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Comment by anonymouskimmer | Hacker News Reader

I think you misread the point GP was making. The poor-poor don't have credit cards. They have cash and debit cards. They pay the same as we do at most[1] merchants, despite credit card transactions nominally costing the merchant more money than cash or debit transactions. Most merchants budget the cost of credit card fees into their regular prices that all people pay regardless of method of payment.

[1] - https://www.thebalancemoney.com/credit-card-surcharges-31542...

TLDR: The existence of credit cards is basically an automatic 2-3% inflation on prices. As a fraction of income, this hurts the poor the worst. The better off get this 2% back as rewards. Cash payers get nothing back.

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> The existence of credit cards is basically an automatic 2-3% inflation on prices.

If you want to draw this conclusion you’d have to calculate the cost of the alternative. What would the impact on prices be if there were no electronic payments? What would the impact on prices be if every bank had to implement its own electronic payment system with every merchant? The credit card system integrates a huge portion of the worlds merchants with nearly all of the worlds banks. It’s massively more efficient than the alternatives, apart from other conceptually similar systems that have exactly the same type of costs. Your claim that removing this efficiency would lower prices seems entirely implausible and to me.

Canada already has a national electronic system called Interac. It was established in 1984 and has a somewhat complicated fee schedule that generally maxes out around 35 cents per transaction. https://www.interac.ca/en/business/support/understanding-fee...

The world you described exists, and it’s called Alipay (in China), TNG (in Malaysia), Pix (Brazil), etc (that's why I listed them in my original comment). Alipay and Wechatpay is the standard in China, a country with a population triple that of the US, and only charges 55-60bps, a quarter that of the US. So yes, I do believe that we can gain efficiency by switching.

Also note that interchange is capped in the EU at 30bps, and they seem to do just fine without 2% cashback on every purchase. One might start to think that we can do with something similar here in the US.

I use several such systems, including TNG, and they have all of the same fee structures as credit cards.

The TNG cash back program: https://fintechnews.my/33848/e-wallets-malaysia/fave-offers-...

The TNG loyalty program: https://www.touchngo.com.my/promotion/redeem-your-points/

The TNG cardholder fees: https://www.touchngo.com.my/policies/touch-n-go-card-fees-an...

There’s also merchant fees (which are confidential). All of these systems are just reinvented credit cards. They often try to compete with credit cards on merchant fees, but you’re still paying for exactly the same thing. This “alternative” is just the same thing with a different name. You might find a few base points difference in merchant fees here and there (especially during the growth phase of these technologies), but the alternative isn’t to eliminate the premium charged for processing credit cards, it’s simply to allocate it to a different service provider.

This is the relevant number here: https://merchantsupport.tngdigital.com.my/hc/en-us/articles/...

Merchants are charged 0.5%. Compared to 2-3% in the US credit card scheme.

That’s a promo rate, and only available to certain merchants. Wait until it becomes profitable in “3 to 4 years”. The only real opportunity these systems have to increase efficiency is to not offer consumer fraud protections, which is obviously of questionable value to the consumers.

EU interchange rates are regulated to 0.2% for debit and 0.3% for credit and they offer fraud protection just fine

> If you want to draw this conclusion you’d have to calculate the cost of the alternative. What would the impact on prices be if there were no electronic payments?

The alternative is credit or debit cards with a tenth of the fees and no cashback, just like in every other country.

The alternative is not "no credit cards", it is "credit cards, but with lower interchange fees"

> What would the impact on prices be if there were no electronic payments?

According to the local gas station, 10 cents cheaper per gallon. Which is about 2%.

It’s a flat fee of 0.000025 and takes about a second for payments to go through on current gen blockchain L1s, many of which have retail Point of Sale systems.

You are failing to price in counter-party risk, exchange rate risk, and myriad other risks. Not to mention the cost of having a whole separate point of sale for a currency nobody has - or the fees for converting it back into a currency you can pay your suppliers and taxes with. Or the cost associated with reporting.

You can pay a very similar flat 1/3 of a cent fee for an instant FedNow payment with none of those risks or costs starting in July.

Cash, bank transfers, etc don't price in counter-party risk either. The only thing that does is Visa, and that's a layer on top of your existing statutory rights. Agreed re: fiat onramp/offramp.

0.3c is still far in excess of 0.0025c but maybe that won't matter.

The wild fluctuations in exchange rate and having a terminal for a currency nobody uses are a dramatically bigger risk than 0.3c - and yes, your counter-party risk is a non-issue in legacy finance.

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