Thread

1. carlosjobim · 1790944813 · focus · HN ↗

   And the benefits for users would be?

   1. asimpletune · 1790945273 · focus · HN ↗

      Probably lower prices since there’s competition between payment processors

      1. carlosjobim · 1790945587 · focus · HN ↗

         There's already competition between payment processors, and not lower prices.

         1. furst-blumier · 1790945946 · focus · HN ↗

            Isn't it actually "competition" in the visa/mastercard case?

            1. carlosjobim · 1790947341 · focus · HN ↗

               There are many other options already besides Visa and Mastercard. What I'm asking and nobody wants to answer is what the benefits for users are. The first thing you should think about when making a new product or service.

               People are only answering me here with benefits for European politicians and their sovereignty. That's alright. But what I'm asking about is benefits for the users.

               For example, Visa and Mastercard offer fraud protection to the users, and many card emitters offer cashback to their users. Can this new European system offer this? If not, why not? Can they offer something else which benefits the user over current providers?

               1. rswail · 1790949810 · focus · HN ↗

                  There are not many other options already besides Visa/MC for their payment network, not the branding. Interbank account transfers with instant settlement are clumsy.

                  The change is that newer financial systems, using ISO20022, run at bank level, allow instant net settlement between individual accounts, not just settlement at the bank level.

                  So the benefits to merchants/customers compared to Visa/MC:

                  Merchants

                  * Interchange is much cheaper, because the banks transact via the central clearing house which is usually sponsored by the country's reserve bank

                  * It allows for the merchant to set up direct debit payment structures that allow for things like subscriptions and other payments to be made with similar network and transaction fee savings

                  * It has all of the advantages of EFT and CC payments

                  * It can use QR codes, email addresses, and mobile numbers as identifiers, so it is much easier to pass on payment details. Merchants can operate with just a printed QR code, verifying payment on the customer's mobile.

                  Customers

                  * Banks can offer all of the same "perks" of credit cards, like lines of credit, branding, account holder offers.

                  * They can offer things like product insurance and return protection and similar consumer protections.

                  The "rails" are much cheaper to run and suits a 21st century financial system and is easier and more secure for consumers.

                  1. maratc · 1790952884 · focus · HN ↗

                     What banks "can offer" is irrelevant until they offer it in practice.

                     As a customer, I have zero interest in paying for my lunch via "QR codes, email addresses, and mobile numbers" when I can do it with near-zero friction with a double-click on a phone (funded by a credit card), or with a tap or swipe of the credit card. I also have better protections. Switching costs are non-zero and I will only switch if there are some substantial benefits; pure "feature parity" is a reason to not switch.

                     The benefits to merchants are tangential to me, but there is a substantial downside of all the merchants having to do integration with an additional system.

                     1. rswail · 1790960411 · focus · HN ↗

                        These systems have been rolling out across Asia and EU and other places.

                        If CCs were the system of the last 75 years to allow quick transactions, these systems are the next generation.

                        The US is a specific banking market that has a very embedded structure, regulation, and players. Other nations have a more flexible financial system that allows for services to develop that are better than the existing Visa/MC duopoly.

                        This is just the next step of allowing them to operate cross-border/jurisdiction.

                        The fact that you have zero interest does not mean there are many small merchants and customers that find the ability to easily transfer money instantly with very low fees and the same safety as cash is a very useful service.

               2. asimpletune · 1790950916 · focus · HN ↗

                  > What I'm asking and nobody wants to answer is what the benefits for users are.

                  I answered that it will lower prices, does that not count as a benefit to users?

                  Even if merchants pay the processing fees, those prices are inevitably passed onto their customers. With more competition among payment processors there will be pressure to lower processing fees.

                  All of this happens automatically. It’s the beauty of markets.

                  I’ll rephrase your own question in a different way that I think actually supports my point: Since there is no difference, as a product, between visa, Mastercard, and this new European alliance, then there is very little reason to not want more competition.

                  Payment processing is essentially a commodity in this sense. It’s all the same, with the differentiator being supply. If we increase the supply the price will go down. That’s it. It should honestly be stupid to not want a European alternative.

                  1. maratc · 1790952364 · focus · HN ↗

                     The problem with your argument is that the price to the consumer stays the same, regardless of the payment processor involved (or cash when none are involved.) These are the rules set by payment processors. With these rules, the prices will stay the same with any amount of the supply. If these rules are changed, all payment processors will suffer in cash's favour, and as governments oppose cash-based economy for tax maximisation, the change of the rules is unlikely.

                     1. asimpletune · 1790959954 · focus · HN ↗

                        We may be talking past each other. If card processing costs a business money, that cost is passed onto the consumer. It therefore stands to reason that the converse is also true with savings. The question remaining is just at what time scale.

                        I think you’re taking about a single transaction in the near future, whereas I’m talking about the effects which are felt, in aggregate, over a long period of time. Absolutely things will get slightly cheaper.

                        1. maratc · 1790973309 · focus · HN ↗

                           Currently, a cost of "something" is:

                           1. 100€ if paid with cash

                           2. 100€ if paid with sovereign-European low-cost GPDR-compliant ISO-certified processor

                           3. 100€ if paid with American expensive monopoly behemoth Visa/MC.

                           Currently, it stands to reason to pay with Visa/MC and not bother with carrying cash or switching from Visa/MC to anything else.

                           In the future, it might be that the cost of the same "something" is:

                           1. 99.5€ if paid with cash

                           2. 100€ if paid with sovereign-European low-cost GPDR-compliant ISO-certified processor

                           3. 102€ if paid with American expensive monopoly behemoth Visa/MC. (Note: Visa/MC explicitly prohibit this.)

                           If this is predictable and repeatable, everyone needs to change their customer habits. It stands to reason that the change would be to carry cash.

                           1. simonra · 1790981558 · focus · HN ↗

                              The price difference would have to be significantly more than 1 to 3% to justify the inconvenience of carrying around cash again for me as a consumer for the things I don't buy online. Also don't underestimate the benefits of not dealing with cash for the merchants either. After cash usage almost vanishing completely they made it mandatory to accept cash a couple of years ago in Norway in an attempt to keep the infrastructure on life support in case of crisis (but still illegal for big transactions like cars and houses because something something crime). At least one hairdresser chain notably resolved it by only accepting pre booked appointments, which you could only get along pre paying for them in an app.

                              1. maratc · 1791025204 · focus · HN ↗

                                 YMMV, but I still carry cash and find no inconvenience in this. Cash is never out of battery, never out of software support, and unaffected by AWS outages, cellular outages, or electricity outages. I also don't install apps that are supposed to make life convenient for others but not me. WRT that hairdresser chain, I suppose I'd simply use a different hairdresser that would accept both walk-ins and cash, and I'd hope there's no shortage of such.
                           2. asimpletune · 1791007856 · focus · HN ↗

                              Well that is one way, but how about this?

                              It currently costs 100€ to buy something. 90% of their customers pay card and the rest cash. Their profit margin is 5% and the payment processor takes 2%, leaving 93% other costs not part of this discussion.

                              Now, the same item is still 100€ but some Europeans are paying with their cards by these cheaper payment processors. They charge only 1% per transaction. Also half of the card payers use these rather than the status quo. Therefore the merchant gains a percentage of profit on 45% of their transactions.

                              They can now lower their price to compete better. So the new price becomes something like 99.55€ for everybody: cash, visa, European cards.

                              Then, visa and Mastercard will lower their prices, to not lose customers in Europe, matching them, and now the price has fully gone to 99€, for everyone.

                              In Italy the price is the same by law regardless of how you pay. So it stands to reason savings go to the merchants and eventually the customers, rather than having a multi-tier price.

                              1. maratc · 1791024977 · focus · HN ↗

                                 Too many things have to line up exactly the way you imagine for this to happen, and I think your scenario is too optimistic as a result. Specifically, the merchants "can now lower their price" but they might not do it, especially considering that the costs of integration with this system are probably non-zero for them.

                                 Wizz is a Hungarian (so: European) airline (since 2003) and girocard is a German (so: European) instant low-fee payment system (it's been rebranded in 2007 from EC-Karte that existed since 1960s). At this moment, as far as I'm aware, you cannot pay for your Wizz ticket with girocard (they only accept Visa/MC/Amex or "co-branded" girocards.)

                  2. carlosjobim · 1791029156 · focus · HN ↗

                     > I answered that it will lower prices, does that not count as a benefit to users?

                     Very fair point! Although we haven't seen it online after many years of national digital payment systems in Europe.

                     The only places where I've actually see discounts offered for non-card payments is in physical small businesses if you ask for a discount for this kind of payment. Places like the mechanics. But such payment isn't cross-border.

                     > It should honestly be stupid to not want a European alternative.

                     More options are always better, but to me it seems that the benefit for the customer is always forgotten in these projects. The customer is king, and only the most hardcore EU loyalists would actively hurt their own interests just to follow things like this.

               3. phs318u · 1790984892 · focus · HN ↗

                  One benefit to users is they can’t be debanked at the whim of a lawless orange dickhead from a country outside the EU.
      2. maratc · 1790948928 · focus · HN ↗

         Usually, a product that costs $100 costs me the same $100 regardless of the payment processors involved (and $100 cash when none are involved), so I can't see where "lower prices for consumers" could come from.

         1. Lex-2008 · 1790950386 · focus · HN ↗

            I've seen few places accepting only cash or cards from a local payment processor. And it looks like local payment processor takes about 0.16% from each transaction.

            So I assume that if they were accepting more expensive cards, they might've increase the price of the $100.16 product for me, to offset their costs.

            And yes, I also heard that payment processors have rules that require merchants to have the same price no matter what payment processor (or cash) customer will choose.

            1. maratc · 1790952016 · focus · HN ↗

               We seem to agree that "lower prices" have no place to come from. If "lower prices" can't happen, what are the benefits to users now?

               1. Lex-2008 · 1791065112 · focus · HN ↗

                  well, I mean, lower prices can come if merchants stop supporting Visa/Mastercard and support only cheaper options :)

                  Alternatively, merchants can give users more cashback points for using their preferred way of paying. Not sure how this flies with payment processor rules, but I've seen it in the wild.

                  1. maratc · 1791105129 · focus · HN ↗

                     > if merchants stop supporting Visa/Mastercard

                     In this case, people who don't have local cheaper option won't be able to buy from them.

                     Cash/local-card-only might be OK for a grocery store in rural area only serving the locals, less so for a coffee shop in tourist centre of a major city.

Unofficial Hacker News client; not affiliated with Y Combinator.