There are many countries where debit cards are the norm and credit cards are extremely rare. In France, people are so afraid of consumer credit that cards are renamed ‘deferred debit cards’ rather than credit cards, otherwise people do not want them.

> For many consumers there isn't sufficient money in the account to settle all the one-time and ongoing transactions they are liable for

This is a uniquely American viewpoint. In most of Europe you don't buy anything on credit ever.

> credit cards are giving you a revolving loan

I'm confused - is it not the issuing bank that gives you the loan, and the credit card company just provides the infrastructure?

Btw. having an overdraft limit of a few hundred Euros is quite typical for those liquidity issues. You don't need a credit card for that.

I shouldn't have to pay for your usury economy if I'm using cash. If that were really the issue, these companies would have no problems with businesses charging different prices or offering discounts for cash.

Cash flow and fraud, yes. Credit, not much in most of Europe. AFAIK nobody has had something close to real credit cards until recently. They were called credit cards but it was a debit card with payment and deferred to the end of the month and backed only by the cash in the bank account linked to the card. I guess that no financial institution did like to risk any money on the behavior of European customers.

> credit cards are giving you a revolving loan, there's risk it will not be repaid, and that risk ends up reflected in processing fees

Neither Visa nor MasterCard are loaning customers their money. It's the European banks that hold the bulk of the risk for European credit card transactions.

Visa/MC have built walled gardens which provide many services.

Some of the services include: - Consumer Credit - Fraud protection - Payment network - Discount service (rewards, etc) - Concierge services - Rental/Ticketing services - etc

No one is denying the utility of what they have created. The problem is they’ve built monopolistic walled gardens where these are all bundled together which raises overall costs while also prevents competition.

These services can easily be unbundled (for example in India the payment network is open and cost free, so anyone can provide those other services on top of the payment network).

What has made this far more urgent, however, is that these companies are located in the U.S. which has recently leveraged the power these networks have to attack EU citizens for frivolous reasons.

So even if the MC/Visa business model was perfect, it would be foolish for even American allies to rely on them given the actions of the current administration.

> If you want to switch the world to a debit-based system where economic transactions are limited by cash on hand, I'd argue that's a poorer and less dynamic world than the one we're operating in today.

Disagree. Credit has its uses, but debit is superior for the vast majority consumer transactions: lower fees, lower risk, instant settlement, easy P2P transfers, and broader accessibility. That we've become used to credit card payment system in the West is largely a historical aberration that needs correcting.

Also, I'm a bit biased since I live in China, but WeChat Pay and Alipay are so far superior to the credit card system that I can hardly find a single redeeming quality in the latter. China was lucky in that it leapfrogged the traditional credit card system since it didn't have that historical baggage.

You're mixing debit and credit cards.

In the EU, debit cards are pretty common, and largely its a network effect. You need to get terminals that are supported by your payment provider.

A lot of merchant terminals are provided by banks, and frankly they are itching to get a sweet sweet cut of each transaction. Not only the information, but the cut of each transaction. Something like 0.2-1.5% of each transaction. (I'm sure mastercard and visa give them a cut)

For Credit cards, the banks/operator already handle most of the risk, and then pay visa a percentage for the privilege of charging usury like rates

Replacing EM dash with "--" doesn't take away LLM smell.

I agree the risk transfer is very important, but Visa and Mastercard don't do that (they just facilitate it)

Isn’t that financial risk of credit cards borne by the banks doing the lending? It’s not really any different to a debit card transaction on a bank account with an overdraft facility.

> - For many consumers there isn't sufficient money in the account to settle all the one-time and ongoing transactions they are liable for -- credit cards are giving you a revolving loan, there's risk it will not be repaid, and that risk ends up reflected in processing fees.

Their risk is covered multiple ways (as reflected in their profits). You pay an annual fee to have a card. You pay per transaction, you pay for paywave, you pay 21% in interest.

They cover their risk by hitting every possible angle.

> For many _businesses_ managing cash flow is existential

Err, no - for _all_ businesses managing cash flow is the _only_ NR 1 crucial thing, because if they dont, they will disappear by tomorrow :)

> For many consumers there isn't sufficient money in the account to settle all the one-time and ongoing transactions they are liable for -- credit cards are giving you a revolving loan, there's risk it will not be repaid, and that risk ends up reflected in processing fees

This is really much less of a thing in Europe, or at the very least in Germany and Spain. Mostly it's the overdraft from banks that you can use as what you call a revolving loan. Most of the visa and mastercards I've had in my life simply debit from my main account.

This risk is all covered by the banks, not the interchange networks?

Hmm, maybe for countries with strong consumer protection, yes.

I lost 3 credit cards INSIDE an airplane (hello AirAsia!). I only realized it when I turned on my phone while queuing at immigration and was bombarded with dozens of "Successful transaction" messages. That's ~30min from stepping off the airplane. When I checked my statements, I saw dozens of physical transactions (swipes/taps) with different merchants in different cities from the airport.

All 3 cards have different PINs. All require a PIN for transactions above ~USD200. Yet the banks rejected my disputes because "it's a physical transaction, so you must be the one doing it." Apparently, they all think I could fly to different cities, buy different items, and fly back to wait in immigration, all in 30 minutes.

That's all the bank's problem, not the network's.

Your comment seems to miss the point. It is totally possible to enable the first two of your bullet points without Visa or Mastercard, for example banks could just give lines of credit directly to consumers. Indeed, the myriad of loan products is run without Visa and Mastercard.

They are taking a percentage point or two on the entire consumer payment system.

I think there's plenty of money to back all the activity.

Especially if there are central banks willing to back them

Switch? We mostly use debit cards today.

man who has only used the american financial system: the world not singularly using the american financial system is less dynamic. surely there are no counterexamples to this.

In the Netherlands, before VISA, there already was a national debit card standard called PIN [1]. Sure, times have changed and it's probably not super easy, but it's also not going to be super hard.

[1] https://en.wikipedia.org/wiki/PIN_(debit_card)

India built RuPay, China built UnionPay. There's no reason why Europe can't do the same.

My takeaway from the episode was that its actually really easy to setup up visa, you just need to get the banks, vendors, and card issuers onboard, which should be easy if you're the government

> Because at a minimum you want American tourist dollars and Europe isn't going to start issuing European credit cards to Americans or other citizens around the world.

It could be handled similarly to how tourists in Brazil can now use Brazil's Pix payment system.

One way Brazil handles it is with 3rd party digital wallets that tourists can install on their phones such as Wallbit [1]. Another way is with 3rd party services that let you pay from your own digital wallet or bank app and the service makes the Pix payment [2].

[1] https://www.wallbit.io/en/blog/brazilian-pix-and-a-payment-a...

[2] https://www.pagbrasil.com/lp/pix-for-international-travelers...

> Well you have to deal with American and European financial regulations, KYC, &c. - you have to vet merchants, you have to run the infrastructure to process transactions, refunds, direct payments from bank accounts to pay for cards, and all of those things. Those are real, genuine business activities that are non-negotiable and while they may seem simple, in practice they are not at all simple.

Those are partially or completely taken over not by the card network but by the bank that is issuing you the card, so a change in the underlying technology will be transparent.

> Buying a bottle of Calvados in some remote area? Yea just tap to pay with your Mastercard.

Hard disagree. Until Covid, many small shops didn't take cards in Europe. Taxis, restaurants, market stalls, even trains were often cash only not that long ago. I in the UK ran accounts in companies that had people travel extensively in Europe. We used to issue travellers with EUR200 for the things that cards couldn't buy. Most shops didn't take Amex due to fees. Americans will either have to bring a compliant card or change some cash at the airport.

I also think you have misjudged the mood. I guarantee there are a large number of people in rural Europe that would be very happy never to meet another American tourist, even if it costs them. Americans can look forward to worse service everywhere. I wouldn't be suprised if some people in rural France refused to let you have the Calvados at all.

> Today you can, at least as an American, just walk in to the subway in just about any country and tap to pay.

Is that really true? I remember wanting to buy a train ticket at Charles De Gaulle airport, and the machine only took French credit cards. That was around 2010, so I don't know if something changed.

This last summer, I couldn’t use my US-issued Visa or Mastercard credit card in most places in the Netherlands.

Had to use debit.

About your point in [1] yes it is complex but maybe 50% is done by the issuing bank/institution

And people do underestimate the complexity of it

Rather than a moat of details, it's first-mover advantage. Anyone can run a credit card network, but merchants and banks need to support them. Many others exist, but the issue is that they don't have widespread adoption. Solutions that work exist, which means the lesser supported alternative is not widely used, which again reduces reason for wider adoption...

Regulation changes "why bother" to "oh crap".

> If there's one thing the EU really does have, it's the capacity to revise regulations.

This is the central power lever of the EU and one that is frequently underestimated.

European power projection doesn't work through tanks and aircraft carriers. It works with regulations, trade deals and economic incentives. Remember how a few years ago everyone was scrambling to get GDPR-compliant? That wasn't some random event. That was the EU projecting power.

Why do iPhones have USB-C now? European soft power.

Why are things like Champagne and Prosciutto di Parma protected brands that can only be sold if they're from the actual region? And I mean not just in Europe itself, but everywhere it has deals? Canada, Japan, India, China, Mercosur, etc etc? European soft power.

The EU is playing a different game from the other major players. Not one of brute force, but one of shifting the foundational rules of commerce in their favor. And they're very good at it.

What about it?

If the entirety of Europe comes up with a single system I think that'll be more than enough incentive for merchants to update their pos software to accept the new network. I hope that they are eventually so successful that merchants here in the US support them too. I'd love to stop using visa and mastercard.

Crypto is also a shit payment method though. Expensive and difficult to run and with high transaction fees. And if you use a chain with low transaction fees, there's no consensus on which chain that is (otherwise transaction fees would be high) so you have to support all of them. Then you might as well outsource the whole thing.

Most merchants don't work with Visa and Mastercard, they work with payment processors like Fiserv, or other middle men even further removed from the card networks, that already abstract all the different cards (including existing local debit cards) away into a unified flow.

> Want to accept russian MIR cards?

Thankfully, this use case has been solved by Russians themselves.

Fraud is mostly resolved by the two banks involved. The network is just that, a network.