Whether you agree with Julian Assange or not, the fact that democratically elected leaders in a democratic country tried to force a democratic society to _NOT_ support a cause by telling MasterCard "don't process these donations" was an incredibly chilling event.
It's even worse than that. Not only can MasterCard arbitrarily refuse to accept payments for a business, it can cancel any consumer's account with little recourse. Let's say that someone steals my credit card number and uses it in a foreign country, and MasterCard detects this fraudulent use of my card and shuts down my account. At that point, if I can't buy food and other essentials with cash, I'd be in real trouble. Also, it's hard to get a credit or debit card if you're unemployed - if you have no income and/or no credit history, credit card companies and banks don't really want to do business with you. And if you're homeless and begging for money on the street, nobody is going to lend you their credit card.
Since the banks issue cards on behalf of MasterCard, they essentially constitute a single, tightly-coupled system from the point of view of the consumer. And the problems I described exist no matter which part of this system manages the end-users' accounts.
that's incorrect. in practice, MasterCard cannot do any of the things you suggest, aside from "arbitrarily refuse to accept payments for a business", which they have already done. your bank could shut down your card due to fraud, which may suck for you, but you can switch banks if you disagree with them. unemployed people can absolutely get visa/mastercard debit cards. ditto homeless people.
mastercard deserves criticism, but try to actually stick to things under their control (e.g. their appalling but now discontinued ban on wikileaks donations).
It was sort of under the table, not done via regular, publicly visible means. It's prone to abuse. Asset freezing usually (always?) comes from a court order, which is generally done in public, with arguments from both sides.
Often it is not. Funds are frozen without any due process whatsoever, or even giving the account holder a specific reason. I know of instances where tax authorities have simply seized accounts on their own authority without sanction from a count. I know of instances where real estate has been seized on the mere suspicion of Marijuana growing. Yes, due process is available to remedy such wrongs... by suing in court for relief. Good luck with that if you have no liquid funds to hire a lawyer. And your bank is foreclosing because you can't pay the mortgage.
More and more, KYC means asking permission to spend your own money. Putting all payment processing into the hands of a few middlemen is a dangerous concentration of power.
It's sad that we make retailers eat a 3% gross tax on transactions in exchange for bullshit rewards. In the end merchants just bill the costs right back to us anyway. Individually we feel like we're doing well. We get flights or 1% cash back. In reality we're buying these things for ourselves and we're overpaying.
I wish they would just be more honest and state that killing cash would give them:
1. A payment processing oligoply that would persist forever because of regulatory capture and regulatory barriers to entry.
2. A privileged insider position when dealing with government, as all government control of payments would be implemented by them. Imagine the current revolving door between the fed, sec, treasury, and banks, but much worse. Think of all the political enemies that could be rendered financially dead.
3. The power to implement negative nominal interest rates in deflationary scenarios, which is the dream scenario of large banks and central banks everywhere, allowing them to steal from savers in ALL economic circumstances.
It's a fascist (I.e. corporate state) control freak's dream.
The Japanese have been smart enough to stick with cash in their decades of deflation. As it looks increasingly like a number of Western economies may 'turn Japanese', I hope those nations will follow Japan and stick with cash.
... and 1.5% of GDP (almost certainly overstated by an order of magnitude) is a low price to pay to prevent a demonstrably criminal and corrupt banking cartel from controlling all transactions.
In the USA, it's cheaper to process paper checks than it is to do credit and debit card processing. Why? Because the US government does check processing.
The USA, as a society, made a huge mistake in letting private interests make electronic money. The oligopoly issue is huge, as is the cost per transaction, and the security issues of such a patched together Rube Goldberg system.
Why? Because the US government does check processing.
That does not follow. In my country, our main payment system is handled by private banks and it's also cheaper than MasterCard/Visa (only 0.9%, with a maximum of 1.5€).
Sorry, I should have written "the US government does check processing free of charge". That makes a paper check purchase often have lower transaction cost than a credit or debit card purchase, at least to the merchant.
I'm not sure what the legal status of charging the customer a different price based on method of payment is in the US - for a long time, merchants couldn't charge different prices based on what the customer used to pay. But now occasionally you see the very oddly named "Courtesy Fee" for when you pay with a credit card.
It's not directly a legal issue: Prior to Dodd-Frank, most/all merchant agreements only allowed for a "cash discount". That is, when agreeing to accept Visa or MasterCard, a merchant had to also agree to accept cards for all transactions and charge the same price no matter the payment type, excepting an option of a lower price for cash (but not for checks or debit cards).
Dodd-Frank made such agreements illegal: All merchant agreements must now include an option for the merchant to refuse credit (but not debit) cards for purchases under $10.
the US government does check processing free of charge
Does it?
With passage of the Monetary Control Act of 1980, Congress required the Federal Reserve Banks to charge fees for payments services (including checks, automated clearinghouse transfers, wire transfers, coin and currency, settlement and safekeeping) that are priced to recover the Fed’s cost of providing those services (including direct and indirect costs, overhead, imputed taxes, and imputed returns to capital). The Act was designed to increase competition between the Fed and private sector service providers.
Purely noble motives regarding removing cash from society, right? It essentially gives international financial corporations oligopoly over commercial transactions.
And for those of you that cherish privacy, imagine the tracking possibilities in a society where commercial transactions no longer can be pursued anonymously.
I pray for a day when this guys' power is torn away from their hands by Bitcoin. World with Mastercard instead of cash is a distopian nightmare. Ask Wikileaks.
I believe most PIN-based payment systems end up being a lot cheaper than that, and since this is MasterCard we're talking about, maybe you should look at a network like Maestro (which is big in the EU). Unfortunately it's really hard to pin down exact rates with a casual Google search...
The rules are very complicated and arbitrary. To give you an example: cashback interchange in Poland is negative (acquirer get money from the issuer), intradomain interchange is positive (issuer gets money from the acquirer) and interdomain interchange is zero.
There is no way explain interchange without using the words yacht, golf course, hookers and cocaine.
The US rate for credit card (and check card) processing is indeed very high! The upside of this is that it makes a variety of financial firms (banks and credit card companies) quite interested in issuing them. For instance, some banks will offer no-fee bank accounts with direct deposit and a certain minimum number of monthly check-card purchases (in lieu of requiring larger minimum balances). Some providers will also explicitly send a significant fraction of these fees right back to the customer as "cash back", airline-miles, or similar rewards.
(The downside is obvious. The dynamics of the interplay are interesting. I wonder if there are any good studies.)
You actually negotiate the interchange fee somewhere along the process of getting a merchant account. If you're a "Level 1" merchant you pay less and smaller merchants pay more, American Express and Discover charge more, if you're in a dodgy business coughPORNcough you pay quite a bit more. I think that Visa or MasterCard will increase your interchange fee if your customers do too many chargebacks and disputes, too.
I'm out of touch with that any more, but 1.75% used to be a very good interchange rate maybe 10 years ago.
We actually had a debate about this in Norway; removing cash completely. Only 2.7% of all Norwegian transactions are in cash, anyway. In Norway I can go for months without having any cash with me. Germany, where I live now, lives and breathes cash, which was very shocking when I came here.
True. Cash is still the primary payment method in central Europe (Germany, Austria, Switzerland, etc).
With cash you always have the overview of how much you carry around in your wallet. Cash is also a proven anonymous payment method. ATM are available everywhere and usually free (no service fee).
On the other hand online payment (ebanking, paypal) is popular too (for online shopping).
All payment methods (incl cash) come with some hidden fees and/or operating costs. And all have advantages and disadvantages.
Let's hope that cash will survive for a long time to come.
Denmark is having that debate as well. Currently stores doing in-person business must accept cash (part of the law on what constitutes legal tender). There's a proposal to let them go to card-only and not accept cash, but it hasn't passed.
One of the complications is that the only card some stores accept is Dankort, a Danish debit card system with low merchant fees (especially true of some small bars, coffee kiosks, etc.). So if they stop accepting cash, those places will effectively become limited to Danish residents. Today even if most customers pay with Dankort, a foreigner can always pay in cash.
Why is that a complication? Wouldn't it be up to the vendor if they want to lose the foreign business? Or are you saying that the government doesn't want it because they don't want to exclude foreigners?
It's a discussion, but yes, one of the arguments is that allowing places to exclude non-Danes is undesirable from a public-policy perspective. It's currently not legal to explicitly exclude non-Danes: you cannot ask for ID cards and refuse to serve foreigners. This change would make it possible to do that de facto, with the Dankort being sort of the ID card. There is also a possibility it would violate Denmark's commitments to the EU, requiring it to ensure equal treatment of EU citizens in commerce.
Well, the EU should probably do something about these regional card services. Ideally they should be forced to offer processing to all merchants in the EU. Here in Germany, they have EC and girocard, both of which aren't very foreigner-friendly. Expect foreign Visa cards to only work in the more commercial half of shops that take cards - maybe a third of all places you may want to shop.
I doubt Neelie Kroes is listening, but if she is, this is the kind of stuff that needs to go.
MasterCard's duopoly (with Visa) of all electronic payment systems in the world is so well-known it is often used as the first example of such a market in economics courses. "Legacy" payment systems such as cheques and cash are being slowly replaced by systems very much controlled by MasterCard or Visa.
This is troublesome for two reasons.
The first is political; both companies are American. This gives the American government way too much control over such critical infrastructure. Even if they do not overtly mess with the system, they most certainly are passing all this information on to their intelligence agencies. Even a single worthy competitor from somewhere else would be a huge improvement.
The second is that it stifles innovation. Because of the lack of a well-established competition, the only innovation these companies are interested in is new products that make use of their existing infrastructure. Contactless payments on mobile phones could have been reality five years ago, but MC and Visa have to jump through several hoops and require special SIMs to have it all run over the infrastructure they sell instead of the internet. And the banks are happy to wait instead of innovating themselves.
I'm all for killing cash by digital means. But not if these two companies are doing it.
What does the fact that I can pay with Bitcoin in a very narrow selection of web shops have to do with the vast network of debit and credit card systems that I can pay with anywhere I want (web and brick-and-mortar) without any effort whatsoever? The suggestion that cryptocurrencies are competition to MasterCard's and Visa's duopoly is ridiculous. Cryptocurrencies, due to their intrinsic online nature, are a very limited payment solution.
Note that I do support cryptocurrency efforts, use them, and follow the news with interest. But cryptocurrencies are not even close to mainstream enough to have this duopoly worried.
Every Bitcoin-derived cryptocurrency has to keep in sync with the blockchain in order to participate in payments. That is what I mean with "online in nature".
Ok now I got what you meant. thanks for the explanation.
Having said that your consideration about "on line nature" applies also to my mastercard in almost all the shops I usually buy stuff be it on line or off line. Without me providing the OTP and the payment processor verifying it I can't buy anything.
A little bit OT but worthy IMHO. There are quite a few SPV (1) client implementations that remove the need to have all the blockchain stored locally. The things are moving even further in these field with the implementation of the payment protocol (2)
As if cards are not "online in nature"? Bitcoin is, by the way, much ahead of cards in that regard. You can have bitcoin radio and have PoS (coffee machine, ticket machine, shop's PoS) that does not have Internet connectivity for months.
Is there a way to practically keep in sync with the blockchain on a battery constrained device? Because at the moment, I don't think you can make the equivalent of a debit card for bitcoin. Even a mobile app would be impractical with it keeping in sync with the blockchain on battery.
Debit cards are only online in the sense that the shop must provide a connection to a trusted third party, which is a far easier problem to solve. The cryptocurrency equivalent would be to present the blockchain on the spot; if that's not insecure it is at best very unpractical.
You don't need the entire blockchain on your phone. To answer the question:
> practically keep in sync on a battery constrained device
Simply don't, and have it be an app for blockchain.info (ie, someone else hosts the wallet and sends the money) or for your own personal wallet (that you have hosted somewhere).
But in practice, all you need to initiate a bitcoin transaction is the signing key of your address and someone to send your transaction to in the swarm. You never need the blockchain itself to do anything - if you forge illegal transactions where you say "give 50 bitcoin to X, but I only have 5" the chain will disregard it as false. You don't have to know your own balance to do that. And you don't need the blockchain to know your own balance - plenty of web services provide APIs to query the balance in a wallet.
And common retail works just fine here. The store is an entry point into the blockchain, and it is in their interest to provide a valid entry point to submit transactions through. They can't modify your transaction because they don't have your private signing key to authorize it, but if they don't broadcast it and have it confirmed in the swarm they can't get paid. It doesn't get quite as simple as "swipe a card" because you need some transistors that construct a valid transaction that requires your private signing key, thus you can't use a public terminal to generate it. But it doesn't need to be complex, have internet access, or have a complete blockchain to work.
There are practical Bitcoin wallets for Android phones. I use one on every day basis. It does not have a copy of blockchain because I don't need one to be able to use Bitcoin.
You're right, but for the wrong reason. Crypto currencies are a canary highlighting general anxiety over the fiat currency model that has served us for many years.
End of the day, the irresponsibility associated with currency management and the harsh controls over capital at the individual/small business level are what fuels demand for bitcoin.
This puts incredible power in the hands of the financial industry. It is the most clear evidence I've ever seen for the shape of the coming (already here?) plutocratic era.
The problem with "Yes, if.." is that the person asking only hears "Yes..." You better make sure the "if.." is in writing, with extra bold font. That, or you're stuck supporting IE6 with no budget or time to do so.
One great reason why you wouldn't want to get rid of cash is anonymity. There is no better way to give companies and gov'ts the middle finger when it comes to tracking purchases than to use cash.
The MC CEO wants to instruct his people to never turn down a deal, because he wants to expand into the 85% of the market MC et al. do not have.
He's making the bet that as he grows the market, MC will be able to make the new parts profitable somehow, and that the thing holding him back is his dealmakers being too conservative.
Put another way, he's hit top safe speed, and he's just flipped up the molly-guard on the "untested go-faster button."
"I don’t mean this in any bad way, considering I’m a man [myself] — but if you give the man money, he uses it for … drinking, some [form] of hedonism," he said. But, if you give the money to a woman, "the first thing it goes into is the kids: their education, hygiene in the house, clean drinking water and better food"
I thought this was meant to be about 'killing money', not Bangladesh's apparent lack of gender equality or the MasterCard boss's rather blunt views on the subject.
The article is all over the place. And -
"What really helps them realize they can make a difference is [the ability to make] a decision — and that not making a decision is a criminal offense."
If I were an employee of MasterCard, I would feel very patronized and angry in the face of a policy that disregards our opinions - even if it's obviously just a marketing farce for the stockholders.
>“Cash is the dirtiest secret of the modern economy. It belongs to a 200-year-old economy. It’s being allowed to play a role because it suits vested interests.”
is an odd statement. Cash goes back to at least the 30 pieces of silver in the Bible, it's not much of a secret and I wonder who the "vested interests" are. Perhaps the several billion people who use it daily? And "allowed to play a role" is odd as it's the standard system everywhere. Maybe Banga dreams of a world where Visa and Mastercard have the power to ban cash but perhaps still graciously allow it to play a role. I hope that does not happen.
Cash isn't going anywhere. There is WAY too much money that's "off the books" floating around, and MasterCard is completely foolish if they think that's just going to disappear because some idiot banker tells them that cash is history.
Visa and MasterCard are basically branded, proprietary protocols. They regulate how card issuers (banks) and card acceptors (PoS and other banks) work with each other.
You can remove those proprietary protocols, replace them Bitcoin. Your card in such situation is replaced with multi-signature Bitcoin wallet and have most advantages of current system without it's greatest problems.
What stays? Third party (ex-bank) is still capable of providing you mechanisms that are there to protect your money in case of theft of your wallet. What goes away? Third party (bank) no longer has control over your money. They can't steal it or freeze it. They can't prevent you from using it.
Added value? Since you no longer need Visa INC and you can freely switch between financial services providers (ex-banks) your costs go down.
Mods, please change the name of this submission. It is completely misleading. The linked article is titled: "Why Killing Cash is Key to Mastercard's Competitive Strategy".
On the other hand, if this was meant as click-bait, then go right ahead and not change the name. I'll just regret my click, and hopefully this comment will serve as a warning to other unsuspecting, curious individuals.
Edit: I see that the title has been changed. Thank you very much, mods!
To me the interesting portion of the article was the "Yes, if" instead of giving the answer of 'No.'
The tab in the browser says "Why Killing Cash is the Key to Mastercard's Competitive Strategy" but the title on the page is "MasterCard’s Ajay Banga: Why ‘Yes, If’ Is More Powerful Than Saying No." I typically don't pay attention to the title in the tabs.
Anyway, I found the comments on the article interesting even when the discussion went where I didn't expect.
MasterCard refused to process donations: http://observer.com/2010/12/card-declined-visa-mastercard-re...
Whether you agree with Julian Assange or not, the fact that democratically elected leaders in a democratic country tried to force a democratic society to _NOT_ support a cause by telling MasterCard "don't process these donations" was an incredibly chilling event.