This is the same naive analysis everyone makes when they first look at the payments system. "Look at all that money. 2-3% on every transaction. A $500B tax. LOOK AT ALL THAT MONEY."<p>The reality is this: <i>Most of that money gets passed back to consumers</i> via rewards, benefits and consumer protections.<p>It's not a tax so much as an incentive for consumers to keep using their cards. And so it is considerably harder to come up with an alternative that is appealing to merchants without taking anything away from consumers.<p>For example, the interchange on a Visa rewards card for a typical brick-and-mortar retailer is about 1.5 - 1.65%. (Processors mark that up, but that's the "wholesale" fee that goes to the card issuer.) But many rewards cards pay out at least 1% cashback, on top of other benefits. That leaves a much smaller margin to compete over.<p>And remember, a new competitive option faces massive rollout and adoption costs that the entrenched system does not. Even the acts of changing behavior, upgrading POS systems and training staff are adoption costs. So your new alternative has to offer <i>significant</i> benefits for <i>both</i> merchants and consumers. Significant enough to overcome adoption costs.<p>Oh, and there's one more thing: debit card interchange just got regulated down to almost nothing (0.05% + 21 cents) by the Durbin amendment. So there already is an alternative, low-fee option that merchants can steer consumers toward and that they already support fully. So that pretty much takes out the opportunity to offer a lower-fee, lower-consumer-benefit option. That already exists now.<p>That leaves what? A higher-consumer-benefit option? Why would merchants adopt that? A same-benefit option but at a lower cost? But how much lower would the cost be while still matching 1-2% cashback reward programs and whatnot?<p>But.. but.. LOOK AT ALL THAT MONEY. :-)<p>(Btw, the digital cash for micropayments and garage sales and whatnot does sound interesting to me. My criticism is limited to the project of competing with Visa/Mastercard/banks.)