Comment by toomuchtodo
14 hours ago
> Take SEPA Instant, for example. It’s great for many things, but effectively nobody pays using it in stores or even online.
My link mentions how Wero, replacement for US credit card rails in Europe, is being built on top of SEPA Instant. An adoption tracker is included, to show uptake progress. ~35% of tracked banks in scope in Europe for Wero have adopted it, as of this comment. They are actively building to get off of US credit card rail infrastructure.
In the US, similarly, it will take time to move off credit card rails, but we’ll get there. As mentioned, Walmart is already running live trials for pay by bank. I agree it is not fully operationalized yet, but it will be eventually. The most important primitive already exists (FedNow rails). Everything else is app experience and consumer training (for payment requests and transfers).
I see the pattern between the EU and US credit card -> instant payment transformation journeys, but maybe you don’t. Pix and UPI have shown how easy it is.
(Almost every deposit institution in the US currently has access to FedNow, per the Federal Reserve’s latest participant report, and through those deposit institutions and service providers, their customers)
I can definitely see that it would look like that – if stakeholders wanted to. On that, I’m not convinced at all, for these reasons:
Banks earn money on card payments and pay (or potentially even lose, due to fraud liability) money on ACH and FedNow. The card networks compete with each other exclusively on the issuer side for structural reasons (a merchant generally has to accept whatever the cardholder pulls out of their wallet or risks losing the purchase) and can for this discussion be considered aligned with the banks.
Cardholders get (often opaquely valued, sometimes even gambling adjacent) points and perceive credit cards as having better dispute rights for them, so they also prefer them over anything else, including cash and bank transfers, and any legal action against cards will face immediate popular backlash. (I can hear the "mile optimization" influencers screaming bloody murder just thinking about it.)
Merchants are the only stakeholder heavily lobbying congress for literally anything cheaper, but so far it hasn't made a real dent, despite decades of trying. I think the Durbin amendment can be considered a failure, all things considered; not many stores offer discounts on debit cards or surcharges on credit cards specifically, and those that do seem to often just make a completely disproportionate money grab of 4% or more, vastly beyond their actual costs. Besides that, the "small issuer exemption" ends up benefiting large fintech players at least as much as the actual local and community banks it was intended to serve.