Visa and mastercard innovated in an era where payment settlement was notoriously difficult and expensive but they've used their monopolies to entrench themselves in (by negotiating deals with merchants and bribing consumers with points) while the rest of the world moves on towards "layer 2" payment systems that are much cheaper and efficient.
In India there is UPI (Unified Payment Interface), which works with all bank accounts, it's facilitated by the Government and it comes with
i. QR Code (Used with strangers and at Merchants)
ii. UPI ID
iii.And links to phone number.
Anyone can pay to anyone instantly free of Charge. Only limit is it's limited to ~ $1000 payment. The QR code can also be dynamically created by POS terminals containing the total bill amount as well, so upon scanning the amount is auto populated in the payment app, you just have to enter the security pin.
And since it's a Govt. Project, its not limited to just one app, there are lots and lots of apps working on the same system. There is even a VISA/Mastercard credit alternative : RuPay that works within the system.
Shameless self-promo: We've been working for the last two years on making money movement free. We use ethereum (and stablecoins) for that, and integrate with the novel real time payment networks like PIX, Wechat, Yape, Mercadopago and so on.
We're still orders of magnitude smaller than Visa and Mastercard, but I do believe products like ours (and competition is red hot here, theres so much good choice!) will be good for consumers.
Money should be like a message: free and instant
We're open source btw, happy to show off codebase and review PRs
Wechat pay in China is interesting. It costs nothing to add money to your balance from your bank, or to pay someone from your balance. It only costs the end merchant who wants to withdraw it from their balance back into their bank. If they can keep it in Wechat pay and spend it on other things (which is very easy as it and Alipay are the primary payment methods for everything), then there's no charge.
I guess Tencent are making their profit from the interest they earn on the money that was transferred into them that just stays in people's Wechat wallets in effectively a parallel currency.
> Revolut works similarly. You don’t pay any fees on transfers to other Revolut accounts, but you do for other bank accounts.
Does it? I'd be surprised if it does in the UK at least, as all banks do free transfers to every other bank in the UK via Faster Payments. I thought it was the same in the EU?
It's time for Europe to process the own money. Strange that the dominance of Visa/Mastercard/Maestro was left for so long. Of course there is a lobby from them to attack the digital Euro
There is already the EPC QR code, which contains all the data required to initiate a SEPA credit transfer. This code is supported by practically all banking apps (at least in Germany). The standard is public and free (see https://en.wikipedia.org/wiki/EPC_QR_code)
The merchant's system displays this code, you open your online banking app, scan the code, select "SEPA INST" (here's the usability catch!) to make the payment instantaneous, and confirm. Within 10 seconds, the money is transferred to the merchant's account.
Either the merchant's bank or a third-party Open Banking API immediately informs the merchant's system (e.g. by push notification or webhook), and a receipt is issued.
Everything is already here, but since this system would be virtually free to use, nobody really has an incentive to push it. It costs money to educate the public, and there is no money to be made. Instead, everyone gets paid handsomely by the card mafia.
Do people who pay ridiculous interest qualify for 2% cards? Honest question; I don't carry a balance so have no idea what is advertised at other types of consumers.
I was just under the impression that the cards with the best benefits were somewhat harder to get. I do understand that credit card companies make money on interest and late fees, so they should find consumers to be attractive so long as they ultimately pay the bill/interest.
I guess the question is whether they can distinguish between people who are going to carry a balance but ultimately pay and people who are a true default/bankruptcy risk.
You might be surprised to hear that my small business sometimes sees fees at 11%.
We blocked that card processor, obviously. But the % is very much not constant across e.g. Visa, often every purchase in a day is slightly different, and we can't even tell people what the rate is for their purchase due to a couple layers in between (still figuring out if we can fix that). It's vile, and probably should be illegal to not pass through the cost visibly.
Stripe is 2.9%+30¢ right, and that’s the advertised rate. So I assume any business seeing averages higher than that can be avoided by using a platform like Stripe.
The Stripe rate is a careful blend. There are many cards that are cheaper to process and there's probably a few that are more expensive to process at that rate, it works out in the wash in favor of Stripe. Also, that 30 cents is a large percentage if you're looking at a $5 transaction, for example (6%!)
Small merchants are people, and people vary in their intelligence/savvyness and may have other issues like poor credit or high chargebacks that they usually forget to mention. Some people roll the cost of the terminal into a higher fee as well.
I helped out a friend who owns a deli when he took over from his parents. His dad saw cash as a way to avoid taxation and had some awful payment processor where they paid a high fee and was renting a POTS based terminal - $60/mo to Verizon and $30/mo for the terminal.
Now he keeps one set of books, and raised his average sale by about 10%. Their catering business, which drives profits, are up significantly with online ordering through the POS.
Ditto with a non-profit I was on the board of. Pushing Venmo and Square for donations increased donations by like 30% and reduced shrink at fundraisers. Anyone who claims they can’t afford a 3% fee is going out of business anyway.
One factor that the author glosses over a bit is that highest swipe fees are for credit cards with benefits. The interbank system he describes is a debit system, no credit is being extended. Even in the US, debit swipe fees tend to be less.
Visa and mastercard innovated in an era where payment settlement was notoriously difficult and expensive but they've used their monopolies to entrench themselves in (by negotiating deals with merchants and bribing consumers with points) while the rest of the world moves on towards "layer 2" payment systems that are much cheaper and efficient.
Anyone can pay to anyone instantly free of Charge. Only limit is it's limited to ~ $1000 payment. The QR code can also be dynamically created by POS terminals containing the total bill amount as well, so upon scanning the amount is auto populated in the payment app, you just have to enter the security pin.
And since it's a Govt. Project, its not limited to just one app, there are lots and lots of apps working on the same system. There is even a VISA/Mastercard credit alternative : RuPay that works within the system.
The QR is a URI with the ID, amount and maybe other stuff. It's a client-side implementation.
RuPay sure "works within the system" but is pretty much useless for international payments/subscriptions. Not really a VISA/MasterCard replacement.
We're still orders of magnitude smaller than Visa and Mastercard, but I do believe products like ours (and competition is red hot here, theres so much good choice!) will be good for consumers.
Money should be like a message: free and instant
We're open source btw, happy to show off codebase and review PRs
https://github.com/peanutprotocol/peanut-ui
https://peanut.me/
I guess Tencent are making their profit from the interest they earn on the money that was transferred into them that just stays in people's Wechat wallets in effectively a parallel currency.
Revolut works similarly. You don’t pay any fees on transfers to other Revolut accounts, but you do for other bank accounts.
Does it? I'd be surprised if it does in the UK at least, as all banks do free transfers to every other bank in the UK via Faster Payments. I thought it was the same in the EU?
I know that the banks are trying to build a payment solution on top of this technology but it's not really getting traction.
I am wondering if there is a way to bootstrap something bottom-up by offering something to merchants that has a clear value prop.
The merchant's system displays this code, you open your online banking app, scan the code, select "SEPA INST" (here's the usability catch!) to make the payment instantaneous, and confirm. Within 10 seconds, the money is transferred to the merchant's account. Either the merchant's bank or a third-party Open Banking API immediately informs the merchant's system (e.g. by push notification or webhook), and a receipt is issued.
Everything is already here, but since this system would be virtually free to use, nobody really has an incentive to push it. It costs money to educate the public, and there is no money to be made. Instead, everyone gets paid handsomely by the card mafia.
How did Venmo and Cash app get any traction? After all, we already had PayPal. There was already a way to transfer money to your friends.
How did Robinhood get any traction? We already had Etrade and other online brokers.
I guess the question is whether they can distinguish between people who are going to carry a balance but ultimately pay and people who are a true default/bankruptcy risk.
We blocked that card processor, obviously. But the % is very much not constant across e.g. Visa, often every purchase in a day is slightly different, and we can't even tell people what the rate is for their purchase due to a couple layers in between (still figuring out if we can fix that). It's vile, and probably should be illegal to not pass through the cost visibly.
See the "raw" rates here: https://www.mastercard.com/content/dam/mccom/us/business/doc...
I helped out a friend who owns a deli when he took over from his parents. His dad saw cash as a way to avoid taxation and had some awful payment processor where they paid a high fee and was renting a POTS based terminal - $60/mo to Verizon and $30/mo for the terminal.
Now he keeps one set of books, and raised his average sale by about 10%. Their catering business, which drives profits, are up significantly with online ordering through the POS.
Ditto with a non-profit I was on the board of. Pushing Venmo and Square for donations increased donations by like 30% and reduced shrink at fundraisers. Anyone who claims they can’t afford a 3% fee is going out of business anyway.