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Comment by lstodd | Hacker News Reader

Absolutely support passing crap like this on to customers.

Otherwise there is no incentive to lower them.

Completely agree and it also punishes people who pay with cash because we all have to indirectly pay for the processing fees of others.

One could also say that the costs of using cash are being passed on to card-paying customers

What's hypothetically supposed to happen is the payment vendors compete with eachother for traffic, and businesses negotiate deals and use the ones that give a good deal.

Whether it's actually working that way in practice, of course, is a valid question.

The problem is network effects. If you accept Visa or Mastercard then you lose business, because many customers have only one or the other. So you need both, which means you can't play them off each other for a better deal and they aren't actually competing with each other.

Combine this with contract terms in many places preventing merchants from passing on fees and it gets even worse, because card networks can gain customers and increase their network size by offering rewards and then use the network effect to raise fees. If the merchant can't charge more to customers whose card network charges them higher fees, the cardholder has the incentive to use the card with the highest rewards (and thus the highest fees), so you get a ratchet of increasing processing fees despite an overall trend of falling underlying processing costs due to automation.

Speaking purely hypothetically, it's easy for a customer to carry both a Visa & MC, so if stores more frequently took only one or the other, customers would respond accordingly. Like they already do with AmEx, or when traveling internationally (where MC has a big leg up).

But that's chicken and egg. Collective action problem. You can't stop accepting one or the other until the large majority of customers carry both, which they won't do while most vendors continue to accept both thereby allowing the cardholder to only need one.

True, although Visa card circulation far eclipses MC, so you could take the gamble that they'll have a Visa. Last I checked, Visa actually had more cards in circulation than all three of the other major brands combined.

Slightly old info, but:

SEC filings for end of 2016 had Visa circulation at 335 million, MC at 200 million, Discover at 51.4 and Amex at 47.5.

https://wallethub.com/edu/market-share-by-credit-card-networ...

Nilson report 2016 card usage by volume has Visa at $1.549 trillion, with Amex at $0.695 trillion, Mastercard at $0.693 trillion.

https://www.valuepenguin.com/largest-credit-card-issuers

Forbes has some charts with market share info.

https://www.forbes.com/sites/greatspeculations/2017/09/07/vi...

The problem is it's not a gamble, it's a percentage. Even if 75% of your customers have a Visa, then 25% of them won't and you risk losing that amount of business by not taking what they do have.

Moreover, that still wouldn't give you competition, because then what incentive does Visa have to give you a good rate if they're the only network you could plausibly attempt exclusivity with? It's like trying to solve a lack of competition by creating a monopoly.

I agree that there isn't much of a way to get lower interchange fees, but many, many businesses overpay at the processor level, where there IS a way to get lower total costs.

>contract terms in many places preventing merchants from passing on fees a

This is not a thing anymore, the card brands allow surcharging. It's prohibited by state law in something like 7 states, but those are rapidly losing court battles about it.

Unless if you're Costco.

https://www.fool.com/investing/2017/06/20/how-did-costcos-cr...

I don't know if its true or not but heard that Costco with this new deal with Visa is only paying a flat 40bps in interchange cost. Now that's a deal!!

Companies should feel free to not accept credit cards, but if they do accept them, it becomes a cost of doing business, and I, as a card user, expect to not be penalized for using one.

Providing parking is also a cost of doing business. I don't see any arguments in favor of merchants charging car-driving customers more than walk-ins.

Conversely, we could regulate and treat card networks as utilities (allowing them to recoup reasonable operations costs) instead of for-profit concerns siphoning unnecessarily off of the flows of capitalism. It works for Europe.

Customers regulating through voting with their wallet isn't going to work with how much power large financial firms wield. I contacted Elizabeth Warren's office (she's on the Senate Banking Committee); if this matters to you, I suggest you do too!

> I contacted Elizabeth Warren's office (she's on the Senate Banking Committee); if this matters to you, I suggest you do too!

Unless you've also got a plan to get a Democratic majority in the Senate, your plan probably needs to extend beyond Warren if you are relying on her role in the Banking Committee (if you are expecting her to win the Presidency in 2020, that's perhaps another story.)

> your plan probably needs to extend beyond Warren if you are relying on her role in the Banking Committee (if you are expecting her to win the Presidency in 2020, that's perhaps another story.)

It does. No need to pollute this thread, email me if you want to chat about it.

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