| The problem isn't that you need an alternative to PayPal, you need an alternative to Visa and MasterCard. That's a lot harder because they have more of a network effect. People have a Visa or MasterCard because it's widely accepted and it's widely accepted because a lot of people have one. The solution to this is to make it easier for people to get or accept the alternative payment network. Only now you're into regulatory barriers. The critical feature of PornCard is that you don't have to give your name, right? Except that they're specifically prohibited from offering that. The regulatory cost of establishing a new card is effectively the same whether you have a hundred users or a billion, so high regulatory costs put a disproportionate disadvantage on small and upstart networks, which would then have to charge higher fees, which would then cause no one to accept them. The regulations destroy competition and without competition you don't have a free market. |
I agree with you that some regulations are harmful and are just plain old regulatory capture (https://en.wikipedia.org/wiki/Regulatory_capture) that protects the big incumbents. But we need well-targeted regulation for this situation where the size of existing networks prevents new payment processors from participating and having a shot in the economy. one option is that once you’re above a certain size, providers benefiting from network effects must be treated like a government entity, just like we regulate utilities. After all, services like payment processing are incredibly fundamental to our society’s operation. Another option is to force interoperability so that a new small business doesn’t face an insurmountable barrier to competition.