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>Customers gain an extra 1% cash back assuming they are already using a 2% cash back card.

But how? Your new payment system still has to be paid-for. The 2% cashback credit cards rely on two things: a 2.5-5% merchant fee (that you "never see"), and an expectation you'll never fully pay-off your card (so even with 2% back, they're still getting 8-27% from you)

If you're going to hold folks payment in escrow (like a bank essentially does wrt debit cards), then you have to get folks to deposit money to you (even if it's "instantaneous" a la Paypal) before sending it on to the merchant

If you're not going to be holding payers' money in escrow, you're now loaning it to them, which means you need to establish payment systems to recover from your users the bills they rack-up (ie - you've become a credit card company)

Your analysis is exceptional. My belief is that the card would function like Venmo, a fee-less P2P payment system, but replicating the reward benefits to the user.

What you're presenting is definitively the catch 22 serving the bottleneck to payment processing, but the belief is that removal of intermediaries nets consumers and companies a profit.

Operating on a fixed monthly cost to merchants is then uniquely enabled because of the lack of high variable costs of existing payment methods, allowing me to have the 'cheapest product' so to speak in a commoditized industry.

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