Comments on: Competitive Payments

By: Visa and those Fees, II: For the Activists « Rortybomb

Visa and those Fees, II: For the Activists « Rortybomb — Fri, 08 Jan 2010 04:31:22 +0000

[...] goal is to give the retail market the legal power to differentiate between credit cards types. Here’s Ronald Mann on this topic. Debit cards have less fees than credit cards which have less fees than premium credit [...]

By: John Thacker

John Thacker — Wed, 06 Jan 2010 19:27:06 +0000

“But if the prices for the premium cards are so high that retailers are willing to turn away customers at the point of sale that want to use those cards — and some merchants plainly do have that attitude — doesn’t that suggest that the current system is not providing the right type of competitive pressure?”

I’m confused. Doesn’t that show that there *is* competitive pressure? If no retailers were able to turn away customers, and felt forced to accept high-margin cards no matter what, wouldn’t you use that as evidence of market power on the part of Visa and Mastercard?

By: Ronald J. Mann

Ronald J. Mann — Thu, 10 Dec 2009 00:17:30 +0000

You are surely right that it is not a stable or satisfactory regime. But if the prices for the premium cards are so high that retailers are willing to turn away customers at the point of sale that want to use those cards — and some merchants plainly do have that attitude — doesn’t that suggest that the current system is not providing the right type of competitive pressure?

By: Omri Ben-Shahar

Omri Ben-Shahar — Wed, 09 Dec 2009 23:38:03 +0000

Ronald,
I agree with you. I think there are a few wrinkles that are not as simple to straighten out, and I wonder what your thoughts are. For one, consumers are going to have a hard time knowing which Visas or MasterCards are accepted at which merchant location. This might not be a big deal for those who carry multiple cards, but it might burden others.

I guess you can say that if this is indeed a problem for consumers, merchants and issuers would be pressured competitively to provide simplicity and uniformity in interchange fees. It is not clear, though, where this would end — what type of arrangements they would institute. But my point is that a regime in which different cards in the same network are accepted in different locations does not seem stable or satisfactory.

By: Mark Seecof

Mark Seecof — Wed, 09 Dec 2009 21:30:10 +0000

Bravo. Well stated. I agree 100%.