New York CNN — The US Justice Department filed a lawsuit Tuesday accusing Visa of illegally monopolizing the debit card market. For more than a decade, the department alleges, Visa has abused its dominant positionin the debit card market to force businesses to use Visa’s network instead of competitors’, and to stop new alternatives from entering the market. “We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a statement. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything.” https://edition.cnn.com/2024/09/24/business/visa-doj-lawsuit/index.html
Why would I need to use VISA's network? Haven't things evolved to the point where I can buy anything, anywhere, with cryptocurrency, and in this way, bypass the entire fiat money system?? If the crypto believers are right, VISA will be completely obsolete in a few years. Why is Merrick wasting time and resources with this?
The important point being they specifically said debit card market not the credit processing market. Credit and debit processing (where you enter your PIN) are different in terms of processing and fees charged with them. Confusingly most debit cards today can be run as credit cards, which are then truly processed on their credit network (usually not benefiting the customer any reward points, but allowing for more protections for unauthorized use, charge backs, and ease of use online and with tap to pay without entering a pin number) There of course is overlap on the debit vs credit space, and its clear to see that Visa is using the debit space as a trojan horse or maybe even loss leader to funnel more usage on their credit network (thereby getting them those sweet sweet credit processing fees) The huge growth in travel and reward credit cards has had a huge impact on consumer prices as well, as everyone uses credit networks now for cashless payment (including debit cards ran as credit w/o PIN entry) which has caused consumer business everywhere to just raise prices 2-4% just to cover processing fees. For those looking into the data on this, just look at the rise and proliferation on tap to pay networks, which consumers wanted for their ease of use (its faster that chip insert or swipes), security (random or temporary card numbers for apple / google pay etc.) , and rewards (why use debit or card A when card B gives me 2% back for free?). When tap to pay became adopted and users increased usage of rewards cards we got a huge influx of new processing fee revenues for the credit agencies and greater overhead costs for consumer businesses ( B2B is usually on an internal credit system e.g. net 30 which usually is interback or wire based)
To the point of crypto vs Visa, this is an interesting topic into processing power and cost. Visa technically runs the largest, fastest scaling (1), and cheapest transaction cost process (prices known ahead of time). Not to mention that their transactions are monitored internally which allows them to provide trust and insurance to both businesses (customer verification, fraud prevention) and consumers (chargebacks, free and easy unauthorized reversals, early fraud detection). The crypto revolution is cool, don't get me wrong but my gas fees fluctuate and can be unpredictable or surge during high demand. My transactions are on the public ledger sure, but the lack of a central authority is an inherit design choice, so there will never be authorization or fraud protections like credit processing (private key signing exists, but the money for the insurance on credit processing comes from the fees, so if there is account compromised or malicious activity no one will bail you out). Not to mention there are issues with transaction processing throughput on bitcoin (the most used) and ETH. Crypto is a promising new technology, but I don't see Visa going anywhere fast, and in fact my money would be on them to be one of the first ones to benefit from its adoption if it does take off 1 - Bitcoin processes 7 transactions per second. Visa, on the other hand, is able to process approximately 24,000 TPS, while a Mastercard can handle around 5,000 TPS. https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-transactions-per-second-tps
I wanted to ask Barron what he thought of XAUt (the stable coin tether for spot gold) and the use of XAUt in day to day purchasing transaction for retail as an alternative to Visa. I would mention USDt (the stable coin tether for USD) but I fear that the US treasury and US banks (visa) would sanction and kill this option. How would they keep the XAUt coin from being speculated upward massively? Would a retail terminal be possible using traditional crypto exchange clearing. Does it sound interesting?
Brother you are trusting a criminal enterprise in the Cayman Islands that claims they have the money(gold) and you must take their word for it
"The huge growth in travel and reward credit cards has had a huge impact on consumer prices as well, as everyone uses credit networks now for cashless payment (including debit cards ran as credit w/o PIN entry) which has caused consumer business everywhere to just raise prices 2-4% just to cover processing fees." And this is exactly why I do credit card churning. That 2-4% price increase by businesses is embedded into every purchase you make regardless if you pay with cash, crypto, debit cards, or not. My family spends about $50,000 a year on credit cards at grocery stores, paying bills, vacation rentals, gas, automotive repairs, insurance, etc. it adds up. If we didn't do credit card churning, these fees would cost us about 3% of $50,000. That's $1,500 a year. But with credit card churning, you can re-capture those fees and actually make a profit. Our family has earned $14,000 over 6 years of card churning, which is over $2,300 a year on average. It takes about 4 hours per year of my time to track the cards and research new ones, so I'm literally earning over $500 an hour. It is so easy to do, and my wife and I have seen our credit scores actually rise from 795 to 830 over the 6 years. This is because we have more credit access and our credit usage to credit limit ratio has dropped. If you don't Credit card churn, Visa, MasterCard, and the other big names literally steal from you. So churning lets you steal from them instead. Paying with cash, Bitcoin, debit, etc. will not protect you from the embedded 2 - 4% increase in prices that businesses change across the board to every single customer.
Read my previous post and see why. Everything you purchase with cash, Bitcoin, doesn't matter because businesses embed a 2-4% price increase in everything regardless if you pay with cash, crypto, credit cards, etc. The easiest way to re-capture that 2-4% is to use credit card rewards and sign-ups bonuses to steal the money back from Visa, MasterCard, etc.
I like everything that you said but I would push back against this comment. The reason the businesses have to raise the prices 2 to 4% is because that is what they are losing in the credit card fees. If the companies knew that their profit isn't going to be scaled back 2 to 4%, then I imagine that they could likely drop the prices. Since you did a good job outlining the math, we can also add in this variable. Assume that for every $100 you spend on your CC, you get 2%, so $2. But the company might only see $97 from this $100 sale, so their costs are 3%. You get the 2% cash back, and the CC keeps the 1%. Now if consider transaction fees in the crypto world to be a fraction of 1%, the company and customer could in fact share this 3% in savings. So instead of me paying $100, plus getting $2, hence my cost is $98, what if the price of the product drops to $97.50, so 50 cents less, and this time, the company gets to keep the entire $97.50, vs. only getting $97 from the CC transaction. I'm of course assuming that the few cents of transaction cost is negligible. Plus, the company actually gains a huge benefit in that the transactions are final. No worry about charge backs. I realize most people like the added benefits of using a CC, but this only works well for the top 20% who can take advantage, while the bottom 80% are funding all of this. Cutting out the middleman of transaction fees can be a boom for business. Perhaps there could be less sales overall if people don't have access to credit, since even today people are buying stuff they can't afford to the tune of $1T, but someone always pays in the end.
Yes, I hear what you say. And I hate using credit cards. I wish Visa and MasterCard and the others would simply go away. But right now, I have to adapt to the reality that exists. So I will use their credit cards against them. And for the 80% of the population who either can't use credit because of their situation, or simply won't teach themselves about how to use credit cards properly, well I do feel bad for them. And I wish Congress would force Visa and the rest of them to stop with these ridiculously high fees. But again, I have to live in reality. I would consider using crypto as a form of currency if it were stable, but it isn't, especially Bitcoin and Ethereum. I am stuck using a moderately stable fiat currency, the US dollar, until it loses stability. In the past decade I've had multiple friends advise me to get into crypto. Most of them were Millennials or Gen Y. During that decade I've watched a lot of them wreck themselves financially with crypto. And even the ones who buy and hold have not accumulated anywhere near the amount of wealth I have with investing via traditional systems using US fiat currency and stocks during that same 10 year period . Again, I have to adapt to what is reality at the moment rather than speculate about the possibility that BTC and other cryptocurrencies might stabilize one day. I'm not trying to brag or be harsh, I'm simply re-telling the same success story that hundreds of millions of investors around the world are in agreement with. For the same reason I don't buy and hold long-term a penny stock that is trading on wild speculation, I won't buy and hold BTC or any crypto for the same reason. There are supposedly 21 million Bitcoins in existence, right? Since the mystical, altruistic Satoshi holds a million of them, maybe 20 million people around the world will become millionaires if BTC hits $1 million per coin in the next decade or two. Meanwhile hundreds of millions of traditional investors worldwide will almost certainly make a million dollars or more during that same time frame. And quite frankly, many of their traditional investments will double or triple during that time frame, making them multi millionaires. Most millennials and Gen Y do not pick up on this line of reasoning, and I'm not sure why. I think the USA is becoming more financially illiterate every year, unfortunately. Most of Gen X (my generation) has not gotten caught in the crypto trap, but a few have. And not surprisingly it is usually my friends that have not done well financially in life, they dream about a better world and shun tradition, and ultimately feel cheated by the system. Sound familiar? Again, I'm not trying to be rude. I'm just giving you the perspective of hundreds of millions of traditional investors so at least you will know exactly what our collective mindset is and how we view investing and crypto.