Why isn't there a low-cost payment processor?

[Fire in the Sky]

What is it that actually prevents a new payment processor from entering the market and partnering with banks and credit unions to issue a new debit card through them and charging merchants a low fee to maneuver around the high-fee competition? Like say instead of the 1.5-3.0% fees charged buy MasterCard and VISA, why not charge 0.1% and just offer a zero-frills payment processor service with your card? What about this business model wouldn't work? Merchants would kill for a new low-fee option and would riot outside any major bank that refused to issue the card if it was an option to their customers. This seems like such an obvious angle to enter the payment processor market, so what actually prevents some new group with the capital needed to bootstrap a new payment processor from doing this? Don't just say it's the Jews, because I'm obviously asking why there isn't a group of Jews who try to do this, fucking obviously.

 

[Shig O'nella]

Compliance costs, mostly. It costs a lot up front to get a bit of paper that says you can be trusted not to take the money and run.

 

[Fire in the Sky]

Compliance costs, mostly. It costs a lot up front to get a bit of paper that says you can be trusted not to take the money and run.

I'm not saying you could just cowboy your way into the market with a few million dollars, it would cost billions in compliance and bootstrapping costs for a new payment network, but that money does exist out there. At scale you'd still profit in spades with as a low-fee processor even if you were charging say 0.5% instead of 0.1% (the point is to be drastically cheaper than the competition). So if you had the upfront capital needed to get rolling, what is actually preventing anyone from doing it? Because I'm arguing that there is billions of dollars available out there to do something like this, so why has no one ever done it?

 

[D-X-G-X]

If I told you it was collusion and all of these payment processors were in bed together to make sure this exact thing doesn't happen, would you believe me?

 

[DJ Grelle]

The financial system in America is very 20th century, with a smattering of peripheral 21st century companies offering actually normal service (but again, with fees).

This is the result of a cartel between government and the financial sector. The banks and payment processors earn a ton, while the government keeps it going so the bureaucrats can get cushy sinecures after a stint at the SEC or such orgs.

Both Europe and China have instant, no-fee payments (both with merchants and with other private individuals).
The US is just behind.

 

[Shig O'nella]

I'm not saying you could just cowboy your way into the market with a few million dollars, it would cost billions in compliance and bootstrapping costs for a new payment network, but that money does exist out there. At scale you'd still profit in spades with as a low-fee processor even if you were charging say 0.5% instead of 0.1% (the point is to be drastically cheaper than the competition). So if you had the upfront capital needed to get rolling, what is actually preventing anyone from doing it? Because I'm arguing that there is billions of dollars available out there to do something like this, so why has no one ever done it?

Ah, I see what you are getting at now. My mind was on a different track.

Any group (or the three or four individuals with that sort of scratch and clout) that has the ability to readily lay their hands on the upfront capital needed is risk averse - either financially, reputationally, or both. Why take a chance when they'd get a higher return by doing the same old manipulating of legislation and the stock market?
A nice big slice of the payment processor pie is both lucrative AND a powerful position to hold, sure, but the ones we're talking about already have both other more lucrative options and that sort of power. Microsoft, for example, could swing both the money and the talent easily, but pretty much every government on the planet would immediately start looking at them from a monopolies or anti-trust perspective. They don't want the curtains opened on them. No business does, even if it is scrupulously and honestly run and a byword for integrity.

The ones who are willing to take higher risks for that sort of return can't swing the upfront unless there is a large group of them. Larger group means a smaller slice of both profit and control for each of them and a bigger risk of losing out, even without trust issues between the group members. Remember the existing processors aren't gonna be sitting around watching their profits be plundered by some upstart. They'll be actively working to sabotage it from first rumour.

 

[failed mist]

The all knowing infallible price-finding invisible hand of the market is once again getting its delicate little fingers effortlessly crunched by the rubber truncheon of industry collusion and regulatory capture. Are you shocked?

 

[Idiotron]

Only billionaires can afford this kind of stuff and which billionaire you think is the highly ethical one who gives a fuck about the wellbeing of the plebs?

 

[Lord of the Large Pants]

VISA will send a guy to your house to drown you in an inch deep puddle.

This is not a joke. They will actually do this if there's any serious possibility of competition.

 

[MadStan]

We all pay for the known fraudsters is the bottom line. If Visa disallowed the card holders that constantly have problems (the bottom 20%), they could reduce their fees by 75% and make more money. It is like insurance, you are paying for the bastards

 

[Meat Target]

Compliance costs, mostly. It costs a lot up front to get a bit of paper that says you can be trusted not to take the money and run.

And this is why crypto has failed as an alternative to traditional finance.

The sins of Rothschild finance are like scarlet, but its saving grace is that it is governed by consumer protection laws that give you some avenue of recourse. It may take years for you to be made whole again, but its a helluva lot better than "Logan Paul changed his mind, your shitcoins are now worthless, sucks to be you!"