Relevant: due to Ohio v. American Express, merchants are generally unable to steer customers from using a particular card. For example if a merchant accepts Visa at all, the merchant has to accept all Visa cards, not selectively choose the lower-fee cards; the merchant also cannot tell the customer to use Discover instead to save costs and only use Visa if that's the customer's only card. This anti-steering provision is originally invented by AmEx and now all four major networks have this requirement. And the SCOTUS just ruled that anti-steering provisions do not violate anti-trust regulations. So the only possible recourse is to outright stop accepting a particular payment network.
AmEx was one of Warren Buffet's earlier investments, and a proof-of-concept of investing in companies with defensible moats. This ruling comes 55 years after his initial investment, and the moat feels as deep as ever.
Later businesses have perfected the art of winning the customer relationship and solidifying their lead with hardball terms for vendors (Walmart), merchants (Amazon), advertisers (Facebook/Google), developers (Apple/Google) and contractors (Uber).
It has been asserted elsewhere in this HN discussion that Visa charges merchants higher amounts for transactions with higher-end rewards cards.
Assuming this is true, and these anti-steering provisions prevent merchants from discriminating, what prevents Visa from issuing cards with 200% fees? What's holding the cash back level at a mere 1-2%?
The conservative-controlled court has generally ruled that a contract is a contract is a contract. A contract may void all rights and it may override the laws of the sovereign States. Contracts are the ultimate tool to subrogate rights into someone elses hands.
Once you understand that you can accidentally sign away human rights, a corporation signing away its "right" to speech under corporate personhood also makes complete sense.
" On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general."
My MasterCard is 2% cashback (through points, but that just means I batch it), but has an annual fee of $150 for two cards, and a minimum household income. I need to spend $7500 on the card just to break even, but if I funnel nearly all my expenses through the card I can net $1000 or more a year.
These "rewards" come from the merchant, in the form of higher fees, and because the merchant can't discriminate prices between credit/cash (probably in the CC t&c somewhere) then if the merchant wants x% profit from me, they're earning >x% from someone paying cash.
In Denmark we have a national payment system called Dankort. All issued Visa cards also work as Dankort. Transaction fees on Dankort is one tenth of visa, and all payment terminals default to Dankort. This saves Danish retail a lot of money while still ensuring they we can buy stuff online and when traveling using visa.
This seems like a missed opportunity for Google Pay and Apple Pay. Before smartphones and NFC, it would've been too much for every merchant to make their own card, nobody is going to carry that many cards.
But imagine if Target, Walmart, Best Buy, etc. made store cards and they all integrated with Google/Apple Pay. When a customer enters the store, the app could automatically pick the right card. Google and Apple just needs to be cheaper than the rates charged by Visa/MC/Discover/Amex.
For example, I have a Target Redcard. Why isn't this card integrated with Google/Apply Pay? They've already setup the financial infrastructure to extend credit to customers. It should be a small step to add this to Apple/Google Pay.
In Australia, despite the credit card companies and banks fighting tooth and nail against it, it's legal for merchants to charge credit card fees and the fees have to be proportionate to the actual merchant cost.
Plenty of places charge no fee for Amex. Usually bigger ones like Woolworths, Coles, David Jones, etc.
I use it whenever I can (for the frequent flyer rewards), and I expect quite a lot of people do since they do billions in revenue over here (but unfortunately have managed to pay no tax in Australia for several years according to investigative journalist Michael West [1]).
I hate credit card fees as much as the next guy, but to be fair my credit card was the only way I could pay for things in Asia since I just lived there for 6 months. If I had used cash, the only ATM near me stole my friends debit card, and multiple people I know were robbed and pick-pocketed. My credit card insulated me from those risks, which I was fine paying an extra 1% for.
Now that I’m back in America the risk is far less, but what alternatives in America are there? I hope the payment apps/wallets become universal but we definitely aren’t there yet.
A lot of problems would go away if all merchants (voluntarily or by law) explicitly charged their payment costs to the customer. Both for card and cash transactions, because cash handling isn't free either.
The customers using high reward cards would then soon discover that they are just paying for those rewards themselves, and the free market would quickly push everyone to the most efficient payment systems.
That's why Kroger is willing to turn you away -- they don't want to pay for your rewards.
In a business where profit margins can be a thin 1 - 2%, losing some customers that cost a 3% transaction fee while driving others to cheaper transactions can be a net win despite losing business.
Though I suspect that Visa will blink first before other retailers decide to do the same.
I wish credit card fees would come down, they're ridiculously high and increase the price of doing business, which increases the prices you pay for items.
Seriously, dealing with cash is a hassle, especially on a self-checkout. Arco has tried the same nonsense and I avoid them at every turn, because it requires me to a) have cash and b) stand in line to pay , rather than it taking a moment to swipe a card.
Kroger has most likely done the math with their Kroger rewards program (which has historical payment data), and has determined most people won't care and will switch to debit or a non-Visa CC network instead.
They do, but different cards on different networks have vastly different fees.
The consumer using Visa SuperRewardsPlatinum probably doesn't know that it's costing the retailer more than other cards when they use it.
The originating bank does though, which is exactly why they chose that network in the first place. The market is opaque and doesn't lead towards lower fees and greater efficiency.
It reminds me of super-expensive "we'll pay your insurance deductible" auto glass places which used to advertise on TV all the time. Inflate the cost, and give the consumer a kickback.
Grocers are being squeezed from all sides. Walmart and Target are spending lots of money to take dry goods market share — they will spend $8 to ship you a little box of onion dip. Costco and BJs pull in families.
Amazon is doing all of the stuff they are doing.
Kroger is bigger, but lacks the scale of the giants. And most grocery stores are regional affairs whose footprint is limited by their distribution network and who cannot raise money because why would you when the competition is a behemoth like Amazon who can lose billions to get market share.
Good? I hate the asinine secondary market of "points". Just don't take the money in the first place and then we don't have to sort out how I can reclaim it somehow.
The economics of it isn't just handing you your own money with a couple arbitrary hoops in the way. There's a portion of cross-subsidy from cash, debit, and low-rewards credit card payers, along with capturing some of the merchant's efficiency gains of using cards over cash (harder for employees to steal, no need for armored cars for cash pickups, etc).
Or just work the system - I made around $6000AUD from points in the last 12 months. Its pretty minimal work. Sign up for card. Fulfil requirements to get sign-on points then cancel and move onto the next card. Your credit rating takes a bit of a hit but recovers over time.
I love points. I get to fly first or business class internationally all the time, and it's all pretty much paid for by rubes that subsidize my travels.
So you hate getting something back for choosing one payment method over another when there's no indication that retail stores would lower their prices if credit cards (and their transaction fees) were wiped out?
At this point they should consider investing in their own debit-like card issued by themselves. You prepay it with $100, you get extra 5% loaded on the card, and additional discounts for using it. The retailer saves on per transaction fees since they will have to only pay it once for $100.
This is basically the approach Amazon and Starbucks have taken. Every $25 card reload via the Starbucks app probably adds up to a lot of money in saved transaction fees.
The penetration of credit cards into everyone's daily life is already too deep. Let's face it, at this point they already got everybody well locked up. Any attempts to resist from just a few companies here and there are really just futile.
Maybe this is crazy, but it seems like Google or Amazon could compete with a credit card network with lower merchant fees. Besides being great, it would be great PR.
In the early days of the Republic, individual Banks used to print their own currency. It was all dollars, but it was produced by different companies.
Now our different dollars are plastic or even just ephemeral, the difference being that they may not be universally usable. Something's definitely wrong here.
The article mentions technological alternatives - what are they? There is no way blockchain can fill this void, so .... what can do electronic payment if not the giant card networks?
[+] [-] kccqzy|7 years ago|reply
https://www.supremecourt.gov/opinions/17pdf/16-1454diff_6579...
[+] [-] amsilprotag|7 years ago|reply
Later businesses have perfected the art of winning the customer relationship and solidifying their lead with hardball terms for vendors (Walmart), merchants (Amazon), advertisers (Facebook/Google), developers (Apple/Google) and contractors (Uber).
[+] [-] stickfigure|7 years ago|reply
Assuming this is true, and these anti-steering provisions prevent merchants from discriminating, what prevents Visa from issuing cards with 200% fees? What's holding the cash back level at a mere 1-2%?
[+] [-] kevin_b_er|7 years ago|reply
Once you understand that you can accidentally sign away human rights, a corporation signing away its "right" to speech under corporate personhood also makes complete sense.
[+] [-] unethical_ban|7 years ago|reply
[+] [-] cm2187|7 years ago|reply
[+] [-] ashishb|7 years ago|reply
" On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general."
[+] [-] smileysteve|7 years ago|reply
Cash has high costs that likely make electronic forms of payment competitive.
You have
- Employees skimming the till;
- Theft insurance for a safe, the nightly amount in the safe
- Managers balancing the cash registers with change/safe
- Armored trucks picking up the money (2-3 men guarding the transfer)
- Banks processing the money
- Employee time and frustration ensuring they didn't come up short
tldr; It takes one armed robbery or employee malfeasance before ~2% fees seem very much worth it to reduce cash on hand.
[+] [-] jamie_ca|7 years ago|reply
My MasterCard is 2% cashback (through points, but that just means I batch it), but has an annual fee of $150 for two cards, and a minimum household income. I need to spend $7500 on the card just to break even, but if I funnel nearly all my expenses through the card I can net $1000 or more a year.
These "rewards" come from the merchant, in the form of higher fees, and because the merchant can't discriminate prices between credit/cash (probably in the CC t&c somewhere) then if the merchant wants x% profit from me, they're earning >x% from someone paying cash.
[+] [-] sorenbs|7 years ago|reply
[+] [-] bit_logic|7 years ago|reply
But imagine if Target, Walmart, Best Buy, etc. made store cards and they all integrated with Google/Apple Pay. When a customer enters the store, the app could automatically pick the right card. Google and Apple just needs to be cheaper than the rates charged by Visa/MC/Discover/Amex.
For example, I have a Target Redcard. Why isn't this card integrated with Google/Apply Pay? They've already setup the financial infrastructure to extend credit to customers. It should be a small step to add this to Apple/Google Pay.
[+] [-] jpatokal|7 years ago|reply
https://www.accc.gov.au/consumers/prices-surcharges-receipts...
Unsurprisingly, nobody uses AmEx or Diners here, because nobody's keen on paying 2% surcharges.
[+] [-] stephen_g|7 years ago|reply
I use it whenever I can (for the frequent flyer rewards), and I expect quite a lot of people do since they do billions in revenue over here (but unfortunately have managed to pay no tax in Australia for several years according to investigative journalist Michael West [1]).
1. https://www.michaelwest.com.au/american-express-pays-no-tax-...
[+] [-] lowpro|7 years ago|reply
Now that I’m back in America the risk is far less, but what alternatives in America are there? I hope the payment apps/wallets become universal but we definitely aren’t there yet.
[+] [-] wcoenen|7 years ago|reply
The customers using high reward cards would then soon discover that they are just paying for those rewards themselves, and the free market would quickly push everyone to the most efficient payment systems.
[+] [-] chiph|7 years ago|reply
[+] [-] Johnny555|7 years ago|reply
That's why Kroger is willing to turn you away -- they don't want to pay for your rewards.
In a business where profit margins can be a thin 1 - 2%, losing some customers that cost a 3% transaction fee while driving others to cheaper transactions can be a net win despite losing business.
Though I suspect that Visa will blink first before other retailers decide to do the same.
[+] [-] bostonvaulter2|7 years ago|reply
[+] [-] will_dev_4_food|7 years ago|reply
[+] [-] parshimers|7 years ago|reply
[+] [-] toomuchtodo|7 years ago|reply
[+] [-] jlarocco|7 years ago|reply
[+] [-] sokoloff|7 years ago|reply
Said differently, it's exactly the type of business that I'd expect to care deeply about transaction fees.
[+] [-] oasisbob|7 years ago|reply
The consumer using Visa SuperRewardsPlatinum probably doesn't know that it's costing the retailer more than other cards when they use it.
The originating bank does though, which is exactly why they chose that network in the first place. The market is opaque and doesn't lead towards lower fees and greater efficiency.
It reminds me of super-expensive "we'll pay your insurance deductible" auto glass places which used to advertise on TV all the time. Inflate the cost, and give the consumer a kickback.
[+] [-] Spooky23|7 years ago|reply
Amazon is doing all of the stuff they are doing.
Kroger is bigger, but lacks the scale of the giants. And most grocery stores are regional affairs whose footprint is limited by their distribution network and who cannot raise money because why would you when the competition is a behemoth like Amazon who can lose billions to get market share.
[+] [-] Dwolb|7 years ago|reply
Profit before Visa is $100M, profit after Visa is $80M.
If you negotiated Visa’s fees down to 1.5%, profit after Visa would be $85M. This is a 6% improvement in operating profit which is a lot.
[+] [-] cagenut|7 years ago|reply
[+] [-] ThrustVectoring|7 years ago|reply
[+] [-] rosege|7 years ago|reply
[+] [-] Marsymars|7 years ago|reply
The latest fad in Canada seems to be Paytm, which lets you pay (among various bills), your property taxes with your credit card.
[+] [-] cycrutchfield|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] Bramble|7 years ago|reply
[+] [-] amf12|7 years ago|reply
[+] [-] finaliteration|7 years ago|reply
[+] [-] m0rphy99|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] mhb|7 years ago|reply
[+] [-] mxuribe|7 years ago|reply
[+] [-] a3n|7 years ago|reply
Now our different dollars are plastic or even just ephemeral, the difference being that they may not be universally usable. Something's definitely wrong here.
[+] [-] lifeisstillgood|7 years ago|reply
interesting problem
[+] [-] 8bitsrule|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] exabrial|7 years ago|reply
[+] [-] arisAlexis|7 years ago|reply