|I've been researching a new payment system designed to compete with credit cards designed to do two things:|
(1) Remove the 'deadweight loss' in credit card fees
(2) Outperform the incentive structure of all credit cards for their users
Venmo solves (1), but fails to address (2) because it doesn't properly incentivize users like credit cards offering cash back, and isn't perceived to be a legitimate form of payment for business.
My researched approach is to charge the same processing fee as credit card companies of around 3%, but rather offer an instant discount of the order at the merchant, rather than a points system. What this does is:
(1) Outperforms the reward system of any other payment system
(2) Incentivizes consumers to spend more at SMB because they are getting a discount
(3) Allows SMBs to pass on their fees to save the customer money
(4) Creates instant gratification to the consumer
Because mobile pay is such a nominal percent of transactions, merchants would be given a small RFID sticker that could be appended to their existing POS or elsewhere and consumers would be given tap to pay embedded fabs synced to a mobile app to process transactions like credit cards. Fabs would not have numbers to avoid theft and would just have RFID embedded chips like YubiKey.
The payment system works the same way as Venmo. (I.e. uses the fee-less transaction technology in the way that payments are processed)
If anyone has ideas, open to hearing them below, or anyone interested in pursuing this research.
There are of course other incentives with credit cards such as the chargeback capability and financing. However, it's been cited 86% of chargebacks are 'friendly fraud', which further incentivizes SMBs and disincentivizes at-risk users. Financing may be outsourced and points charged for the rights to do so.