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The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed.

I often wonder how much goes into the pockets of these companies who are essentially providing an easily replaceable service if it were not for the entrenched reality. (IE; to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places)

That said, I can't complain too much about VISA; which (Apple Pay and Samsung Pay also uses on the backend, there is no escape in Europe) -- they seem to be processing things fairly well, even if I don't understand how much both parties paying for such a service.

> The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed.

It goes unnoticed to the consumer because it didn't go unnoticed to the lawmakers. The EU caped the fees those companies can charge to merchants to 0.3% for credit card and 0.2% for debit card back in 2015 [1]. In the US it's less ignored because those fees to merchants are on average 10x bigger! (2% on average [2])

[1] http://europa.eu/rapid/press-release_IP-15-4585_en.htm

[2] https://www.hostmerchantservices.com/current-us-interchange-...

That's not quite true. The interchange fee is the portion of the fee that goes direct to the banks.

The payment processing market is a bit more complicated:

When you make a transaction:

1) Your bank charges Visa/Mastercard an interchange fee (this is the bit capped at 0.2%/0.3%)

2) Visa/Mastercard charge a payments acquirer a processing fee

3) The payments acquirer charges the merchant a fee - this final fee is likely to be a blend of percentage and fixed fee per transaction. There's no cap imposed here.

Here in Denmark, the story is a bit different. Many consumers here use a Dankort, which is a national debit card. The fees are low and regulated by the government. It is usually combined with a Visa so that it can be used abroad as well.
> easily replaceable service

> to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places

That's basically the definition of hard to replace.

> easily replaceable service

For all my disagreements with major payment processors, I must say that there is a lot more than meets the eye in these networks.

Having visited the fraud detection apparatus of a couple payment networks, I am thoroughly impressed. Most of them were doing machine learning at an industrial scale at least eight years ago.

Only tangentially related, but it’s the same in the US. Sure Discover and Amex exist, but fees for merchants are usually high and adoption is lower.

I’ve travelled quite a lot, but everywhere I’ve been there has been the same - Visa, MC, and a local alternative or two that might be popular within the country but don’t extend elsewhere.

Is there actually any other network elsewhere in the world that is of a similar scale? I assume China must have something?

fees are also much cheaper in Europe. Interchange fees are capped at 0.3%, compared to 2%+ in the US. https://en.wikipedia.org/wiki/Interchange_fee
I worry that Visa/Mastercard will use their duopolistic position in credit/debit/etc payment processing to gather more data and spy on consumers. I suspect Visa/Mastercard collects even more valuable data than google or facebook and they've already indicated they want to me more of a technology/ML/AI company.

With data being ever more valuable and a small group near monopolistic companies in position to siphon most of it, it's going to be difficult to lead a private life.

In germany we have Girocard (formerly EC Card) which has about 4 to 5 providers with 40% marketshare and less, to my knowledge atleast.
That's probably got a lot to do with credit cards being vastly less popular in Europe. Paying with plastic/card usually means using a debit card (many names, largely the same). Additionally in most parts of Europe paying cash is far more common than in the US.
A lot goes into their pockets. VISA is the 20th largest company in the world by market cap and MasterCard is 43rd, and they are still growing quickly.
In a lot of European countries, payment cards use the domestic payment scheme and are co-branded Visa/MasterCard (or V-pay/Maestro).
Are they abusing the market ?
"easily replaceable service"

Yeah. It's called "cash" and "checks".

I have to say the best thing about credit cards in the U.S. is the massive point bonuses you get for signing up for cards. I have gamed the credit card bonus system for ~6 years and pay for 90%+ of my personal travel including international business and first class flights and high end hotels with points earned from opening multiple cards each year with almost no impact to my credit score (760+). Combined with the fact that points are not taxable it is probably the single most lucrative “side hustle” I have that requires almost no work.
Money doesn't grow on trees. The "bonus" you get is actually paid by higher prices on the stuff people buy. Card fees are transferred to merchants, and merchants transfer it to customers via higher prices. I wrote about it some time ago: https://svedic.org/economy/indirect-razors-and-blades-busine...

But, you are right, if you careful you can game the model. In your case, if you are paying 90% of your travel expenses with bonuses you are probably getting back more than $400 a year, which is an average credit card cost per US household.

Are you sure you're not spending more than you otherwise would be? That's the real kicker with bonuses.
All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices.

You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.

r/churning for those who are interested.
I wonder why this isn’t the case in Europe? Some cards offer small bonuses but peanuts compared to US ones.
That’s amazing. Do you have any tips? I was trying to do this and got completely overwhelmed with all the numbers.

Plus for the life of me I can figure out if a travel card is better than cash back.

The best thing about credit cards in the U.S. is the amount of transactional data credit card companies are able to sell to anyone with a dollar.

Your credit reward system comes at the cost of half of the world's businesses and the government knowing every single thing on your shopping list last week.

Hopefully crypto payments/stablecoins will get more traction so we can get ride of these mono/dupolies.
This was my thought too. It amazes me that people don't see crypto currencies as the answer here, and one that solves a number of other problems at the same time.
For that to happen, they'd need to match the current system on cost, performance, safety, and availability. There are a ton of people — e.g. almost every small business — who would like alternatives but for a legal business there are too many cases where their costs (either direct or support) would go up enough not to be worth it.
How would they help here?
still lots of progress needs to be made from a usability standpoint.
> The fine would have been higher, but Brussels reduced the amount by 10 percent to thank Mastercard for cooperating.

I am unable to find a link to the ruling in the article, does anyone have it? Curious how this number was arrived at.

Press release: http://europa.eu/rapid/press-release_IP-19-582_en.htm. It says:

”Mastercard cooperated with the Commission by acknowledging the facts and the infringements of EU competition rules.

The Commission granted Mastercard a 10% fine reduction in return for this cooperation. Further information on this type of cooperation can be found on the Commission's Competition website”

with a link to https://europa.eu/!XC69Qb.

Basically, you get a fine reduction if you promise not to appeal to the fine.

It's sad that this duopoly is controlling so much of the market, especially that merchants can't make customers pay the fees (in which case mastercard and visa would quickly lose their market share).

Especially considering that many european countries such as Germany had (and have) independent systems with often orders of magnitudes lower fees, faster transaction times and more safety and security.

I'd rather see girocard become a monopoly on the european market than to see this mastercard/visa monopoly continue.

Nowadays credit and debit card fees are limited by the EU. Around 0.3% per transaction. A 10x reduction to before. Since then adoption of credit card payment has spread widely in German supermarkets.
> ... especially that merchants can't make customers pay the fees ...

Why not? Is that due to contract terms that prevent you from charging more for card transactions vs other payment methods?

I vaguely remember clauses like that were recently thrown out in the USA. I’d imagine the EU would be even more consumer friendly.

I seem to remember that the store did transfer the costs to the customer in Denmark at least, Maybe 12 years ago. It led to an oproar by consumers faces with paying ~4cent per transaction, and some stores not allowing card payment on purchases less than ~3$.

There was quite a reaction against it, but in the end I assume they dropped this because they say usage numbers drop, though that is just speculation.

I don't know the entry barrier details, but are governments working on standards to put your own payment system based on a defined API and following standard regulations?
> On this basis, the Commission concluded that Mastercard's rules prevented retailers from benefiting from lower fees and restricted competition between banks cross border, in breach of EU anti-trust rules

The following will be extremely unpopular here, however, it's a bit interesting that the EU is, in the case of private businesses, interested in preventing "restricted competition," however, when it comes to taxes, the EU continually criticizes Ireland for low corporate taxes. Essentially the EU is opposed to tax competition.

The EU parliament has accused Ireland of being a tax haven and damaging the economies of its neighbors. While now, Mastercard is being accused of harming the EU economy by preventing competition. Mastercard gets fined for preventing competition (a correct decision in my opinion,) while strangely, Ireland also gets condemned for attempting to have lower taxes. Ireland, Hungary, and Bulgaria are promoting competition and they're in "trouble" while Mastercard is restricting competition and they're in "trouble" with the EU as well.

So the EU Parliament is effectively acting like Mastercard by attempting to prevent tax competition which would lower prices for consumers far more than anything Mastercard could come up with. If the EU actually cared about competition and lower prices for consumers, then they'd let members set tax rates to whatever they want, but instead they want to "harmonize" tax rates -- essentially destroying the competitive advantage of lower tax locales. The countries that are harmed the most by tax competition are the ones that have highest taxes and public obligations -- yet Ireland, Hungary, and Bulgaria are supposed to raise their taxes to compensate for the fiscal decisions of France, Spain, or Italy?

"The EU’s tax commissioner Pierre Moscovici said in November that the Commission was considering using extraordinary powers to strip EU states of their veto power on tax matters to break resistance over blocked legislation."[1]

So the EU tax commissioner wants to essentially force EU member states to comply with a "harmonization" of tax rates, despite some members opposing such a move and now the EU is fining Mastercard for attempting to "harmonize" interchange fees? That's hypocrisy, assuming the reason for the EU fine is to protect competition and/or lower prices for consumers. The difference is that businesses can more easily stop accepting Mastercard than they can change governments. It's worth noting that Pierre Moscovici is French and France has some signifiant headwinds in terms of regulatory and taxation attractiveness for companies. Punishing Ireland, Hungary, Bulgaria and other countries with significantly lower taxes serves to benefit high tax countries such as France.

So good for the EU for punishing Mastercard -- let's hope that they now turn to punish themselves for attempting to prevent competition with taxes. To be clear, I'm not anti-tax, I'm anti-tax harmonization and the reason is that tax harmonization essentially subsidizes bad fiscal policy. So countries like Ireland lose a competitive advantage simply because Spain can't balance its checkbook.

[1] https://www.reuters.com/article/us-hungary-ireland-taxation/...

> The following will be extremely unpopular here, however, it's a bit interesting that the EU is, in the case of private businesses, interested in preventing "restricted competition," however, when it comes to taxes, the EU continually criticizes Ireland for low corporate taxes. Essentially the EU is opposed to tax competition.

How is that "interesting"? That should be obvious. Taxes pay public goods, private companies just extract money to investors. They are diametrical opposed.

This is why we need crypto.
We already have crypto. Now we await utopia, apparently.
How would crypto-currencies change the situation?
Europe seems to be on a roll lately but is brexit going to change that? Is GDPR and all these other consumer focused regulations lessened by losing that market?
Why would Brexit affect the EU's GDPR legislation that already exists? Perhaps it could change in Britain, but it would still exist in the EU, where the legislation was approved and is currently being enforced.
This is not exactly a consumer focusing regulation, one of the bing things of the EU is destroying barriers to the single market like foreign bank fee for withdrawals, roaming charges on phones, SEPA, etc.
> The Commission, which monitors competition, said that Mastercard's rules prior to 2015 forced retailers to pay certain bank fees in the country they are located rather than let them shop around.

Meanwhile I can’t get a debit card from my bank that defaults to a language I speak at POS terminals because that’s not the official language of the country I opened it in.

The logic and connection being that is the country in which I signed the terms of service and agreed to x, y, and z (one of those being the language and another being fees).

So I, as a consumer, am stuck with the terms of the country I reside in, but the bank, as a merchant, shouldn’t be?

That's a false analogy. No one forces you to stay with your bank. If you are an EU citizen, you can open an account in any other EU country. Mastercard was forcing merchants to only use banks within their respective countries.
If you live in EU/EFTA you can open an account with any EU/EFTA bank which wants you as a customer. Revolut and N26 are two popular examples of banks that offer accounts in many countries.
As a consumer you are free to open another account with any bank anywhere in Europe. The merchants should have the same freedom.
The EU laying down the law!