Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.

There are many people all over the world without access to banking - they can't store money, they can't transfer money, and they can't invest money. That may be someone who has poor credit in the US, or someone who's living in rural India or Africa. Without access to banking, you are essentially cut off from globalization.

If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check.

Plenty of other examples. Whether this is a good solution I don't know, they just announced it.

In Denmark we solved this the lowtech way. Visa cards have to be Dual visa/dancard, where the dancard has extremely low cut limited by law(0,055$/transaction flat rate)

It’s not hard, it just requires you have politicians capable of dodging the huge piles of cash MasterCard and Visa throw at them whenever talk of breaking the duopoly hits the table.

But maybe for the US, something like bitcoin will be the only way forwards, using technology to try to solve a market problem though “disruptive technology” when what is really needed is just disruptive politicians.

If there was political will, there is nothing stopping governments from capping the fees taken by Visa/MC.

American Express (and all the other schemes where the issuer is also the acquirer, i.e. Diners Club) aren’t capped.

The 0.3% cap however did kill Amex’s licensing model where they let other banks around Europe issue their cards, so they simply withdrew from those, as 0.3% is not enough to pay for the rewards.

Note that this is just interchange. Payment processors still charge merchants whatever they damn please.

Sure you feel one way. Other people feel another.

But it's also possible the correct answer doesn't depend on your feelings but on falsifiable theories.

Macroeconomic theory relies on a lot of spherical cows. In theory I don’t disagree with you, but in practice we don’t have the tools (yet) to do this type of economics in a scientific/falsifiable way.

You can't guarantee or even approximate a given input and output for a scenario like this.

But we also don't need to specify initial conditions exactly to do science.

I'm less convinced that the equations themselves are unknowable.

Politicians will screw up the implementation, businesses will engineer around it and the alternative solution might ultimately come out to be a better one in practice than in theory.

Trying to define economics by simple equations which you expect to define policy is a lost cause.

See e.g. Milton Friedman's comments about how flawed Hayek's economics are and how great Road to Serfdom is.

So my take on that speech is it's political rather than scientific.

In general I'm skeptical of arguments that something is unknowable unless they come with a rigorous proof or at least a well stated conjecture that has stood the test of time.

I get that this type of oversight is likely against some philosophical POV here but it's not like middlemen making money is an all-to-great and solitary goal a society should try to defend.

Ignoring the difficulty of avoiding lobbying money, yes, it'd be difficult. This is a large scale financial change and there are always, always loopholes that will come, not just from politicians who make those because of lobbying money. With how giant the economies are, and how often these cards are used, it isn't a simple move at all.

Look at credit card chip readers in the US. The amount of backend equipment change it took to get something "that simple" in action was a lot. I'm not defending them for it not being quicker, but a move like a duel card is absolutely difficult.

Europe made this jump well over a decade ago.

It isn't a backend equipment problem.

Dual cards are easy btw. I used to have a joint Amex MasterCard. Separate cards, but same account.

I'd wager that the banks didn't give a damn as long as fraud was cheaper than investing into a new, much securer system. France was the first country to introduce chips into debit cards and tha was in 1990[1]

[1] http://www.theukcardsassociation.org.uk/history_of_cards/ind...

EMV is a thing, you know. And cards don't run out of battery or get smashed like phones.

Even as a tech guy, no thanks. Phones are mostly ok but still fuck up too frequently to trust them with anything serious.

At least in some jurisdictions I lived, debit card is as good as cash (well, not exactly the same but because handling cash has also its cost, most of retailers treat them equally)

The fact that it is a _cryto_ currency is merely anecdotal. Its an implementation detail. It makes people think this currency is actually distributed as most other crypto currencies, while in fact it's just a consortium of companies having total control over all aspects (issuance, destruction, etc.) of the currency.

> set up an interoperable network for banks and custodians to use

This is just plain wrong. It's not banks or custodians that use this currency, it's just end users and the consortium. Banks are heavily controlled and regulated. I _mainly_ trust governments and legal systems to take fair decisions or litigate properly monetary issues. There is nothing like that here. The consortium of companies owning the currency decide the amount they want to create, they decide who gets refund and why, etc. I have much more trust in a country and a judiciary system than a bunch of worldwide companies to handle my currency.

Don't forget the amount of support they will provide. Looking at major tech companies and their histories in providing customer support I see a rather bleak picture here.

This goes also for all those new fangled disruptive app banks. Guess how much success an N26 (new German app bank) customer had to contact support after 80'000 Euro went missing from his account. Spoiler: Until it was a massive story in the press, not much.[1]

[1] https://en.wikipedia.org/wiki/N26_(bank)#Controversy

Completely agree. It's a currency.

> It's not banks or custodians that use this currency, it's just end users and the consortium

I do not agree with this

> I have much more trust in a country and a judiciary system

compared to a protocol that can be monitored for the total amount of money it holds?

For small, everyday transactions this may be true but mainstream banks are much better for all the other stuff.

Serious banks have been doing that for literally hundreds of years.

That's very subjective.

I've had many many banks accross the world. Monzo is what everyone wished for.

I only ever use debit to pay off the balances of credit cards and to withdraw cash.

What debts? I clear the balances when I get the statements.

In the mean time you are in debt.

> Actually helps me to track my money better.

Have you used Monzo?

Why/how is that a bad thing?

I think you’re overestimating that rate, and by quite a bit. Mastercard’s fees seem to be between 0.2%-1.65%[0] depending on the card and transaction type.

I didn’t bother to look for Visa’s rate, but I’d imagine it’d be similar.

[0]https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...

He used "Visa and Mastercard" as a metonymy for the entire payment processing network i.e. payment gateway + issuing bank + acquiring bank + card networks. The total fee for the entire network is indeed 3-4%, and as you rightly pointed out, Mastercard Incorporated and Visa Inc. fees actually only make up for less than half of the total transaction fees.

It doesn't include the fees which go to MasterCard, nor does it include the fees paid by the merchant to their merchant bank.

Those same "tight currency and economic controls" apply just as much to cryptocurrencies as they do to Visa gift cards. There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars".

But beyond that, people have the right to determine their country's monetary policy independent of, say, Bitcoin devs, Facebook executives, or a foreign government (ex: Venezuelans using USD), and it's hard for me to ignore the vague scent of opportunism here. The solution to corrupt governments is not "get rid of all governments", it's "get rid of corrupt governments".

US has often taken advantage of its dominant world currency position. For example, massive amount of QE that eventually gets absorbed worldwide with little inflation in US. Similarly "petro dollars". The bottom line is that if someone is allowed to print currency at whim, they will.

have you tried buying anything with bitcoin? currently the transaction fee is almost $2 to have your transaction confirmed within 10 minutes.

Not a lot on big purchases, but that's 20% if you're say trying to buy a $10 lunch with bitcoin.

Bitcoin fees are basically just the price you pay for having drugs delivered to your house.

There are two assumptions you are making, both of which are false. The first is that handling cash isn't expensive, but it is. You have to store in various secure locations, transport it between those locations, count it multiple times... And that's true even if you're a market trader or a small shop. For those people it could easily be a significant part of their day and a significant risk, all of which goes away with cards (and the fee is nowhere near 3-4%, it's more like 1-2%).

The second is that, in a market that has demonstrated a willingness to accept the transaction fees of the major card providers, that anyone would "leave money on the table". Sure they'll undercut them initially to win market share but once they have it, the price will inexorably creep back up to the level the market will bear.

The second point sounds like an economics 101 conclusion. Network effects are real. Regulatory capture is real. Starting a new card network is harder than beating google in ad revenue in search.

Gas stations might be higher at least in the USA because the kick back for gas is sometimes higher (e.g.: 1% cash back). Also, gas stations seem to really don't want to handle cash those days.

https://qz.com/1646097/what-does-facebooks-crypto-coin-libra...

Crypto transactions however, have not lived up to the "hype" of being truly cheap thus far. Visa/MC are positioning themselves such that the value they bring is not something that crypto can provide. We'll see where that ends up - I'd expect Visa/MC stock to move a bit if the transaction fees for Libra end up being sub-$.05.

The Mastarcard fees appear to be 0.2%-1.65% as per https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...

In the UK right now I can send money to your account nearly instantly, and for free. I wouldn't want to purchase anything like that though, I'd want to use some kind of card, why would Libra be any different?

I'm guessing some of that goes towards chargebacks and other protections in the form of reimbursing purchases from stolen credit cards. It would be tough for me to trust any online replacement without a very firm and reliable appeals system.

Visa and MasterCard are collaborating on the Libra protect.

For those two reasons I don’t know if it makes sense to say Libra is competing with the incumbents.

In Cambodia, you can only get a credit card from a Cambodian bank if you have a deposit with them that matches your credit limit (i.e. to get a card with a $5K limit, you need to maintain a balance of $5K in your account).

Most people cannot get credit/debit cards because the banks won't issue them, because they don't trust anyone and won't take the risk involved in issuing cards

I can see how Libra will solve a lot of frustrations for Visa/Mastercard working in poorer countries

- A currency outside of traditional governments would theoretically be free of currency manipulation by those governments (ex. China and the Yuan)

- An international currency can sidestep the artificial middleman fees and friction caused by traditional monetary exchanges. Ex. my friend who is currently studying in Japan wanted to get some money from her US bank account to Japan to pay for tuition and not only had to wait for banks to be open, but also had to pay exchange and transfer fees.

- This one doesn't necessarily require an independent currency, but crypto also theoretically enables the fabled land of online micro-tipping for content creators, publishers, etc.

You can't live your life outside your country's currency though. It has a built-in demand because you have to pay taxes in it. So you're going to have to buy some of it somewhere.

> - An international currency can sidestep the artificial middleman fees and friction caused by traditional monetary exchanges. Ex. my friend who is currently studying in Japan wanted to get some money from her US bank account to Japan to pay for tuition and not only had to wait for banks to be open, but also had to pay exchange and transfer fees.

Try TransferWise.

> You can't live your life outside your country's currency though. It has a built-in demand because you have to pay taxes in it. So you're going to have to buy some of it somewhere.

Yes but then you can shop around for conversion and can keep the majority of your liquidity in a vehicle which is less easily manipulated but just as fungible (I am just arguing about the utility of a global, trans-national currency and not speaking to specifics offered by the Facebook coin specifically).

Currently, if you want to hedge against the Yuan but still want to buy goods in China, you don't have many choices. But if vendors accepted some other currency in addition to Yuan, you can convert to Yuan to settle debts with your government and keep your holdings liquid elsewhere.

TransferWise doesn't work any faster than SWIFT -- if anything it's usually slower. They don't have any magic way to put money into your account on a "bank holiday" either.

I imagine Libra won't take Sundays off, at least.

And a lot (if not most) of them will not accept foreign cards, even if the ATM is accessible.

7/11 to the rescue, however.

As long as these three points are true: a) the notion of a stablecoin means stable relative to one selected fiat currency, b) the goods you are selling or purchasing are priced both in your local currency (which may or may not be the stablecoin peg) and the stablecoin, and c) that governments can still manipulate the ordinary currencies, then I don't see how you can be free from government manipulation.

FWIW, the EUR/JPY and USD/JPY pairs are historically highly correlated.

https://www.youtube.com/watch?v=Shxiy7l5b_4