Credit card companies teamed up with visa/mc to collect 2% transacrion rents from from retailers. No other country has this kind of setup and card transaction costs elsewhere are only like .10$. This market structure is further inhibiting fintech innovations that are already widespread in China, such as Ant, QR payments and facial payments The only way I see to end this duopoly is if consumers are forced to pay transaction costs rather than retailers to incentivise using GPay or ApplePay linked to bank accounts or legal limits on transaction costs
There are multiple entities involved in the transaction. Generally it’s a 3 or 4 party model. 1. Issuer bank- they keep the lion share but return most of it as cash back. 2. Network - visa/mc- their usual share varies from 0 to upto 0.4. For example- Costco pays 0 to visa on their citi bank cards. 3. Payment processor- they keep a small share for providing the end user platforms. 4. 3rd party company(optional)- Apple and google for Apple Pay and Gpay are examples of this. All airline and hotel chain credit cards etc have some share. Most of the charges are usually for the services that each of the parties provide. Of course they have their profits build it but that’s how businesses work.
Thank you for sharing your knowledge with us
WeChat Pay is free.... the current system is clearly suboptimal but we are trapped in this system due to monopolistic behavior, the credit card companies give consumers rewards to lock them in, while collecting fees from retailers
Fin tech in United sates is light years behind Asian countries.
AMEX masterrace. Will never leave my Platinum and Gold cards. Don’t accept Amex? Sorry, won’t be coming to your biz next time
Lol skipping a restaurant because you want that 2% more cashback? How cheap can you be?
Not about the points, but for the principle
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Just general lack of understanding here. For near universal acceptance of payment the networks take a tiny fee. In the US the issuer keeps the lions share of that 2-3%. Most is given back in rewards. Some for risk and fraud. Little for profit. Cash ain’t free either. It has carrying costs and those armored safes aren’t free either. It’s a good deal for everyone. Not much to squeeze.
No I have studied the industry pretty well. Everything you have stated is classic monopolistic behavior. They give consumers rewards to lock them in, while charging retailers a percentage instead of just a flat fee for transaction. Cash isn't the only other option, digital payment solutions can take over like WeChat in China, which is fee free for transactions! Its not a good deal at for retailers and small businesses who basically have a 2% tax...
Explain the mono in monopoly. There are many networks, viable alternative payment forms like cash, ACH which are a large percentage of payments ... consumers have choice. Asian and by extension Latin American payments ecosystems evolved differently because they are newer and relative to the American ones don’t offer enough added value to change consumer behavior. The EU regulated the profits away so you have little innovation. And the bloc was largely incompatible due to many systems merging and the lack of a 250 year old central bank as in the US. Furthermore the networks V/MC don’t offer the rewards. The issuers do. And they change networks all the time. Your logic makes no sense.