Why in the world of mobile payments is Visa/MC/Amex still popular when other low fee systems like Venmo/PayPal exist and would save merchants and users more money?

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Why in the world of mobile payments is Visa/MC/Amex still popular when other low fee systems like Venmo/PayPal exist and would save merchants and users more money?

In: Economics

Venmo/Paypal do not offer me the same protection and rewards that the other credit cards do. Venmo offers 0 rewards and no protections if I get into a dispute with a vendor. Paypal offers minimal protections and has been known to lock users accounts and also has 0 rewards. My credit card will refund me if someone steals my card, they will refund me if the merchant doesn’t provide a service I paid for, they give me insurance on my rental cars and they give me some percent back in free money every time I use the card.

It doesn’t really make sense to use Venmo or Paypal as a consumer, when free credit cards with better protections and rewards exists. Due to that it also doesn’t make sense for vendors to not accept them.

If you have a bank account you very likely already have a debit card that supports Visa, MasterCard or American Express payments. There are *many* people who do not have PayPal or Venmo, and you already need a bank account to use these anyway.

Nobody likes paying fees but people especially dislike turning away willing customers.

1) Network effects. If you’re only going to have one thing in your wallet, you should have a credit card, because that’s what most merchants accept, especially offline merchants. Venmo and Paypal are trending towards having this much coverage, but they still don’t have enough that people are going to be abandoning their credit cards, and until they do, online merchants still have an incentive to accept credit cards as a default.

2) Many consumers don’t “pay” anything to use a credit card, or do so in a very roundabout way. The fees are all paid on the merchant side. This may raise prices in stores that accept credit cards, but it’s impossible to tell by how much. On the flipside, many credit cards pour some of those fees back into rewards for their users, so a clever consumer could possibly come out ahead.

3) The “credit” part is actually important. Some people use the cards as credit instruments (to spend more money than they have at that particular time). Even the people who regularly pay off their balance only need to attend to that once a month no matter how much they spend, as opposed to having to monitor and top-up a Paypal or Venmo balance. Credit cards also help people demonstrate creditworthiness and build up their credit score.

4) Credit cards are backed by banks, and these banks have a lot invested in preventing fraud and making consumers feel like they can use their card without identity thieves putting them on the hook for thousands. Venmo and Paypal don’t have the same trust built up (whether or not they’re better at dealing with fraud or experience it less often).