo et al.). The closest thing to a
"small" player is the Cash app, owned by Square.

No commentary on the larger picture here or Amex/Discover, just pointing out
your other examples don't exactly fit your point fully.

~~~
ww520
Good points. Thanks for pointing out.

------
annadane
...can't we go after every monopoly and power abusers and not 'forget' any of
them?

------
vinniejames
OP needs to read about Bitcoin, it solves most of the problems discussed in
the article

------
x87678r
Amex/Discover cards exist too, you should use them!

~~~
jedberg
I used to carry an Amex, but I also had to carry a Visa for all the times the
merchant wouldn't take my Amex. Life got a lot easier when I got a Visa with
all the same rewards as my Amex.

------
except
So, how does one build a card network?

~~~
User23
It's easy, you just convince a plurality of banks to honor your IOUs.

------
raffraffraff
Well whatever, but the mastercard name is so uncool right now I'm amazed they
haven't changed their brand to primarycard.

------
xtat
was all on board until the conclusion was "regulation"

------
MaximumYComb
What was on NP2 that it's been censored by Mastercard? A quick search online
suggested it was right wing politics but I suspect it must have had some
content cross some legal line in order for it to be blacklist.

------
biolurker1
blockchain can change that with stablecoins.

------
frankzen
Bitcoin Cash

------
programAgaib
Forget finance and tech, medical is under the tight grip of Physicians.

Every medical service requires paying a physician. And it's no trivial amount,
its a huge expense. Further, any numbers on physicians salaries are horribly
skewed because they don't consider specialists "physicians".

------
exprZ
Giving everyone access to payment processing means giving platform to unworthy
people like misogynists, white supremacists and conservatives as well.

Maybe we are better off with VISA.

~~~
voldacar
Can't tell if satire or not

------
pwdisswordfish2
Let's tackle Google first then we will have a look at the other complaints.
Not going to "forget" Google. Sorry.

------
programmarchy
Why not nationalize credit and banking? The industry has shown its gross
incompetence time and time again, notably in 2008 and now with COVID they’re
yet again settled with bad debt, this time corporate instead of housing. The
nation already subsidizes their risks and failures, so why not the upside.
Establish a clear hierarchy of accountability rather than the free for all
smash and grab we’ve been seeing for decades.

------
Jerry2
> _Forget Google_

How about NO! How about we go after all three of them? Google should not be
left off the hook. This is just whataboutism by Google's PR.

Anyway, Google's employees are all over this thread.

