[nish1500]

When you pay a merchant $100 with your card they get about $97. When this $100 has exchanged hands 50 times only $15 remains. The bank owns the other $85.

Cash is a hassle but it cuts out the middlemen. We need a unified payment system in western countries, but it's almost impossible given how much of a chokehold big banks have over our economy.

Capitalism at its finest.

[signal11]

UPI has no dispute resolution (as of now). So if you pay with UPI to someone and have a dispute, good luck. You have to approach the Indian courts to get your money back, which, given the Indian justice system, is… difficult.

By contrast, dispute resolution with cards is much easier. Also, I don’t recognise this 3% figure — not in all geographies.

Eg Europe under PSD2 has 0.3% for credit cards, and 0.2% for debit cards. In Canada, Visa and MC recently agreed to a 1% cap.

That said, I’d be very interested in seeing where the conversations around dispute resolution in UPI leads. Context: Indian banks have already begun to complain about UPI being free, and the Indian authorities had to quickly walk back a consultation around potential merchant-side charges to UPI.

I guess this tension between business, customers, and digital intermediaries is what makes payments an interesting space.

[hocuspocus]

The EEA cap on fees only applies to interchange in 4-party schemes, i.e. the part that goes back to the issuing bank. PSPs typically charge between 0.7 and 1.5%. But yes, it's possible to do much better than countries like the US. For starters because card-present fraud is virtually nonexistent, and online fraud is drastically lower thanks to SCA.

That said, you're right, there's a fundamental difference between moving funds in an immutable way (whose marginal price tends to zero) and a payment system.

[toomuchtodo]

Which means bifurcation will occur. Payments where you have high trust and confidence you won’t need a dispute will use UPI or similar instant payment rails. Transactions where you are not confident or are concerned a dispute is going to be required, you’ll pay the transaction fee to use CC rails. Credit cards will become “insured payment” rails for lower trust transactions.

I’d never dispute a payment to my mortgage servicer or electrical utility, but I absolutely might for a rando Facebook ad sale.

[1024core]

> UPI has no dispute resolution (as of now).

And cash does??

[vivegi]

> UPI has no dispute resolution (as of now)

Not true. [1]

[1]: https://www.npci.org.in/what-we-do/upi/dispute-redressal-mec...

[cubefox]

> We need a unified payment system in western countries, but it's almost impossible given how much of a chokehold big banks have over our economy.

Credit card companies charge even more than banks.

[umeshunni]

Most of the interchange goes to banks.

[1024core]

> When this $100 has exchanged hands 50 times only $15 remains.

Just to nitpick: 0.97^50 is 0.21806. So only $21.81 would remain and the banks would have $78.19

[nish1500]

I used 2.9% + 30cent for each transaction

[thatfrenchguy]

Only in America are fees that high :)

[somerandomqaguy]

Plusses and minuses to each system. You don't need to pay the cost of transporting the cash to and from a bank (worst case is armored car transport), and electronic transfers have lower accounting overheads (no need to manually count). And modern credit cards have pretty sophisticated fraud/card theft detection nowadays.

[louwrentius]

I agree. From what I understood, the Dutch iDeal system (which I love) might become a European standard. It doesn’t cover large parts of the world but I think the fees are not as “insane” as PayPal or systems like this.

[aleph_minus_one]

> From what I understood, the Dutch iDeal system (which I love) might become a European standard.

What can you tell me about iDeal's privacy aspects? Does it allow anonymous transactions (here it mght make sense to distinguish between

- non-anonymous entity sends money to anonymous entity

- anonymous entity sends money to non-anonymous entity

- anonymous entity sends money to anonymous entity;

"anonymous" is here to be understood as "anonymous to iDeal", i.e. iDeal has no practical chance of de-anonymizing this identity)?

[sunshinerag]

wow Capitalism? Where?

[solatic]

You make it sound like the other $85 that the bank got sits in a vault somewhere, extracted from the economy and hoarded in a stockpile. Actually the banks have their own costs (e.g. salaries) and much of the money is further invested. In fact, the natural state is to keep so little cash on hand that Dodd-Frank forced the banks to hoard more than they otherwise were inclined to.

Yes I've oversimplifying a lot of differences (payments infrastructure vs. investment banking, for one) but the point remains. I do think that day-to-day realtime debit-style payments should be a publicly-operated, minimal-or-zero-fee commodity rather than a massive source of rent, but having access to electronic payments for consumer retail is literally responsible for trillions of dollars more economic activity than you would see if we went back to cash-only.

[nish1500]

Salaries for what? Marketing? Obscene bonuses? Downtown office buildings? It is a manufactured need.

I am simplifying things but if we had a public owned payments system that wasn't a profit centre the costs would be far less.

Even within the developed world the costs are very different between Europe and the US. Your fees are paying for someone's hefty bonus and lobbying expenses.

Again, it has been proven. UPI works.

[wildrhythms]

Why do you believe the investments made by the middlemen processors and banks are more worthy than the investments made by businesses who the consumer is directly patronizing?