[wffurr]

The service is incredibly useful.

The profits returned as dividends are pure rent extraction and essentially a tax on global economic growth.

That's why it should have a different structure. The mystery is why the member banks allowed it to become a for-profit entity and why governments continue to allow it to suck profits from their economies.

[MSD1976]

I'm sorry but why is what Visa does considered "pure rent extraction" versus any other for-profit business?

Merchants may often gripe about the fees they're paying per transaction, but this ignores the tremendous benefits they receive. Yes, a huge retailer like Wal-Mart or Costco has the resources to extend credit, develop POS software, establish relationships with thousands of banks, etc. But do you think the corner bodega does? Or a restaurant that has 1% margins? It may sound simple: "eliminate cc fees and the merchant's margins go from 1% to 3%". But then you're hunting down customers for payment, mailing invoices, extending credit for 30-60 days. There's a real benefit to working capital to getting paid as soon as you swipe that card.

As for why this is the structure...well, it used to non-profit and co-owned by all banks and it worked okay for a bit, but it's harder to balance incentives. And, banks were strapped for cash in 2008 (time of IPO).

- https://money.cnn.com/2008/03/21/news/companies/visabanks/ - https://economix.blogs.nytimes.com/2008/02/25/visa-bailing-o...

I would also disagree with your assessment that it "sucks profits from their economies". These networks truly create far more economic value than they themselves keep. And what they do keep isn't going up into outer space or getting incinerated....

[kalleboo]

Other places like Europe, Australia have capped interchange rates through regulation. Many countries have domestic cards with much lower (or even flat yearly rather than per transaction) fees.

The fees don’t have to be as high as they are.

Costs to chance delinquent debt should be included in the interest calculation

[wffurr]

You said it yourself. Their capex is flat (in real terms?) and their marginal cost per transaction is zero. What happens to the per-transaction fee? It looks like it almost all goes to shareholders as dividends.

That's funneling money from the entire global economy into the accounts of a few wealthy shareholders and institutions in the west. That's pure rent going to capitalists just because they have the dominant payment platform.

No doubt that it creates economic value, that's why people use it! But a non-profit that charged fees just enough to cover operating costs would do just as well and leave money in the local economies where the payments are made instead of contributing to global inequality.