People arguing about regulation tend to favor one side of the argument and believe that either the government or the market has the capabilities and the desire to standardize and solve consumer problems. Theoretically, both approaches are valid, even if they lead to different outcomes. I wanted to tell you about two particular examples I like the most. And yes, basically I will compare the United States and the European Union.
First is credit card cashback. But we need to take a few steps back first. When you buy something for $100 with a VISA or MasterCard, the seller doesn’t get $100. There are interchange fees charged by the card processing network that are shared between them, the bank operating the card terminal, and your own bank.
This creates a few challenges. The seller gets less money, but in theory, you’re more likely to spend more at their establishment if you can pay with a card. Still, they most likely keep their prices a tiny bit higher to account for this loss. The interchange fees also aren’t totally linear. The advertised Stripe US rate is a good example: 2.9% + 30¢ for each successful card charge. A brick-and-mortar business is more likely to use something like Square, which offers 2.6% + 10¢. But there’s always this fixed part, which makes fees on a small purchase much larger.