[scrollaway]

My years in fintech have taught me that it'll be very difficult to get these charges down without legislation. What they are is, essentially, insurance.

For Visa/MC, "running the network" at cost is possible on much less money, but the network involves a lot of elements along the chain that can get transactions reverted. The "insurance" (1-3% of tx) pays for the legal-adjacent issues related to handling those transactions being contested.

Go to a restaurant, use a US terminal? Great, the restaurant owner can modify the transactions after it's been authorized and long after you're gone, "because tip". There's zero checks on this, it's a matter of "it works because most people don't do it". So when it happens, sometimes the payer notices and issues a dispute and the dispute management is part of the network. This is where a lot of costs go.

Anyway, the network is ridiculously bad. The fraud/aml checks are not usually shared among payment providers, because they can just milk each other instead by selling their checks. No wonder it's hard to get the transaction fees down.

And yeah, it's a duopoly. The solution by the way isn't to directly try to build a global visa/mc competitor; with the moat, that's impossible. Rather, it's to build on top of what European countries are doing. EU countries have built their local competitors (Bancontact, EPS, BLIK, iDEAL, Sofort, ...). Those have lower costs, and so would any locally-targeted provider because they each have to deal with less risk and complexity. Any aggregator (like Stripe is, by the way) can take payments for all of them and push people away from card payments. The problem with that very last part is a UX issue, people like paying by card.

It's a difficult problem. What makes it especially difficult IMO is that once you're down this path and become successful, it takes some very specific, very early business choices in order to be able to turn down the mountains of cash that show up to your doorstep in the form of "align your fees with the rest of the industry".

[ptman]

https://www.epicompany.eu/ and https://nordicpayments.eu/ instead of Visa/MC

[scrollaway]

Yup exactly, but you need to take that strategy and apply it beyond europe. For this you need local networks in the US as well for example. Right now, there aren't really any; some crypto based local networks but that's all.

But the US is undergoing some serious banking network updates this year and that likely means some new local networks are being built. This idea will look very different by 2024 and maybe even be feasible.

[hocuspocus]

Unfortunately EPI has stalled, I don't know if we'll ever see MC/Visa cards co-branded with a pan-European scheme.

However, the free market approach seems to work for mobile payments solutions such as the extremely popular ones in nordic countries. They have started to build an interoperable and federated network in Europe and beyond. For instance, there's a real demand from businesses that want to let Chinese or Indian tourists pay with AliPay or UPI.

Don't get me wrong, I think DSP is one of the greatest thing the EU has ever done, but it looks like physical cards just need to die before we can see a true competition.

[krinchan]

You're referring to the launch of FedNow, right? It's interesting because most of the analysis I've seen keeps assuming it'll be more B2B and that people will just continue to use P2P apps. However, I don't see any reason said apps won't move to FedNow themselves. The underlying ACH should be fairly easy to swap out with FedNow, right? Venmo and CashApp have only free money (in the form of lower fees and faster settlement) and better security to gain, it feels like.

[scrollaway]

Yeah FedNow. It will be b2b but this means an easier time to launch fintechs in that space that make use of it. Consumers will benefit, the iteration time is just a bit longer.