INDIA – JUNE 09: Credit Card in a ladies purse (Photo by Vivan Mehra/The The India Today Group via Getty Images)
The India Today Group via Getty Images
It’s so easy to forget that as the 20th century came to a close, over 90 percent of transactions were settled through the mail. If not for credit cards, this would still be true.
Think about the limiting nature of this for businesses of all sizes, not to mention businesses geographically distant from would-be buyers. Thankfully credit cards combined with the internet have changed this. Which was a huge leap.
To see why contemplate what Kimbal Musk, brother of Elon, was told by the head of a major Toronto newspaper when the brothers shopped their nascent online database in the form of Zip2. Nowadays an online directory reads as rather dated, but in the same decade when most transactions were consummated through mail, online was another planet strange. The newspaperman laughed at Kimbal, asking him if he truly though Zip2 would replace the Yellow Pages…
All of this, and so much more, is essential to keep in mind as Visa and MasterCard near a settlement with merchants over interchange fees, card acceptance, and cards with rewards. The dispute is 20-years old, but to merely contemplate the settlement is to marvel at the seeming amnesia of the merchant side of the agreement.
That’s because it’s easy to forget what a miracle credit and debit cards are not just for internet transactions, but overseas, local and over-the-phone transactions. Thanks to credit cards, businesses in the smallest, most remote U.S. towns can transact with buyers around the world, and without having to pay any kind of mind to the financing of those transactions.
Credit card companies do all the work, and they take on all the risk associated with a failure of customers to pay what they owe. Which means the only financial risk for merchants is that they’re possibly undercharging for services rendered.
All of which requires more thought about the internet side of online transactions. Seriously, how easy to forget what a lift it was to convince consumers to give out their credit card information “online.” This was unheard of, and risky not just for consumers. Seriously, what of the credit card issuers that would finance the exchanges on this rather exotic advance populated with unprofitable (remember “Amazon.org”?) businesses?
It’s a reminder that credit cards aren’t just a miracle for the power they place in our pockets every time we walk into a shop, but also what they do for us as we transact with merchants near and far. They’re taking enormous risk in financing our purchases, but also in entrusting their mode of finance to businesses the world over.
Despite this, the primary dispute from merchants over the last twenty years has had to do with how much credit card issuers could charge for financing the expansion of businesses of all sizes around the world, along with the rewards certain cards have showered on consumers for allowing them to finance the growth of businesses large and small.
Implicit in the years of wrangling was that for going to the great expense of enabling secure transactions of all kinds, Visa and MasterCard don’t rate reasonable compensation for moving proverbial mountains. Despite this, Visa and MasterCard negotiated lower interchange fees while conceding to merchants the self-defeating right to refuse certain high reward cards, only for the merchant groups to start negatively talking about the settlement just as it’s announced.
Oh well, they should be careful what they wish for. So rapid has commercial progress been thanks to credit cards, it seems merchants forget how things used to be. Which seemingly explains their bratty comments about a settlement that’s not yet signed. How very obnoxious.