| This comment shows how little people really understand about the business model of credit card companies and their relationships with merchant banks. > but with 2.5% cashback there's not a lot of room to make money from transaction fees. The cash back is not instantaneous. It does not happen in the cycle in which the consumer buys something; it is pushed out as a short-term liability by the banks, contingent upon Visa/MC doing all the math and allocating the pieces from the top-down. In the short term, all these microaccounts of customers "cashback savings" are accumulated as points or whatever to the consumer, but they are real cash assets for the holders. Taken in aggregate they equal huge long-term cash assets (for Visa/MC). Just like everything else in the credit card world, it adds up quickly across hundreds of millions of customers. That leverage is why Visa has been untouchable and why MC has virtually no incentive to make it compete. Merchant banks are already so fragmented (and in many instances actually competing with each other) that the lockin is something they just accept. This is why the collusion to set fees at 2.9 percent (or whatever) among payments processors is so evil: Visa and MC ransom the full fees for the short term to make the banks/merchants beholden to their terms in perpetuity. Cash back rewards are not a necessary part of a credit transaction, but they're being baked in to hike the "commissions" of the middlemen. This industry is just like the Realtor industry: full of corrupt and exploitative groups of individuals implicitly colluding with each other to maximize their collective rapaciousness. |
thanks for enlightening the world