There is also a new EU law on the books mandating the provision of instant digital payments across the market. The critical paragraph in the law is that providers are *not allowed* to charge more for instant payments than delayed cleared payments. This will effectively drive the cost of retail instant digital payments to zero.
```
PSUs are very sensitive to the level of charges for substitutable payment methods. The level of charges can therefore
steer them towards or away from a given payment method. In national markets where higher transaction-level
charges for instant credit transfers in euro have been applied, when compared to charges for other credit transfers in
euro, the uptake of instant credit transfers is low. That has prevented the attainment of the critical mass of instant
credit transfers in euro that is necessary to realise the full network effects for both PSPs and PSUs. Therefore, all
types of charges applied to payers and payees for the execution of instant credit transfers in euro, including pertransaction charges or lump-sum charges, should not exceed such charges applied to the same PSU for
corresponding types of other credit transfers in euro. It would be undesirable that PSPs circumvent the aim of that
requirement. When identifying corresponding types of credit transfers, it should be possible to use criteria including
the payment initiation channel or the payment instrument used to initiate the payment, customer status, and
additional features or services.
```
that's also why we don't get any decent credit cards in europe - there's no money to pay for it
i think the US system is probably better for wealthy people who always use cards and actively play the game (and for the credit card processors of course). Euro system is better for everyone else
ps: is there some sort of contract that stops vendors from adding a "credit card processing fee"? maybe banning those clauses would be the best way to let market forces sort the issue out - once people see that they're paying 3.5% more to use a 2% cashback card, they'll start asking for other options
Another way of looking at it is that every credit card in EU is better than in the US because the credit card companies are not taking with one hand and giving back less with the other. The money has to come from somewhere.
It’s a great coup of US credit card companies to convince credit card users that they are getting “free money” when it’s the exact same money they paid in transaction fees.
> It’s a great coup of US credit card companies to convince credit card users that they are getting “free money” when it’s the exact same money they paid in transaction fees.
The transaction fees aren't explicitly added to only credit card transactions - they are baked into the price so people who pay cash and debit are also paying a fee. Credit card rewards therefore reallocate money from people who use cash/debit cards to people who use "reward (credit) cards".
US credit can be indispensable for those taking career risks and those operating small businesses.
In any case, I don't pay transaction fees the merchant does. They're often not allowed to give cash or particular types of cash-in-kind store discounts. This actually just raises the prices for everyone.
The payoff for the merchant is it reduces some of the risk of taking cash money and stabilizes some of their transaction flows through their account. It's all probably worth slightly more than what the EU caps it at, but the solution to improve this discovery is to increase the number of transaction networks, not arbitrarily cut them off at the knees and ensure the market never grows to this point.
It's at least one reason to love bitcoin and other crypto. You don't need permission to conduct a transaction. Which, given the extreme costs of transactions there, was clearly sorely lacking in the current artificially scarce market.
> Sure but what happens in case of fraud, or if I need to initiate a dispute ? What are the fees for that transaction ?
Well, yea, exactly. I'm pointing out two systems that are diametrically opposed and nothing in the middle. It highlights the fact the market is broken. This is one consequence of that.
> Unless you're one of those operating small businesses.
Ironically, I never took credit. Cash or Check only. Handling costs don't apply because the chain of custody is just myself.
To provide another data point, in France you are allowed to refuse credit cards or checks. Cash is the only payment method that you cannot refuse but there are exceptions for that as well.
It does, and it's usually free if you pay in full every month, just like in the US.
Given the interchange cap (0.3%) and current interest rates, this interestingly looks like a losing product at a first glance (the cost of capital for an average due date of 6 weeks after the purchase date is higher than 0.3%).
> is there some sort of contract that stops vendors from adding a "credit card processing fee"?
In EU it is not allowed to charge the customer any kind of extra fee for using a card. Though obviously it only works well together with the 0.3% cap on the actual fees the vendor pays.
> You're not allowed to charge your customers extra for using a credit or debit card. This applies to all card purchases (in shops and online) made throughout the EU.
It’s a bit more complicated: Even in the US, it’s not Visa and Mastercard taking the entire 3.5%. The largest part of that goes to the issuers, who pay a significant fraction back to the cardholder as rewards.
It's also increasingly common to pay without the credit card companies getting involved at all and have the payment completely free. At checkout you're just presented with a QR code which you scan from within your bank's phone app and which populates all of the payment details. Then you just tap pay and because the bank to bank payment is instant the checkout page will update within a few seconds and you're done. The downside is that this kind of payment is not insured and you cannot do charge backs (so smallish amounts only).
Given that people usually tip by card, in a way they do (not sure if businesses usually subtract the processing fee from the amount they pay out their workers).
So much for market forces in the land of the free!
How is this not market forces? Europe is using anti-market forces regulations to artificially lower the price, while the US is letting the market (ignoring some monopoly and collusions arguments of course) find the 'natural' price of a product. "Market price" doesn't necessarily mean lower price.
Even the most pro free market economic theories have the core assumption that the free market only leads to efficient pricing under a set of core assumptions.
These include low barriers to entry, strong competition, perfect elasticity on both the consumer and producer side, and no mono/duo/oligopolies that prevent those from working correctly.
This is a classic oligopoly where the free market does in fact not work to find the "natural" price.
In Europe it is capped at 0.3%. So much for market forces in the land of the free!
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
There is also a new EU law on the books mandating the provision of instant digital payments across the market. The critical paragraph in the law is that providers are *not allowed* to charge more for instant payments than delayed cleared payments. This will effectively drive the cost of retail instant digital payments to zero.
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L...
Quote from link:
``` PSUs are very sensitive to the level of charges for substitutable payment methods. The level of charges can therefore steer them towards or away from a given payment method. In national markets where higher transaction-level charges for instant credit transfers in euro have been applied, when compared to charges for other credit transfers in euro, the uptake of instant credit transfers is low. That has prevented the attainment of the critical mass of instant credit transfers in euro that is necessary to realise the full network effects for both PSPs and PSUs. Therefore, all types of charges applied to payers and payees for the execution of instant credit transfers in euro, including pertransaction charges or lump-sum charges, should not exceed such charges applied to the same PSU for corresponding types of other credit transfers in euro. It would be undesirable that PSPs circumvent the aim of that requirement. When identifying corresponding types of credit transfers, it should be possible to use criteria including the payment initiation channel or the payment instrument used to initiate the payment, customer status, and additional features or services. ```