Comment by bob1029

5 hours ago

Payment networks are not an easy thing to build or maintain. The security contexts you are operating within are extremely adverse.

I understand why this makes HN so upset. To the uninitiated nerd brain, these are just pieces of information flowing in and out of some computer system across networks. How expensive could it possibly be to actually send a packet to perform an online authorization with a bank's database? We all know the actual communication is ~free. What you are paying for is the maintenance of that connection, the security around it (e.g., PCI-DSS compliance), the ability to dispute that communication out-of-band, etc.

We could cut the cost of VISA's network in half or better if we could drop the compliance piece. I don't know how that would play out for the consumer segment though. How much economic activity would be curtailed if the average consumer had to start worrying about the security and stability of payment networks? Card skimming is a great example of this. Consumers will avoid certain retailers if they perceive an elevated risk of theft.

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bob1029

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nvme0n1p1  4 hours ago

Nobody is denying it costs money, the problem is it's not proportional to the value they add, nor their costs.

In the EU, their rake is capped by law, to an order of magnitude less than what they charge in the US. And it's still profitable. (Otherwise they would have pulled out of the market if they were losing money, obviously.)

The fraud prevention/etc you discuss benefits from economies of scale, but their fixed x% per transaction does not reflect those economies of scale. The free market has broken down here because of the difficulty for new market entrants.

  • carlosjobim  22 minutes ago

    > Nobody is denying it costs money, the problem is it's not proportional to the value they add, nor their costs.

    The value they add is much greater than their costs. People who deny this lack a lot of imagination to ponder how inconvenient things could be without credit and debit cards.

    But we don't need to imagine: If Visa and Mastercard didn't add more value than they cost, then merchants wouldn't accept them. It is still 100% voluntary for a merchant to decide if they want to accept cards or not. Which is a freedom they should have. These cards aren't legal tender.

usrnm  5 hours ago

> Payment networks are not an easy thing to build or maintain

Then why are there so many of them? I like travelling and almost every country I go to has its own thing going on, often more than one. I lost count long ago

Glyptodon  5 hours ago

How do countries like India and Brazil do it then if it's so hard and challenging that it couldn't possibly be a public service?

  • tflinton  4 hours ago

    What india and brazil have is more equivalent to Zelle in the US, not visa/mastercard. There's no viable chargeback, no international interoperability and no fraud protections.

    • abdullahkhalids  2 hours ago

      Chargebacks and fraud protection are largely needed in the credit/debit card system because you go around handing people the key to your safe to merchants and ask them to take whatever they want. And pinky promise not to share the key with anyone else.

      Once you have sane system like pix or upi, there is far less need for chargebacks and frauds.

      1 reply →

autoexec  3 hours ago

> We could cut the cost of VISA's network in half or better if we could drop the compliance piece. I don't know how that would play out for the consumer segment though.

I doubt the amount credit card companies charge in fees has much to do with the actual costs of running their service and are being inflated just because they can. My guess is that reducing the VISA's costs by letting them ignore security considerations would only mean that consumers get regularly screwed over while VISA continued to raise their fees every year.

Marsymars  2 hours ago

> We could cut the cost of VISA's network in half or better if we could drop the compliance piece.

We could also cut the cost to merchants by notably more than half if we dropped credit card rewards.

shermantanktop  3 hours ago

If the fee is covering all the investments required to make it convenient, we're socializing the risk taken by customers who buy from sketchy merchants or lose their card. That insurance system is a net positive for consumers, but they don't know they are paying for it.