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0 pointsskybrian2y ago0 comments

India’s system is more usable, though, apparently. This seems like an improvement but it doesn’t do the same thing?

> Because UPI is designed to be intermediated by computers rather than by humans, transactional information gets captured by the payments company while the transaction is in progress, and that can tell the clerk (or cron job) that the payment succeeded without them needing access to the bank account.

> This is a fun engineering challenge in many countries, which are often overlaying bank transfers as a payment method on top of bank transfers as a settlement method.

[…]

> Bank transfers are an extremely small percentage of customer-to-business payments in the U.S. In addition to the speed issue, which might get improved by FedNow when it launches (wags have referred to it as FedLater), bank payments have no consistent way to receive metadata, and despite being no-cost they compete with well-developed credit card ecosystems which credibly offer better-than-free pricing through rewards schemes (to the customer, who generally gets to choose which payment method they use to transact).

https://www.bitsaboutmoney.com/archive/bank-transfers-as-a-p...

0 comments

toomuchtodo2y ago

Reward schemes are funded by interchange fees funded by higher product prices. They are a tax on the entire economy. Merchants can push the CC fees to customers who opt to pay with CCs vs cheap or free instant payment systems. T-Mobile has dropped autopay discounts if you use a credit card vs deposit/bank accounts for payment, for example. Walmart wrote public comments on this topic supporting the FedNow implementation.

Reward systems won’t last as merchants push towards FedNow as a payment alternative and charge you to use a credit card. Nor should they last.

https://news.ycombinator.com/item?id=36012866

> Walmart has observed a severe misalignment of incentives that has plagued the payments system in the United States for decades. Certain incumbents and large participants enjoy massive profits by stifling innovation in payments, ensuring that account access is limited to a small number of networks, and perpetuating barriers to entry for alternative solutions. Controlling this access allows the dominant players to extract rents from other payments system participants, ultimately resulting in higher costs for all consumers, particularly consumers who are unbanked or underbanked.

staringback2y ago

My Citi Custom Cash card gives me 5% back on gas station purchases (my highest category), even paying the higher price at the pump for credit cards I still come out ahead. I'm fairly certain Citi is not making 5% on interchange fees

Spooky232y ago

It’s a loss leader that is usually capped. They are marketing against other cards in your wallet. Most consumers use a card or two so the habit of buying gas drives more spend.

Discover does the same thing with quarterly promos. They are paying 5% for the first $1500 of Apple Pay/Google Pay transactions… an incentive to add Discover to your wallet.

Gas is also unique. Our local supermarket chain gives you gas discounts for spend. People are always annoyed about gas so they fixate on saving $1/gallon, forgetting that they spent $1000 at the most expensive grocery chain so they can save $12-20 for a fillup. That $12 probably cost them $50.

Clent2y ago

Isn't it easier to assume Citi is recovering the 5% via interchange fees versus Citi is losing money every time a customer uses an advertised card feature.

2 more replies

skybrianOP2y ago

You could think of credit card rewards as a form of price discrimination similar to coupons. Whether you get the higher or lower price depends on what you do. Credit cards with high rewards are discount cards.

There are many ways to pay and they have different discount rates. Some places have a cash discount, for example.

As a "tax," this falls on people who don't shop around for whatever reason. Some of them are wealthy and can't be bothered to play this game. Others might not find playing the game feasible for other reasons.

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