Comment by pdonis
3 hours ago
> middlemen don't have much value add
On the contrary, the middlemen in credit card transactions are providing a service whose value add is so obvious that it's basically invisible, because it's become so normal: financial intermediation. The credit card company is basically covering your debts for you until you pay your monthly bill--and shielding you from having to give every merchant you purchase from your bank account information. On the other side of the transaction, the credit card company is guaranteeing payment to the merchant, who now doesn't have to care about trying to assess the financial reliability of every customer. It's become so normal that we don't realize what a huge value add it is, as compared with, for example, trying to convince the grocery store to accept your check, which forces you to hand them your bank account information, and forces them to decide whether they think you (and your bank) are reliable enough that your check isn't rubber.
Credit card companies are essentially charging a rake on the consumer economy. They provide a valuable service, but skimming every transaction and funneling it into a handful of private companies is a net detriment for the vast majority of society. They've been at it for decades. First-mover advantage. Entrenchment effect. When CCs are integral to the transaction of money, it's essentially a tax on exchanging money. It's monopolies conducting parasitic toll collection.
Consumers shouldn't have to pay a fee to give someone money. Sellers shouldn't have to pay a fee to collect money. Security should be built into the system, not a luxury you're taxed for.
They should not be able to tithe all of society in perpetuity because they set up shop decades ago.
See also: the app store, telecoms, health insurance in the US
> Consumers shouldn't have to pay a fee to give someone money. Sellers shouldn't have to pay a fee to collect money.
As I said, the fee you're paying if you use a credit card is for financial intermediation. That's not just "giving someone money" or "collecting money". There are other things included that have significant costs to provide.
> They provide a valuable service
And that means all your rhetoric about "charging a rake", "tax", "parasitic toll collection", "tithe", etc. is misplaced, because those things all imply that there is no valuable service being provided.
If you want to argue that there are ways to reduce the cost of the valuable service, for example by competition, that's one thing. But that's not the argument you're making.
> significant costs to provide
3% of transactions is an incomprehensibly large amount of cash. The systems that exist to transact cash have been in place for decades already. Major countries have already developed their own payment systems because they understand the problem and the cost to society. Most of these are entirely free and AFAICT, they work just fine.
> for example by competition
Sure, if you set up a time machine. Even in that case, there would be no meaningful competition. Someone else would simply occupy the position in the middle of the intersection instead.
"Parasitic" and "toll collection" remain accurate descriptors. What about "entrenched" and "monopolistic"?
Why couldn't this be a public service though? Governments spend so much money on producing and managing cash as a public good. Why can't we do the same for digital payment infrastructure?
> On the other side of the transaction, the credit card company is guaranteeing payment to the merchant, who now doesn't have to care about trying to assess the financial reliability of every customer.
The customer can file a chargeback in which case they win almost every time even if they are scamming.
Surely I can't get unlimited free groceries by just always paying with a credit card and then doing a chargeback, right? Like, it might work a couple times, but then wouldn't they just close my account?
I have no idea. Probably depends on how big you are as a company that the credit cards would care enough to step in rather than lose a customer or how much that customer costs them.
All I know is that for the chargebacks I've gotten for my saas, I submit a mountain of evidence that the user used it heavily and then filed a chargeback after the subscription ends.
Most of the times paypal will even agree the customer scammed, and they say they will talk to the credit card company on our behalf. However we have never once won one of these chargebacks if it was done with a credit card. Then paypal proceeds to remove the money from our account and tack on a chargeback fee.