Mandate Man

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

Great comments by everyone. Some things I have to add:

To original post, yes the merchants have ultierior motive: its to put cash back into the cash/check/debit customer's hands so they can spend more! Call it a "tax" reduction; with all the well known stimuli surrounding such things. Yup, merchants win and so do ALL consumers through lower prices.

Rewards. Great white paper done by Fumiko Hyashi at the KC Fed, deducing that rewards probably aren't benefiting society. I have always contended, just because I get 1% on my Discover I don't buy more gas, groceries or anything else. Consumption is defined by your income and credit line (which we know is sometimes not appropriate). Rewards can only "bend" this line to the value of the rewards - like the $300 you get back.

Fun facts -
* Visa now processes over 70% of all debit transactions?
* PIN debit interchange has risen 14% CAGR sinced 1996 (within 2 years of Visa buying Interlink and releasing the signature debit product) - faster than credit interchange?
* 22 other developed countries have recognized V/MC market power and moved to reduce interchange?
* US pays more interchange than any other developed country - about 60% of what is globally collected. We also have the highest interchange rate of ANY tier 1 or 2 country?

THAT is what a strong lobby buys you in America.

Visa Puts Heartland on Probation Over Security Breach

Take away - it doesn't matter if you are PCI complian or not, you get hacked, you are liable. Gotta hand it to the card brands - they get everyone else to pay for their own lack of security (e.g. DUKPT PIN on every transaction, which would have made this - and EVERY other hack - an inconvenience, not catastrophe). Retailers want PIN, consumers want PIN - Visa and MC don't want half their offline volume going to cheaper EFT! You gotta love a monopoly! Billions being spent by the afflicted to make V and MC SOX compliant.