Top Cryptocurrency Coins Are Challenging MasterCard and Visa’s Merchant Payment Duopoly
How Cryptocurrencies Are Challenging The MasterCard And Visa Duopoly
It is unheard of for a multinational, let alone two multinational heavyweights to lose out in a court case. What is even rarer, is when the court case forces them to part with settlement costs totalling $6 billion.
Earlier this week, the Business Press released a report indicating that MasterCard, Visa, and a few banks would be required to pay a multi-billion-dollar settlement to more than twelve million merchants. The court case arose out of the fact that the two payment networks, in collaboration with some banks had conspired to raise their swiping fees illegally.
As the case came to its conclusion this past Tuesday, a settlement of between $5.54 and $6.4 billion was agreed on. If you are wondering what the fees in question are referred to, they are known as an interchange.
This is a transaction cost that all merchants have to pay for them to use a processor from a particular network anytime a sale is completed. This money is traditionally channelled towards maintaining the network. A percentage of it is, however, sent to banks, which then offer credit card reward schemes to their clients.
Although increasing the interchange fees would not hurt the profit margins of giant retailers, e.g., Starbucks, arbitrarily increasing these costs can hurt the profit margins of smaller businesses. And if there is one thing the payment processors are aware of, is that there is no modern business that can survive without accepting card payments.
As such, the payment processors have a stranglehold over merchant’s all over the world. And this is a position that they have traditionally used to exploit merchants to rake in more profits.
The Rivalry Between Visa And Cryptocurrencies
On Tuesday, the same day that this settlement was reported by Bloomberg, it went on to launch an attack against BCH (Bitcoin Cash) claiming that the platform was being used by a few tech enthusiasts to create money from nothing.
It is important to note that this hostility being displayed by Bloomberg towards cryptocurrencies is not new. This is because they have entrenched business interests that often appear to have a deep hold on their editorial inclination.
However, when you look at their analysis, you will find that the editors completely failed to consider the reasons why the BCH fork occurred. Bitcoin Cash was an idea that was developed with the hope of coming up with a better peer-to-peer cryptocurrency.
This means that instead of concentrating on off-chain solutions, the availability of increased block sizes meant that the network was better placed to process transactions much faster as compared to Bitcoin. In addition, it would also cost the platform users to transact on BCH as compared to BTC.
The point here is that there are now multiple alternatives to MasterCard, Visa, and other centralized payment processors. The new alternatives are deemed to be better, and much more viable than their competitors. Visa and MasterCard are not out of the woods yet as there is another ongoing case that seeks to have them change their business practices.