Their value really is that they exist and are more or less a monopoly, so you have to pay the fees to use them (as a merchant) or turn away the overwhelming majority of customers.
I think they clearly have value, but the problem is that it's hard for the market to settle on the true value because of the games they play with credit card points. They've tricked consumers into thinking that credit cards incur no costs, but in fact give them cash back and points.
If points were banned, and consumers instead paid the credit card fee as a line item on their receipt next to taxes, you might find more downward pricing pressure or consumers willing to pay cash.
Well duh, of course people would prefer cash if their credit card started costing them money. Credit cards are basically free to the consumer. You could argue that the ever-present fees causes the prices of goods to go up to compensate but it's just really not the case. You can look at merchants that accept and don't accept credit cards and you won't see really any tangible difference between the prices of their services.
There are a decent number of places that have a minimum price for using a card, and I've even seen gas stations that charge extra per gallon if you pay with credit instead of cash. I definitely agree that in the overwhelming majority of cases there isn't a difference to the consumer, and even when there is it's fairly slight.
Prior to their existence what mechanism provided the same avenue for transaction? Especially as the world moved online I would argue they became more relevant for transactions. I don't disagree with the monopoly part but that doesn't discredit their value in my opinion.
Not only do they exist, but they provide some kind of infrastructure to transfer payments. How do you do this without a middleman? Even mailing a check relies on banks and a postal system.
If you're paying 3% you're getting ripped off. There is no reason you should be paying more than 1%. In the EU interchange is 0.3% for credit and the scheme fee is less than that.
Maybe if you're doing an unauthorised, interdomain transaction with an imprinter in a brothel then 3% is reasonable.
Authentication would only solve one type of fraud (using someone elses credit card). What about when you buy something online and the seller doesn't send you the item? Or sends you a broken item? What is a service breaks their contract with you?
There are lots of kinds of fraud that aren't identity based.
It really depends on a lot of things (do you have a chip terminal? If not, are you a gas merchant and based in the US, and the total transaction is under $50? Are you enrolled in 3D Secure? Are you on the Full Fraud Recourse list?...etc.)
How you answer those questions determine chargeback eligibility. Even if networks do issue a chargeback, you can provide a 2nd presentment with evidence supporting your claim that it wasn't your fault. Finally, if all else fails, you can go the Good Faith Credit route.
Which leads me to say that the burden of fraud really falls on the network, not the merchant, since they have to abide by definitive chargeback policies set forth, and be willing to accept 2nd presentments for the sake of maintaining merchant relationships.
Your conclusion still holds true- swipe fees should be less than 3%- probably closer to 1%... let's just say I work in the industry, and see how the proverbial sausage is made.
Only online transactions(CNP) where you ship the product to address other than card's billing address. If the merchant uses 3D secure for online transactions, issuer is fully liable for fraud. For card present transactions, issuer is fully liable for chip based transactions. Merchants only bear risk if its a stripe or a manually keyed in transaction.
High cost of for credit card transactions is because merchant pays for the 60 day interest free loan on the money that the bank is giving the consumer to make the purchase. Debit network transactions are a lot lower, 0.5% for durbin amendment cards(90% of cards out there).
I am in Australia where the rules are different, but does 3D secure protect you against the CC owner claiming the item is not as described or was not received?
visa fees? way less. total fees to the merchant per swipe is way under 3% for any sizable businesses. something like 1.2% + $0.10 was average when I worked for a payment processor.
