Why payment fees matter more than you think

In India there is UPI (Unified Payment Interface), which works with all bank accounts, it's facilitated by the Government and it comes with i. QR Code (Used with strangers and at Merchants) ii. UPI ID iii.And links to phone number.

Anyone can pay to anyone instantly free of Charge. Only limit is it's limited to ~ $1000 payment. The QR code can also be dynamically created by POS terminals containing the total bill amount as well, so upon scanning the amount is auto populated in the payment app, you just have to enter the security pin.

And since it's a Govt. Project, its not limited to just one app, there are lots and lots of apps working on the same system. There is even a VISA/Mastercard credit alternative : RuPay that works within the system.

Let's just call it for what it is.

Visa and mastercard innovated in an era where payment settlement was notoriously difficult and expensive but they've used their monopolies to entrench themselves in (by negotiating deals with merchants and bribing consumers with points) while the rest of the world moves on towards "layer 2" payment systems that are much cheaper and efficient.

Shameless self-promo: We've been working for the last two years on making money movement free. We use ethereum (and stablecoins) for that, and integrate with the novel real time payment networks like PIX, Wechat, Yape, Mercadopago and so on.

We're still orders of magnitude smaller than Visa and Mastercard, but I do believe products like ours (and competition is red hot here, theres so much good choice!) will be good for consumers.

Money should be like a message: free and instant

We're open source btw, happy to show off codebase and review PRs

https://github.com/peanutprotocol/peanut-ui

https://peanut.me/

This article is missing some important aspects/context:

> If the card processing cost is 4 percent of the sale price, the fee amounts to $6. That $6 is not 4 percent of the profit; it is 12 percent of the merchant’s margin.

Sure, but merchants are raising prices overall together with all their competitors, or charging more when using a card. Credit cards aren't taking away 12% of merchants' profits that they'd keep otherwise.

Also, credit card fees are not 4%, they're 1.5-3.5% with an average of around 2.3%.

> The merchant may pay little or nothing per transaction, the funds usually arrive immediately and no physical terminal is required.

But what's missing here is fraud protection. It's more like debit cards than credit cards, and debit card transactions are much cheaper in the US too (more like 0.7%).

Now that it's increasingly common for local merchants to implement a credit card surcharge (so non-CC users don't have to pay more), and a large percentage of credit card fees come straight back to the user as rewards (e.g. a 2% cash reward), it's not really clear that payment fees matter all that much in the end. See:

Fed Data Shows Economics of Interchange: 86% of Fees Fund Rewards Programs: https://www.pymnts.com/news/loyalty-and-rewards-news/2025/fe...

Wechat pay in China is interesting. It costs nothing to add money to your balance from your bank, or to pay someone from your balance. It only costs the end merchant who wants to withdraw it from their balance back into their bank. If they can keep it in Wechat pay and spend it on other things (which is very easy as it and Alipay are the primary payment methods for everything), then there's no charge.

I guess Tencent are making their profit from the interest they earn on the money that was transferred into them that just stays in people's Wechat wallets in effectively a parallel currency.

It's time for Europe to process the own money. Strange that the dominance of Visa/Mastercard/Maestro was left for so long. Of course there is a lobby from them to attack the digital Euro

In the EU, we now have instant, free SEPA bank transfers.

I know that the banks are trying to build a payment solution on top of this technology but it's not really getting traction.

I am wondering if there is a way to bootstrap something bottom-up by offering something to merchants that has a clear value prop.

If a restaurant runs on a 9% net margin and pays around 3% in card fees, then roughly one-third of its net profit is going toward payment processing.

4% seems high. Quick googling in the US (which has high rates) shows 1.5-3.5%, avg of 2%

In Argentina we can transfer using our account number (or account Alias, for example my alias could be kwanbix) directly, account to account, instantly, it costs 0.

One factor that the author glosses over a bit is that highest swipe fees are for credit cards with benefits. The interbank system he describes is a debit system, no credit is being extended. Even in the US, debit swipe fees tend to be less.

Why not FedNow?

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