Credit Card Giants to Hike Fees, Impacting Businesses and Shoppers

12 September 2023

Welcome, and thank you for being part of the MyZucoins community! Let's get into an interesting piece of crypto, finance, or tech news to stay ahead.

Visa and Mastercard, two of the world's leading credit card companies, are set to increase their fees, directly affecting many businesses.

Starting in October and again in April, these companies plan to raise the costs merchants have to pay when their customers use credit cards.

This change will be particularly noticeable for online transactions.

This fee hike could lead to businesses shelling out an additional $502 million yearly, as consulting firm CMSPI estimated.

Of this amount, over half will come from increases in network fees, the cut kept by Visa and Mastercard.

The rest will be from increased interchange fees, which are the costs merchants pay every time a customer swipes their credit card.

These costs are mostly invisible to the consumer. However, they are a key point of contention between the card networks and businesses, ranging from mammoth online retailers to small corner coffee shops.

According to the Nilson Report, U.S. businesses paid a staggering $93 billion in Visa and Mastercard credit card fees last year, a dramatic increase from the $33 billion paid in 2012.

Unfortunately, businesses often pass on some of these costs to customers through higher prices.

Visa, Mastercard, and large banks justify these fees as necessary to cover fraud prevention and innovation expenses.

Furthermore, banks often use the revenue from interchange fees to fund popular credit card reward programs.

However, with the current economic climate of inflation and high interest rates, many businesses are concerned about the impact of these rising fees.

This has caught the attention of Congress, and new legislation has been introduced that could potentially allow merchants to process Visa and Mastercard transactions through alternate, and potentially cheaper, networks. Read more here.

Can Emerging Cryptos Like Zucoin Give An Edge?

The rise in credit card fees from Visa and Mastercard showcases an area where cryptocurrencies like Zucoins can bring significant benefits.

Zucoins' Splitchain network offers a transaction system devoid of transfer fees like those found in traditional blockchains.

In contrast, traditional card networks charge merchants for every transaction.

Interestingly, crypto networks usually charge even more fees than payment gateways like Visa and Mastercard.

This is because many cryptocurrencies go through several more layers of processing, including:

• Blockchain validator/mining fees (on the base layer 1 system)
• Sometimes gateway fees (the provider who's giving you access to the crypto network)
• Blockchain "layer 2" fees (for faster transactions on top of the base blockchain using often centralized solutions)
• Crypto exchange processing fees for local-currency-to-crypto conversion fees (sometimes with another stablecoin swap fee wedged in between)

In total, on many popular crypto ecosystems, there can be up to 4 layers of fees!

By eliminating these costs, Zucoins can provide a more affordable alternative for merchants and small-medium businesses, potentially saving transaction fees as the current economic cost of living crisis mounts.

Addressing fraud concerns is another area where Zucoins can excel.

With traditional credit card companies justifying high fees with the need for fraud prevention and innovation, Zucoins' Splitchain network can highlight its two-way transaction feature.

This system requires confirmation from both the sender and receiver, offering a robust solution to many kinds of common fraud and provides a compelling reason for merchants and consumers to consider switching to Zucoins.

Lastly, businesses are looking for cost-effective alternatives amidst rising financial pressures from inflation and pandemic-related recovery.

As commenters in the article point out, it's a little odd that two dominant companies are choosing to raise fees at the same time.

Crypto systems like Zucoins can seize this opportunity to highlight their advantages over traditional transaction systems.

By emphasizing features like fee-less transactions, two-way authentication, and efficient energy usage, Zucoins can be a beneficial solution for businesses navigating these challenging times.

---

If you liked this newsletter, please forward it to someone who might like it too.

What did you think of this newsletter? Reply to send us feedback on what you liked or want to see featured more. There’s more coming, so stay tuned.

—

All the best,
Peter & Rob
MyZucoins

Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.