> Also, if you factor in that cash is an option, and the significant inroads being made by options like Square and Venmo
The real competition is the NACHA's ACH system. Square and Venmo ride atop existing payment networks. The innovation is adding another level of ease of use over another layer of rent-seeking largely because Visa is slow to innovate and ACH is effectively a government product.
> Visa, Mastercard, and Discover's primary value they provide is fraud detection and prevention.
Most of this value is provided by the MSP and merchant banks, not by the card associations. ACH fraud protection is mostly reversable transactions.
> independent, fly-by-wire cut-rate providers is in the public's best interests long term
That is what we have today - tons of small MSPs and a few big ones. Square, for example, is a big one.
> Most of this value is provided by the MSP and merchant banks, not by the card associations.
Not necessarily accurate. My bank does not offer the ability to reverse transactions or replace funds lost to merchants. They also can't remove fraudulent merchants from the payment network.
Actually accurate. "Merchant bank" is not the card holder's bank - it is the bank that actually settles transactions with the issuing bank (i.e. your credit card) and then deposits money into the merchant's actual bank account. Money flows through the merchant account. Incidentally, the merchant bank is at risk for fraudulent merchants as they are often advancing money (a few days early) to the merchant in anticipation of settling. Merchant banks can shut down merchants and they also have the power to require the merchants to leave an amount of money on deposit with them to mitigate risk.
> My bank does not offer the ability to reverse transactions or replace funds lost to merchants
Correct. Your bank does not have that power - you have to initiate a chargeback, and that is ultimately handled by the MSP. Incidentally, if you have a credit card, the issuer (often a bank) initiates the chargeback process.
The real competition is the NACHA's ACH system. Square and Venmo ride atop existing payment networks. The innovation is adding another level of ease of use over another layer of rent-seeking largely because Visa is slow to innovate and ACH is effectively a government product.
> Visa, Mastercard, and Discover's primary value they provide is fraud detection and prevention.
Most of this value is provided by the MSP and merchant banks, not by the card associations. ACH fraud protection is mostly reversable transactions.
> independent, fly-by-wire cut-rate providers is in the public's best interests long term
That is what we have today - tons of small MSPs and a few big ones. Square, for example, is a big one.