full image - Repost: The high price of the Mastercard-Visa duopoly (from Reddit.com, The high price of the Mastercard-Visa duopoly)
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A common criticism I see of cryptocurrency is that Mastercard and Visa are already doing orders of magnitude more transactions per second, why do we need an alternative?I have been compiling some research into the high price of the Mastercard-Visa duopoly. To keep it brief, I want to share some excerpts from a recent article from The Economist: Can the Visa-Mastercard duopoly be broken?. Emphasis in quotes are mine, not the original authors.A small business operator on the processing fees charged by Mastercard and Visa:"It's like Vegas," says Matt Moore, the owner of a small bike shop in Georgetown, a neighborhood in Washington. "You know you're going to get screwed, the only question is how to get screwed the least."Businesses hand over "$138bn in fees each year" to processing payment companies.The unregulated nature of credit card fees in the USA:"Much of Visa and Mastercard's profits are ultimately driven by the fees that are charged when a shopper uses a credit or debit card to make a purchase. The EU has capped such fees for credit cards at 0.3% of the transaction value; intense competition in China means that WeChat and Alipay collect charges of just 0.1%...In America, debit cards are regulated by the 'Durbin Amendment,' which gives the Federal Reserve the authority to enforce a cap. But credit-card fees are unregulated and meatier, usually sitting at around 2% of the transaction and rising to 3.5% for some premium-reward cards."On the deceptive nature of "rewards" programs:"The fees are set by Mastercard and Visa, but collected by banks, which take a slice and use them to fund perks, such as insurance and air miles, to entice customers. For the right to use the card networks' transaction-processing services, banks hand over enormous fees. The result is that consumers pay through the nose for their perks while remaining largely oblivious."Retailers pass on the cost of credit-card processing fees to the consumer, an "invisible tax":"...retailers raise the prices at the tills by 1.4%, passing interchange costs on to the households.Of course, who gets screwed the hardest? The working class:"Poor Americans fare the worst. High fees are built into the price of goods, and prices are typically the same whether you pay with card or crash, which the poor are more likely to use."I thought this was important to share. Even if cryptocurrency may not ever totally replacement traditional finance, it's possible that having more options can benefit the consumer, even ones that do not use cryptocurrency.Too much of the discourse is superficial in the sense that only first-order effects are considered. Mastercard and Visa are probably always going to be superior than the average blockchain's TPS for the foreseeable future. But this has a cost, and it's usually one that we are not even aware of. Mastercard and Visa are not something to brag about like they are some benevolent force. It's important to be transparent about their pros (of which I admit there are many!) but also their cons, which are subtle and so weaved into our system we don't even consider it a con.
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