Fed’s new instant payment system could be trouble for PayPal, Venmo::The Fed’s goal is to connect 9,000 financial institutions nationwide.
Processing transactions with credit cards incurs fees from middlemen and unnecessarily complicates the merchant-buyer relationship. The merchant ends up paying these fees and ultimately passes this cost to the consumer in the form of a 3-5% or more markup of goods. In some cases, even cash customers are paying the hidden markup as well.
With FedNow, this has the potential to bypass all of this messiness and severely undercut debit and credit card processing networks. Thus slowly bleeding them out of market share.
I can definitely see a new market segment of payment processing which disrupts the existing status quo. Could very easily cover expenses of running the operation on a shoe string budget, charge 1-2 cents per transaction, and become profitable in just under a year (assuming high adoption).
In the end, smaller merchants are able to compete or in some cases undercut bigger stores since they are saving money on CC fees. Consumer has the benefit of more competition in the market and getting that better price. Overall decreased cost of living.
Most of this doesn’t address my specific question, but this sounds a lot more like you expect a diversification/fragmentation of the credit card industry rather than the “end” that was posed originally. Regardless of transactional fees, credit cards would continue to provide their basic function of providing access to credit and people would still desire it.
