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How credit cards make money

615 点作者 gregnavis超过 3 年前

24 条评论

treyfitty超过 3 年前
One of the under appreciated legal precedents set a couple years ago was the Ohio V AmEx anti trust case. The case predicated against AmEx’s merchant contract forbidding merchants to steer customers away from using their Amex card. This was a common practice for many years, especially at restaurants since AmEx charged restaurants 6%.<p>The Supreme Court ruled that amex was able to keep the anti-steering provision in merchant contracts because they defined credit cards as a two sided market, and the harm to customers couldn’t be proven. In essence, the Supreme Court set a precedent that in any 2 sided market, in order for something to be considered anti competitive, a high bar needed to be met: the government must show that both sides of a 2 sided market be harmed in order for something to be anti competitive.<p>Had the ruling been the other way, almost every industry would have been impacted- Uber, App Stores, Advertising…etc are all 2 sided markets.<p>In essence, Credit cards have had a huge impact to our lives this century for reasons that are not appreciated enough.
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teej超过 3 年前
&gt; It’s often forgotten, but prior to credit cards, many Main Street retailers like e.g. pharmacies maintained hundreds or thousands of credit accounts for customers individually, necessitating their own back offices, accounting, and collections headache.<p>This article is a great history of how the modern credit card came into being <a href="https:&#x2F;&#x2F;www.washingtonpost.com&#x2F;archive&#x2F;lifestyle&#x2F;magazine&#x2F;1994&#x2F;11&#x2F;04&#x2F;the-day-the-credit-card-was-born&#x2F;d42da27b-0437-4a67-b753-bf9b440ad6dc&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.washingtonpost.com&#x2F;archive&#x2F;lifestyle&#x2F;magazine&#x2F;19...</a>
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morpheuskafka超过 3 年前
&gt; Debit cards are a very similar product with enough under-the-hood differences that they deserve their own moment in the sun. In particular, due to a quirk of U.S. interchange regulation, they basically fund most of the fintech industry<p>Basically, the Durbin Amendment caps interchange on debit cards at a far, far lower rate than credit cards; they also have different networks (not MC or Visa) that can be run at least for in person transactions. However, the limit does not apply to banks with less than $10 billion in assets.<p>This is why some online banks can offer lower fees and sometimes even debit cash back (1% is the most I&#x27;ve seen though, so not competitive with credit). But its also why ever fintech under the sun pushes debit cards so heavily--the debit card is issued by a (small, non Durbin-covered) partner bank who then shares revenue with the fintech company.<p>At the end of the day, credit cards are still significant better for customers. You can have multiple cards with different benefits while keeping all your money in one place, and you can prevent overdrafts because you don&#x27;t have random subscriptions taking out unpredictable amounts of money in the middle of the night and causing a check to bounce the next day. You are no longer obsessing over &quot;early payday&quot; features or ACH speeds.<p>Credit cards also provide a nice hack to allow cash deposit for those with only online banks--you can often use a big bank&#x27;s ATM to make a payment towards the credit card, allowing you to get rid of ordinary amounts of cash.
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sofixa超过 3 年前
Generally good article, but this part bothers me:<p>&gt; For another, this ended up being an almost peculiarly American experience. In Europe, regulators were worried about the cost of interchange to businesses (rather than consumers) and capped it. Since issuers didn’t have the margin to compete on rewards paid for by interchange, they instead leaned into branding and convenience, and credit cards became a smaller portion of the payment mix (about 47% of electronic payments, compared to almost 70% in the U.S.).<p>First, the 47% is for all types of cards, debit and credit. Second in the SEPA space (at least the eurozone), wire transfers are free of charge, and are frequently used(for rent, salary, buying a kitchen, even between friends, at least in France), which removes some of the uses for bank cards. Furthermore, bank cards usually have limits, so buying expensive things (like a car or kitchen) isn&#x27;t necessarily straightforward, unlike a wire transfer. IMHO shit prices and delays are the reason peope in the US often use cheques where in the EU we&#x27;d use a wire transfer, and it isn&#x27;t really true that cards are less used here.
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patio11超过 3 年前
I&#x27;m happy to answer any questions or take suggestions for future issues if you have them, HN.<p>Repeating something I&#x27;ve said before: this is the 3rd issue of a weekly newsletter, and its going to come out on every Friday for the foreseeable future. As someone who has spent more than 10 years here, I&#x27;m keenly sensitive to HN&#x27;s desire to not have the front page be as predictable as my new shipping cadence. I&#x27;d appreciate if folks could be selective in submitting these; in prior years I&#x27;d space out my essays to avoid wearing out my welcome but that&#x27;s difficult to do with a newsletter that is open-to-the-public.
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lnwlebjel超过 3 年前
Patrick, how much do you read in a given day (eg. hours?) All those words (and the deep knowledge they reveal) must come from somewhere. And what do you read? Not just twitter I suspect.<p>This article of yours is fascinating: <a href="https:&#x2F;&#x2F;bam.kalzumeus.com&#x2F;archive&#x2F;financial-innovation-is-happening&#x2F;" rel="nofollow">https:&#x2F;&#x2F;bam.kalzumeus.com&#x2F;archive&#x2F;financial-innovation-is-ha...</a><p>Thanks
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flerchin超过 3 年前
I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It&#x27;s not clear why they don&#x27;t just fire us as customers.
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hnburnsy超过 3 年前
Merchants may get charged a lot for credit card fees but cash handling come with significant costs too such as banks charging for deposits, having to travel to the bank, counterfeiting, security, and leakage.<p>This article says the cost to handle cash is 5 to 15%, more than credit cards.<p><a href="https:&#x2F;&#x2F;www.palmerretailsolutions.com&#x2F;blog&#x2F;cash-handling" rel="nofollow">https:&#x2F;&#x2F;www.palmerretailsolutions.com&#x2F;blog&#x2F;cash-handling</a>
andsens超过 3 年前
I would love for an EU law that prohibits sellers from swallowing the cost of transaction fees or marketplace cuts. Imagine the app store having to specify the additional cost a user has to pay for a monthly subscription or a customer balking at the 4%-6% surcharge they have to pay because they want to collect their AmEx points or want to pay with their built-in iPhone ApplePay feature. Those leeches of the financial industry would disappear very quickly.
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quantified超过 3 年前
They also drive up prices by a few percent when compared to cash. If you want to support the merchant, spend cash and they don’t lose the 3-5% overhead to the card &amp; network.
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mattfrommars超过 3 年前
The knowledge which the author has been sharing has been my interest for a long time. I gave up because lack of material on it. Any idea how did OP gain all these knowledge?<p>For example, I want to implement a QR payment application, think like transferring money through Venmo using QR code, now Paypal does it, very popular in China -- basically a payment processing application but my local country - think Mexico or Peru. How does one understand all the requirements to make it work?<p>It makes me wonder how did Stripe founder obtains this crucial knowledge to build what they have. Payment processor or integrating with banks. Same thing what Plaid is doing. If I wanted to create an API to interact with a bank for my local city here in the U.S., do I call up a bank teller and ask me to connect me to someone who is interested in integrating their bank with the world?<p>I am certain doing a CFA or master degree in finance will get you no where if your goal is build what Plaid and Stripe have done. Instead, you need to know big shot and have ties with them to achieve success. It kind of make sense this to be true otherwise an developer in India or Ukraine can build APIs ...
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askingpatio21超过 3 年前
Hey Patio - what&#x27;s your current take on Crypto and have you &#x2F; do you cover that in your newsletter or have a more recent twtr thread to send us to?<p>I know you&#x27;ve been a major skeptic of the gratuitous pyramiding, wash trading, and shaky (or non existent) foundation of Tether etc<p>But w&#x2F;your depth of knowledge on the current financial system would be very interested in your take on the current market and next gens of defi &#x2F; staking &#x2F; shared pools &#x2F; etc<p>Would love to see you ingest and break that all down<p><a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2021&#x2F;10&#x2F;13&#x2F;payments-giant-stripe-says-its-re-entering-the-crypto-market&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2021&#x2F;10&#x2F;13&#x2F;payments-giant-stripe-says...</a>
pc86超过 3 年前
Title should be &quot;How credit cards make money&quot;
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newhouseb超过 3 年前
If you want to learn more about this space, I&#x27;d check out Payment Systems in the U.S. [1] which talks about a lot of the history and parties at play here.<p>It&#x27;s also fun&#x2F;interesting to look at the published interchange rates for various classes of commerce. Here&#x27;s Mastercard&#x27;s: <a href="https:&#x2F;&#x2F;www.mastercard.us&#x2F;content&#x2F;dam&#x2F;public&#x2F;mastercardcom&#x2F;na&#x2F;us&#x2F;en&#x2F;documents&#x2F;merchant-rates-2021-2022-apr-2021.pdf" rel="nofollow">https:&#x2F;&#x2F;www.mastercard.us&#x2F;content&#x2F;dam&#x2F;public&#x2F;mastercardcom&#x2F;n...</a><p>[1] <a href="https:&#x2F;&#x2F;www.amazon.com&#x2F;Payments-Systems-U-S-Third-Professional&#x2F;dp&#x2F;0982789742" rel="nofollow">https:&#x2F;&#x2F;www.amazon.com&#x2F;Payments-Systems-U-S-Third-Profession...</a>
Bellamy超过 3 年前
Would be interesting to know if credit card companies sell data and which data exactly?
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megablast超过 3 年前
Why was the title changes from &quot;How credit cards make money&quot;??
_trampeltier超过 3 年前
Does anybody know excactly what data a store get about me, if I buy it with a Credit or Debit card. Does someone has some example data or so?
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BiteCode_dev超过 3 年前
First lines of the article:<p>&quot;Credit cards make money through net interest, interchange, fees, and marketing contributions.&quot;<p>I love you.
paradite超过 3 年前
(For issuer) also via overseas usage, FX fee and spread.
sxhunga超过 3 年前
Interesting discussions about credit card and more!
p2p_astroturf超过 3 年前
&gt;You have probably used one [credit card]<p>no<p>&gt;mostly [aware] how it is a complicated bundle of services with a pricing structure strictly more complicated than a venture capital fund’s.<p>yes
benatkin超过 3 年前
steal money<p>FTFY
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otterley超过 3 年前
Flagging to remove unnecessary author name in title.
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alberth超过 3 年前
&gt; &quot;A much smaller portion of interchange goes to the credit card processor, to the acquiring bank, and to the credit card network&quot;<p>That&#x27;s technically not accurate. Credit card networks do not earn money from interchange [1].<p>[1] &quot;Visa does not make money from individual transactions.&quot; <a href="https:&#x2F;&#x2F;revenuesandprofits.com&#x2F;how-visa-makes-money-understanding-visa-business-model&#x2F;" rel="nofollow">https:&#x2F;&#x2F;revenuesandprofits.com&#x2F;how-visa-makes-money-understa...</a>
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