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What are Visa and Mastercard for and who they are really serving by Arnd Huchzermeier and Ludo van der Heyden
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At one level, today’s payment card system is spectacularly successful. The industry offers a potentially rich ‘win-win-win’ between consumers, retailers and banks, providing consumers with an easy, convenient way of making payments both at home and abroad (plus the nohassle ability to draw on credit lines), retailers with security and processing ease, while also delivering lucrative a revenue stream for banks.
However, at another level, this system is becoming increasingly dysfunctional, imposing an effective tax on all consumer/ retailer transactions while resisting all attempts at reform. To find a way forward, we need to understand how and why the system works as it does: how it is designed to stifle competition between banks and to suppress flows of information that could help retailers negotiate better deals, for example.
By carefully analyzing the system’s dynamics it is possible to pinpoint which reforms and initiatives will have the greatest positive effect.
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