[avianlyric]

None of what you’ve mentioned has anything to do with Visa and Mastercard. Visa and Mastercard are just payment networks, their whole business is literally just transporting transaction information from payment terminals to banks and payment processors, plus keeping track of all the numbers (which is pretty important).

Payment networks don’t provide credit or any kind of liquidity whatsoever, that entirely provided by the various financial entities that communicate via the payment network. The reason Visa and Mastercard haven’t been easily replaced is simple network effects, nobody wants to integrate with a payment network where there’s nobody to transact with.

[jasonfarnon]

I had no idea visa/mc didn't bear the cost of fraud. I remember Paypal almost getting killed by fraud in the early days, and I always thought of Paypal as basically replicating visa/mc for online purchases. I didn't realize they were doing so much more than visa/mc by assuming fraud risk.

[AdamN]

PayPal was a counterparty so if one side didn't pay or there was a dispute then PayPal was stuck in the middle. Visa and MC are just payment networks and have minimal risk. The only risk I think would be criminal liability (handling drug money) or maybe if the bank goes bankrupt before the payment is due to the merchant (but even that might be borne by they merchant - not sure).

[disgruntledphd2]

Visa/MC do carry some risk, but the chain generally goes merchant -> acquiring bank -> ? platform (like Stripe or something) -> Visa/MC. So they care a lot about the people just above them in the chain, and not at all about the rest of them as they won't end up holding the bag.

[zinekeller]

At least if the failed bank is Japanese, all of it will fall under their deposit insurance program (https://www.dic.go.jp/content/000010138.pdf#page=13), although this is actually a rare guarantee (FDIC and SVB comes to mind).

> Full coverage for deposits for payment and settlement purposes, bearing no interest, being redeemable on demand, and providing normally required payment and settlement services

[throwaway290]

MC/Visa do drop merchants who do bad stuff (remember CSAM on PH) so I guess they bear some of it.

[bryanrasmussen]

their monopolies were formed in a different time, when it might have been thought prudent to drop bad merchants even if they themselves did not bear the risk in order to not get governmental regulation imposed that would be more detrimental than just dropping the merchants.

Not saying that's the case, just given circumstances not sure if risk is needed to explain the result in this case.

[eastbayjake]

I replied downthread but I used "value chain" deliberately -- there are lots of intermediaries of which the card networks are just one link in the chain -- and the statement above is about risk being borne (and value being created for consumers) by the entire value chain that is different and difficult/impossible in a FedNow-style immediate settlement model: https://news.ycombinator.com/item?id=46964968

[avianlyric]

Mastercard and Visa also use immediate settlement models and basically always have done. The settlement buffer between end parties is created entirely by entities that are all basically banks.

There’s nothing special about Mastercard and Visa rails that prevents you recreating all the functionality that the broader ecosystem provides, without Visa and Mastercard. Hell all of that functionality could be provided by exactly the same companies and banks that provide it for Visa and Mastercard networks.

[gizmo]

Because mastercard/visa don't personally bear any risk they are very happy to process refunds and chargebacks in the customer's favor. It's not a perfect system, but it's much better than direct bank debit where the customer has very little recourse. There is also a significant privacy issue. Today my bank can only see the sum total of my credit card purchases but not what I buy and from which vendor. Amex can see what I purchase but knows very little about me otherwise. I like this separation, and I like that it's hard for the government to get a complete picture of my financial affairs. I know credit cards get a lot of hate (here and elsewhere) but as a consumer I think they're exceptionally convenient.

[avianlyric]

> Because mastercard/visa don't personally bear any risk they are very happy to process refunds and chargebacks in the customer's favor.

That’s not how chargebacks and refunds work. Mastercard and Visa are not involved in the vast majority of disputes at all, it’s entirely handled by the card issuer and card acquirer. Mastercard/Visa only get involved in cases where network party has broken one of the technical rules of the network. For cases of missing or faulty goods etc, Mastercard/Visa do nothing except transport the messages used by bank/merchant to litigate the dispute.

When Mastercard/Visa are forced to step in and make an arbitration decision, they charge a hefty fee (hundreds of dollars) to the losing side to do so. So they have no issue with people raising disputes, it makes them a lot of money.

> Amex can see what I purchase but knows very little about me otherwise. I like this separation, and I like that it's hard for the government to get a complete picture of my financial affairs.

This is naive, all banks and credit card issuers are required by law to perform KYC (Know Your Customer) to ensure they know exactly who they’re transacting with. It’s trivial for the state to buildup a complete image of your financial situation by sending a small number of court orders to banks and financial entities to turn over all their records on you. That’s ignoring the automated tax reporting that banks also have to do.

[a_victorp]

Yep. Worked for a bank, they definitely know who you are