How do Cashless Societies Cope with this Plot Twist

[Hydrogen]

Visa, Mastercard increasing fees for processing transactions: WSJ

(Reuters) - Visa Inc and Mastercard Inc, the two biggest U.S. card networks, are preparing to raise certain fees levied on U.S. merchants for processing transactions from this April, the Wall Street Journal reported on Friday, citing people familiar with the matter.

Some of the changes relate to so-called interchange fees, the report said. Interchange fees are what merchants pay to banks when consumers use a credit or a debit card to make a purchase from their store.

Fees that Mastercard and Visa charge financial institutions, such as banks, for processing card payments on behalf of merchants, are also set to go up, the report said.

A Visa spokesperson confirmed that the fee hikes would go into effect in April, 2019, but only for merchant banks, and not merchants.

Merchant banks are financial institutions that maintain accounts for sellers such as Amazon and Costco. JPMorgan, Citigroup and Bank of America are some of the top merchant banks in the country.

However, it is up to merchant banks if they want to pass on the fee hike to sellers, or absorb it themselves. Similarly, it is sellers’ discretion to pass on the hike to consumers or not.

Up to 2.5 percent of prices for goods and services go to cover card fees, the WSJ said.

Card companies have said in the past that their credit and debit cards usually result in more sales for merchants, especially in countries like the United States. They also say that expenses for ramping up anti-fraud/theft security measures, to make payment processing safer, need to be covered.

Mastercard did not respond to Reuters’ request for comment on the story.

Recently, the two companies along with several U.S. banks, had to pay over $6 billion to settle a lawsuit brought by merchants who accused the credit card companies of violating federal antitrust laws by forcing merchants to pay swipe fees and prohibiting them from directing consumers toward other methods of payment.

https://www.reuters.com/article/us-paymentprocessors-fees/visa-mastercard-mull-increasing-fees-for-processing-transactions-wsj-idUSKCN1Q41ME

....

Here is a hypothetical cashless society scenario for you.

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.
#3  If paper money were available, everyone could abandon credit cards and utilize paper money instead but with the cash option dead that is no longer possible.

Question: how do consumers cope with conditions under cashless societies where fees are raised severely the way pharmaceutical drugs in the united states are after a single entity buys up existing stockpiles.

There are interesting and somewhat well worn arguments published all over the internet for potential negatives associated with market consolidation, further centralization of markets leading to monopolization.

I wonder if any cashless supporters have a good response to this?

[butka]

Cashless society is a nightmare, not only privacy-wise, but also in other ways we can't currently imagine. I personally don't use credit cards, and if there was no way to buy something for cash, I would usually skip it. At the same time, I'm amazed how people around me opt in for credit cards, like it is something very fashionable and technologically advanced. I would like to see some common sense around me, but not seeing it, so I guess, that's the sad future that expects us no matter what country we live in.

The scenario you indicated is not only possible, but very probable. Further centralization and monopolization, not to mention more control over the lives of the individual members of the society. The fees are almost always absorbed by the consumers. I guess the consumers have no choice but to swallow the increased fees, or maybe, if crypto were widely adopted, switch to using crypto.

[alyssa85]

Here is a hypothetical cashless society scenario for you.

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.
#3  If paper money were available, everyone could abandon credit cards and utilize paper money instead but with the cash option dead that is no longer possible.

Question: how do consumers cope with conditions under cashless societies where fees are raised severely the way pharmaceutical drugs in the united states are after a single entity buys up existing stockpiles.

There are interesting and somewhat well worn arguments published all over the internet for potential negatives associated with market consolidation, further centralization of markets leading to monopolization.

I wonder if any cashless supporters have a good response to this?

This is exactly why central banks have now changed their minds about cashless societies.

For example Sweden was going cashless (with shops refusing to accept cash). But the Swedish central bank stepped in:

https://wolfstreet.com/2018/10/26/nirp-fades-swedens-central-bank-makes-u-turn-on-cashless-society/

Sweden’s Riksbank has become the first central bank in the 21st century to take concrete measures to ensure that cash does not disappear as a means of payment from the financial system. To that end, the Riksbank proposes, in a document published on its website, to make it mandatory for all banks and financial institutions to offer cash services.

[magneto]

Here is a hypothetical cashless society scenario for you.

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.
#3  If paper money were available, everyone could abandon credit cards and utilize paper money instead but with the cash option dead that is no longer possible.

Question: how do consumers cope with conditions under cashless societies where fees are raised severely the way pharmaceutical drugs in the united states are after a single entity buys up existing stockpiles.

There are interesting and somewhat well worn arguments published all over the internet for potential negatives associated with market consolidation, further centralization of markets leading to monopolization.

I wonder if any cashless supporters have a good response to this?

Exactly. And even though it seems like in the article that merchants aren't directly affected, they most likely will since there is no way these intermediary businesses don't pass on the fees to the actual buyers/sellers.

They seem to be attributing the hike in fees in anti-fraud measures (aka chargebacks, credit card fraud), when you simply don't see that being necessary in decentralised cryptocurrencies like bitcoin, since it is not reversible and no one can physically "skim" your data as easily as a card.

It really goes to show the flaws of a cashless society as you said. It will be interesting to see if governments start their own electronic payment system, instead of relying on third parties, in order to go cashless. But imo centralised cashlessness has just too many detriments, including cost, maintenance, security concerns, and privacy concerns for it to be worthwhile to consider.

[dothebeats]

Going full cashless is bad, and a scenario you gave is just one of the many negatives that could potentially happen should this idea come into realization. Aside from interest rates and fees, if a certain catastrophe occurs and disables the whole payment network, then what comes next? Consumers would be the ones suffering from a cashless society, as the services and merchants could increase rates at will without the consumers knowing beforehand. Fraud would be legally permitted once this happens, too.

[BrewMaster]

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.

but i don't think this can happen. because first of all if the  credit card companies did that there would be incentive to keep cash or even reinvent it to get rid of them.
besides lets not forget that we are living in a world of cut throat competition. if credit cards were the only means of payment then there would be a huge amount of competition which would lower the fees automatically. so anybody who raises the fees would simply be kicked out of the game.

and we always have the decentralized solution called bitcoin

[cellard]

Centralized electronic payment processors such as Visa, Mastercard and co raising their fees is the least of the problems, the big problem would be the loss of financial privacy.

Bitcoin would obviously pump massively at the news of relevant countries going cashless. However the rise of demand for block space would raise Bitcoin fees as well, so second layer solutions must be ready by then to profit from the perfect storm.

[sheenshane]

We are now entering the era without fiat/paper money on our pocket. Cards will be the thing we have to keep in pocket and golds in our safes. This is really starting to happen today. We can see that Visa Cards and Master Card, the duopoly is preparing for hike/increase of charges for the next year. That only means that people will try to stop using fiat and use their digital assets instead.

[andriarto]

indeed before the existence of bitcoin we were familiar with visa cards and master cards, in fact they had started it first. and now Bitcoin is present by offering a new system, and unfortunately not all countries immediately accept it. of course it becomes a natural thing if it requires a process

[mrdeposit]

We are now entering the era without fiat/paper money on our pocket. Cards will be the thing we have to keep in pocket and golds in our safes. This is really starting to happen today. We can see that Visa Cards and Master Card, the duopoly is preparing for hike/increase of charges for the next year. That only means that people will try to stop using fiat and use their digital assets instead.

Certainly, every new coming year is closer to technology and this also affects the money system. Cards will also turn into digital money as time goes on. I can even say that this fact is inevitable. Because, when any presence develops, its surroundings should develop accordingly.

[Haunebu]

We are now entering the era without fiat/paper money on our pocket. Cards will be the thing we have to keep in pocket and golds in our safes. This is really starting to happen today. We can see that Visa Cards and Master Card, the duopoly is preparing for hike/increase of charges for the next year. That only means that people will try to stop using fiat and use their digital assets instead.

Are you serious? Do you actually believe that FIAT will disappear just like that just because new methods of payment are available? I find it laughable that people actually believe something like this can happen.

It is a fact that people will always prefer FIAT over anything else like gold, Bitcoin etc due to their historical connection with it and it has proven to be far more reliable when compared to any other form of payment system.

[Kakmakr]

The fee increase will be pushed onto the consumer/client, so they will not feel the impact of this on their profits. The smaller merchants should take note about this on-sided decision and start considering adding alternative payment options for their clients.

It is nice when a duopoly like this can force changes like this, without companies having any choice or alternative in this matter. Their monopoly gives them the power to make decisions like this. This is why Bitcoin was created, to break Monopolies like this and to offer people an alternative option.  

[Findingnemo]

We are now entering the era without fiat/paper money on our pocket. Cards will be the thing we have to keep in pocket and golds in our safes. This is really starting to happen today. We can see that Visa Cards and Master Card, the duopoly is preparing for hike/increase of charges for the next year. That only means that people will try to stop using fiat and use their digital assets instead.

Are you serious? Do you actually believe that FIAT will disappear just like that just because new methods of payment are available? I find it laughable that people actually believe something like this can happen.

It is a fact that people will always prefer FIAT over anything else like gold, Bitcoin etc due to their historical connection with it and it has proven to be far more reliable when compared to any other form of payment system.

Possible thou,when we have no longer in need of fiat but for now everything is connected to fiat which maybe used in digital form so we always using fiat over anything but if a day comes when crypto have stable value with that people will prefer cryptos over other due to the decentralization.

[n0ne]

With large volume transaction the transaction fee won't be considered a big thing, because the fee will be small compared to the amount that has been transferred. The transaction fee arises with the low volume trades, where the minimum fee seems big when compared with the amount transacted. Making cashless society will progress only when every human is taught about technology and its need.

[avikz]

Here is a hypothetical cashless society scenario for you.

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.
#3  If paper money were available, everyone could abandon credit cards and utilize paper money instead but with the cash option dead that is no longer possible.

Question: how do consumers cope with conditions under cashless societies where fees are raised severely the way pharmaceutical drugs in the united states are after a single entity buys up existing stockpiles.

There are interesting and somewhat well worn arguments published all over the internet for potential negatives associated with market consolidation, further centralization of markets leading to monopolization.

I wonder if any cashless supporters have a good response to this?

Thank you for bringing up few very good and strong points on the negative side of the cashless society. It's very much true! If we completely move towards cashless society, we will be at the mercy of banking cartels who will control the entire network. Whenever they will increase the fees, merchants will pass it on to the consumers like us and at the end of the day, we will bear it all! That is the imminent future. But the question is how to cope up with the ever increasing demand of the payment processors and Banks.

The answer is - a government run and non-profit payment processor!

Just to give you an example, In India, Visa and Mastercard is being used by majority of the banks for their payment processing. These organizations are private ones and seeing their dominance in the Indian financial market, Indian Government has started an initiative called "Rupay". It is a similar payment processor like Visa and Mastercard but strictly run by Indian Government. Now slowly all government banks have started using this payment processors and started issuing Rupay cards to the account holders. It is not not only giving great competition to the Visa and Mastercard, but also offering the similar efficiency within India. Only few private banks are still using Visa and Mastercard but all other banks are now offering the choice to their customers whether they want to get a Visa/Mastercard or a Rupay card. The transaction cost of the Rupay card, is simply a lot cheaper than these two conglomerates trying to control the major market share.

So these kinds of threats can be managed of a government wants to manage with good intention. Even governments know that it's not a good thing to be at the mercy of foreign made companies to control our own financial system so they have built their own. I am sure, a lot of other governments will try to achieve the same in the future because cashless society is the imminent future. I hope this answers the valid concern that you have raised here! Thanks for the opportunity!

[wilburwilbur]

If this happens this may happen to the cashless society
•convinient when buying
•effecient, saves you from the hassle of handling fiat moneh
•helps you track your expenses andthe money itself
•no more counterfeit money
•rampant hacking
•oldies cant cope up
•government can peek at your accounts

[1Referee]

Are you serious? Do you actually believe that FIAT will disappear just like that just because new methods of payment are available? I find it laughable that people actually believe something like this can happen.

It is a fact that people will always prefer FIAT over anything else like gold, Bitcoin etc due to their historical connection with it and it has proven to be far more reliable when compared to any other form of payment system.

I think so too. Eventually, I strongly believe that we'll see tokenized fiat, where every token is compatible with PayPal, MasterCard, Vista, etc. In other words, governments haven't pulled out their big guns yet.

In the end, people want something that works as money whenever they want, has a stable unit value, offers convenience, and more importantly, the ability to reverse transactions. People don't know how to take care of their finances. They will always fall for scammers or mess up themselves resulting in loss of funds. If that happens with Bitcoin, your funds are lost for ever, which is a pretty scary thought for people.

[Barbut]

Are you serious? Do you actually believe that FIAT will disappear just like that just because new methods of payment are available? I find it laughable that people actually believe something like this can happen.

It is a fact that people will always prefer FIAT over anything else like gold, Bitcoin etc due to their historical connection with it and it has proven to be far more reliable when compared to any other form of payment system.

I think so too. Eventually, I strongly believe that we'll see tokenized fiat, where every token is compatible with PayPal, MasterCard, Vista, etc. In other words, governments haven't pulled out their big guns yet.

In the end, people want something that works as money whenever they want, has a stable unit value, offers convenience, and more importantly, the ability to reverse transactions. People don't know how to take care of their finances. They will always fall for scammers or mess up themselves resulting in loss of funds. If that happens with Bitcoin, your funds are lost for ever, which is a pretty scary thought for people.

I believe in same outcome, tokenization. What is jp Morgan doing right now? Fiat will disappear, I don`t doubt in that, but what is future bringing for all of us in uncertain. Now we have decentralized cryptocurrencies. What will stop someone to use anonymous zcash and force him to use some USDT or some other stable coin, government coin, corporation coin? We are entering in specific era, what will happen nobody can say, but war between centralized and decentralized sector is inevitable.

[ChinkyEyes]

However, it is up to merchant banks if they want to pass on the fee hike to sellers, or absorb it themselves. Similarly, it is sellers’ discretion to pass on the hike to consumers or not.

Obviously the banks are not going to absorb it...
As an European I am always amazed by the use of Americans and their creditcards. In Europe most people use debitcards and they do not hold the huge fees like mastercard or visa does. Creditcards cripple not only the consumer but the merchants as well.

Sweden’s Riksbank has become the first central bank in the 21st century to take concrete measures to ensure that cash does not disappear as a means of payment from the financial system. To that end, the Riksbank proposes, in a document published on its website, to make it mandatory for all banks and financial institutions to offer cash services.

I do think in the near future cash will be completely gone. But looking at problems Europe faces it could be that they do not want cash to disappear just yet, because the older generations have trouble adapting to newer technologies and like to use cash.

[stompix]

Here is a hypothetical cashless society scenario for you.

#1  Paper money is eliminated.
#2  Credit card companies and assorted electronic payment processors raise fees and APR's by 2,000%.
#3  If paper money were available, everyone could abandon credit cards and utilize paper money instead but with the cash option dead that is no longer possible.

Question: how do consumers cope with conditions under cashless societies where fees are raised severely the way pharmaceutical drugs in the united states are after a single entity buys up existing stockpiles.

There are interesting and somewhat well worn arguments published all over the internet for potential negatives associated with market consolidation, further centralization of markets leading to monopolization.

I wonder if any cashless supporters have a good response to this?

There is always a way to prevent that from happening:

Visa, Mastercard reach $6.2 billion settlement over card-swipe fees
Mastercard Fined $648 Million By EU Over Fees

And if fees go up too much, then the market will react and a new company will pop-up with cheaper fees, and since somebody mentioned Sweden, the leading payment processor in Sweden is Izettle, not any of the big names.

Besides cash gives you a false feeling nobody can touch your money...in a matter of minutes, the CB decides old notes have no value and will consider only new banknotes real money as it happened in Turkey. And all your cash will be useless.

The answer is - a government run and non-profit payment processor!

Just to give you an example, In India, Visa and Mastercard is being used by majority of the banks for their payment processing. These organizations are private ones and seeing their dominance in the Indian financial market, Indian Government has started an initiative called "Rupay". It is a similar payment processor like Visa and Mastercard but strictly run by Indian Government. Now slowly all government banks have started using this payment processors and started issuing Rupay cards to the account holders. It is not not only giving great competition to the Visa and Mastercard, but also offering the similar efficiency within India. Only few private banks are still using Visa and Mastercard but all other banks are now offering the choice to their customers whether they want to get a Visa/Mastercard or a Rupay card. The transaction cost of the Rupay card, is simply a lot cheaper than these two conglomerates trying to control the major market share.

Oh yeah, the government should do it!!!!
Because we all know the government is so damn good at doing things! /s

And how much does this Rupay cost in subsidies from the government?
Because every time any government offers something cheaper it actually costs you more but since it's from tax money people have a tendency to ignore the issue.