All of mlipman13's Comments + Replies
Patrick McKenzie AMA
The percentage cost for card processing (US credit/debit cards in mind here) is set up in a way that would make sense if each individual transaction had a significant marginal cost. Is that the right way to think about the supply side cost of card processing? I don't think it is, so to me it feels like low-cost-transaction merchants are being way overcharged compared to high-cost-transaction merchants. What am I missing? My mental model of the cost of card processing is a big upfront cost for the initial network and for new features, but very very low marg... (read more)
42yI am slightly constrained with respect to talking about the economics of credit
card processing in particular, but can I make the observation "A lot of people
want financial services to be almost free in sticker cost (at least for people
they care about), and all of society wants financial services to be very useful,
and almost nothing which is useful in society rounds to free."
And if I can make an analogy to software, many people wanted software to be
basically free and we decided to make it basically free to consumers in return
for locking them into fantastically lucrative ecosystems while keeping it very
expensive for businesses. (And I think the model for software as "high fixed
cost near zero marginal costs" would also need some very important asteriskes
because it is factually not the case that Google can, on Tuesday, decide to
simply let all the engineers go.)
There are various equilibria which could exist in regards to any particular set
of financial services, and in fact we do see (different!) equilibria present in
different places. In the place you live in, you see one particular equilibrium,
and have a theory as to why you are there, which it is socially difficult for me
to comment on.
Ok, thank you for the answer. Huge fan of your work and looking forward to seeing what you get up to next