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Visa To Offer Person-To-Person Payments
angry tapir writes "Visa has announced it is planning a new service that will let US customers send money directly to one another, presenting new competition to PayPal. Visa already lets people send money to Visa accounts in many other countries, but this will be the first time it will offer the service in the US."
Well, I guess we're seeing market failure.
Basically, an oligopoly between Visa and Mastercard.
I'm not a lawyer, but I play one on the Internet. Blog
Is the postal system so corrupt in your country that simply sending CASH to someone is dangerous? In 50+ years of sending and receiving gobs of cash in birthday cards and christmas cards, I've never had any problems.... and we're talking thousands of dollars here...
paypal will answer for their transgressions.
I like the joke, but as the amount of the transfer goes up, so does the risk. (The risk the money won't be repaid, or the risk the transaction is fraudulent) So, yes, it does cost more to send more money. Does it cost exactly what they charge? Not at all, they can charge what they can get away with.
All ideas^H^H^H^H^Hprocesses in this post are Patent Pending. (as well as the process of patenting all postings)
4% back on gas (that's about 0.15 per gallon, lately)
2% back on restaurants
3% back on some class of merchants I can't remember
and 1% back on just about everything else.
We get a $100ish check for every $9000 or so that we spend through the card.
Rewards cards are part of the landscape now... get used to it, or (as an industry, collectively) grow a pair and do something about it. What the "market failure" whiners fail to account for is the massive investment Visa and Mastercard made across the last 40 years to roll out their system worldwide. Of course they're entrenched, they would have been irresponsible stewards of their investors' capital if they didn't entrench themselves along the way.
As a consumer, I view cash as a "premium" payment option. If I value the anonymity that comes with cash, then I'm willing to go through the trouble to get it, the ATM fees, and the lack of rebate from my credit card. If you're a merchant who accepts credit cards, I assume you've already built in a 5% margin to cover that - if you're a small time place (like a hair salon or locally owned restaurant), I might pay cash as a sort of extra tip, both dodging the credit card fees and making income reporting potentially optional. But, most of the time, credit cards are just a built in cost, a tax paid to the money handlers, and I choose to deal with a bank that slides a little of it back my way.
Life has never been simple, when you were a child, you thought it was and you might have been taught it was, or should be, but those teachers were liars. Paybacks, graft and corruption are not just in the Mafia's domain - they have been a part of "respectable" business since long before the Magna Carta.
The elephant in the room here is the Hawala system (http://en.wikipedia.org/wiki/Hawala) quicker, far cheaper, no accounts getting suspended- as reflects it's origins as a money transfer system designed to work in a hostile environment without regulatory authorities. And it does work, has worked for centuries. The only brake is the media scare stories on 'Islamic terrorist banking'...
"A competitive market should result in enough profits going to owners of capital that keeping their capital in that market makes sense."
Sure, but in a competitive marketplace less capital is needed per unit of gross as time goes on and competitors optimize their product/business model. This because they are, again, in a truly competitive market, competing with one another. Since they are, again theoretically, competing with one another they will also compete with each other over customer market share, which should result in in a smaller cost/product ratio on the customer end.
While cross-market competition for investment capital is a consideration, it should not generally be able overwhelm that trend in the long term.
That it hasn't is indicative that the "free market" system we have is not actually competitive. Some will argue that this is because we don't really have a "free market" due to regulations, others will counter that a "free market" does not emerge spontaneously from anarchy, and in the meantime, while theory is being thrown frantically against the walls, joe six pack will still be paying Visa 2% to sell a six pack to the local Visa-wielding wino, and musical chairs and golden parachutes will continue to be the tune blasting over the office intercoms on Wall Street.
Until the house of cards collapses, that is.
Someone had to do it.