> A credit card processor that charges 0% fee on transactions would have a huge advantage when pitching retailers.
So why, you may ask, do we have such high fees for credit card transactions? And believe me: they ARE high. No more than a hiccup when debit card fees were restricted to roughly $0.15/transaction but CREDIT card fees (which use the same systems) continue to be a substantial fraction (a few percentage points) of every purchase.
It's because no one is pitching retailers. The cards are sold to the consumer (who pays nothing). The retailer pays, but the contracts they are offered do not give them space to do much other than refuse to take a type of credit card (and give up a bug chunk of their business) or to accept them and pay the fees.
Huge barriers of entry. In order to make a card product that is really competitive to Visa & Mastercard, it's a chicken and egg problem - you need on board both a lot of merchants (to make the product useful to customers), a lot of customers (to make the extra effort viable to merchants), and a lot of money (measured in billions, not millions) to get it started - even major tech companies like Ebay/Paypal and Stripe are too small to afford this kind of effort on their own.
If you make the product really attractive to merchants, then you will have a problem getting customers. You will have to compete with the existing credit card products. Banks make a lot of money on those existing products and are highly motivated to ensure that the product you propose never, ever gets off the ground. History shows that they are both willing and able to (a) use this money to "buy" customers over with bonuses that you won't be able to match because you aren't charging the merchants so much; and (b) aggressively try to keep you out of all the infrastructure - there are many 'moats' that they control, including the large settlement systems, technical infrastructure installed at merchants (forget about using the same POS terminals to read your cards and Visa/MC, even if it's technically easy), etc.
There have been and are many attempts to make new alternative card products, but they aren't realistic to succeed. EU considers a wish for such a card system every couple years, but it turns out to be unfeasible even given the combined financial resources of the interested governments. Right now Russia has a strong motivation to support and subsidize such a system, but again, they don't want it that much to warrant the huge expenses for the relatively low expectations of success.
As a retailer you can negotiate like crazy with credit card processors. One of my cofounders worked at a processor and using his knowledge bank managaged to get us absolutely insane rates vs the "walk up" rate.
It probably saves us thousands to tens of thousands of dollars each year and we don't even have a huge amount of revenue.
So why, you may ask, do we have such high fees for credit card transactions? And believe me: they ARE high. No more than a hiccup when debit card fees were restricted to roughly $0.15/transaction but CREDIT card fees (which use the same systems) continue to be a substantial fraction (a few percentage points) of every purchase.
It's because no one is pitching retailers. The cards are sold to the consumer (who pays nothing). The retailer pays, but the contracts they are offered do not give them space to do much other than refuse to take a type of credit card (and give up a bug chunk of their business) or to accept them and pay the fees.