I’m not saying it couldn’t be done. I’m saying that it would require a large investment in infrastructure and network, when the Googles and PayPals of the world are already doing well with their payment systems, while taking advantage of the networks that Mastercard and Visa have already established.
I found this for Canada: Global Credit Card Market Share in 2023 | Balancing Everything
Credit Card Market Share in Canada
While Visa and Mastercard are global leaders, Interac holds the throne in Canada. In 2019, the card’s market share was 47.2% thanks to its 6.25 billion transactions. Visa, with its 3.98 billion purchases, holds the second-largest market share in Canada or 30.1%. Mastercard and Amex are the remaining popular options. The Mastercard market share in 2019 was 21.3% and Amex’s amounted to 1.4%, while they processed 2.54 billion and 0.17 billion purchases.
These figures include personal and commercial credit, debit, and prepaid transactions. As for the credit card purchase volume, it represents 28% of all spending in Canada. In 2018, Canadians spent $5.90 billion through their credit cards.
So discounting debit (Interac), Visa is about 57%, MasterCard 40%, Amex 3%.
According to the same article, in Europe in 2019 it was 59% Visa (down from 68% in 2015!), 39% MasterCard, 1% Amex, and 1% Diners. So, not grossly different from the Canadian figures. Meanwhile, interchange fees remain 8.5x greater in Canada than in France. Note, those are still the same companies—we have not yet brought in any disruptors. It is evidently not a free market.
As for a “disruptor”, even in a “free” market there are still barriers to entry, as in you still need to get enough money and comply with regulation to be able to issue credit yourself, or else convince major banks to work with you. Even if you rely on “the Internet” for communications, you still need to get your card accepted at every point of sale terminal in Canada. I have no idea what a good business strategy would be. Start regionally? Focus on micropayments (under $100)? There may be factual answers there but it’s not something one guy can do overnight working out of his basement.
As soon as you start extending credit to consumers, you’re in a wholly different game in terms of regulation. You’re becoming a bank, which means you’ll have to be licensed as such. You’re also exposing yourself to default and liquidity risks, which you’ll have to manage in accordance with banking legislation. It’s becoming a significantly more complex set of rules that you will have to navigate.
Apple is trying in the US with Apple Card, but I have no idea how they are doing.
From that link, it seems Apple partnered up with Goldman Sachs to issue the Apple Card. So it’s a joint venture where one partner brings in existing tech know how and the other existing financial market know how.
But, the thing is, is that those credit card points don’t emerge out of nowhere. They are a direct tax on the company that is accepting your card. If you are getting 1% back on your purchases, that’s because the merchant is paying higher credit card fees.
As to the OP, I’m sure it would be fun to have more cards to carry around for consumers, and more credit card companies to have to remit payments to for merchants, but I’m not sure it would lower fees any.
And as far as merchants charging for use of a credit card, I think that should be acceptable, since otherwise the alternative is to raise the price for everyone, and those not using a credit card subsidize those who do.
No Friggen’ Way am I letting Rogers get their hooks into my bank account.
You can have multiple bank accounts. I have an account that is specifically for auto-draft payments that I transfer money into.
I suspect because, at least in my experience, Visa is the one near-monopoly in my life that doesn’t feel evil. They make it easy to use, easy to pay, and they have my back if there’s a problem with a disputed charge, or a fraudulent charge. Every other monopolistic company I’ve ever had to deal with has the “Fuck you, who else are you going to buy from?” attitude. They give as little service or consideration as they can get away with.
And the Apple Card uses the Mastercard payment network.
As for the duopoly, I’m not that upset, because I bought Visa stock just after they went public (on the theory that electronic payments were sure to increase in the future and that if they can get one penny or one percent of each transaction, they’ll make a lot of money) and that investment has gone up more than tenfold. (My only regrets are not having bought more stock and not having bought the stock in a Roth IRA account.)
Right. You turn over the physical Apple Card and there is a Goldman Sachs logo as well as a Mastercard logo.
That’s because VISA is an intermediary. You are not their customer. The merchants are their customers.
To any / every merchant VISA looks exactly like the evil monopolist you described.
To answer this: Paypal makes money just like the credit card companies do - from merchant fees for transactions, from currency conversions, and from interest on late payments when you use a “buy now pay later” option. What differentiates them from credit card companies is that with Paypal, private clients can make payments among each other; those are free. But as soon as credit is transferred to a corporate recipient, a merchant fee will be charged.
On a more forward-looking note, a potential competition with some chances to disrupt the credit card payment market is blockchain-based crypto currencies - and by that, I mean actual coins in the blockchain, not cryptocurrency-denominated credit with an exchange such as Coinbase, which is essentially just an account with a financial institution and hence not so different from old-school banking. The downside here is the enormous volatility in the prices of these currencies, which makes merchants hesitate to accept them and consumers hesitant to use them for payments.
Does PayPal have “physical cash” in their coffers like a bank? Like if I have $100 sitting in my PayPal account are they able to make interest on it?
Nope, the BANKS are their customers. Merchants sign agreements with a merchant bank and payment processor. I’m old enough to remember making the deposits from the 1 hour photo lab I worked at in the 80s with the cash, cheques, and Mastercard and Visa imprint slips at our local bank. Amex slips were mailed in about once a week for processing. Today all that busy work is handled electronically by the payment processor and the balance is transferred from the issuing bank to the merchant bank.
How Credit Card Processing Works - Insights | Worldpay from FIS (fisglobal.com)
If the customer needs to pay in Canadian $$, I can provide them with a super smart card with OLED display, Bluetooth, NFC, wifi, and bleeding-edge distributed crypto e-cash technology to facilitate that both on- and off-line, but no way in hell am I going to involve volatile “currencies”. Tip: disregard anything with the term “blockchain” in it.
Also, crypto has transactions fees as well (denominated in the crypto itself). But they’re variable from transaction to transaction. The same underlying issue exists with a slightly different form.
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Sadly, that’s all there is on an Apple Card.
Quite literally: there is the Apple logo, Goldman Sachs wordmark, Mastercard wordmark and logo, and my name.
I found this out when trying to provide the card number to a woman at an airport rental counter–she was required to key in the last 4 in her swipe machine. I gave her the “secret” number that Apple gives you to make purchases, but that didn’t work. I didn’t realize that there is a “double secret” number that is used for this specific circumstance. In fact, there are three hidden card numbers, one secret one and two double-secret ones, all visible only in the Wallet app.
Furthermore, when she told me the card was declined, I did what I always do if a card is randomly declined: I flipped the card over to find the customer service number. There is none!
There I stood, Googling “Goldman Sachs Apple Card customer support” in order to eventually get the number I needed to call. Once I went through all of that, we found that the card had not been declined and it had been user error at the register.
For something that should “just work” it sure is a pain in the backside at times!
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