I don't believe your scenario will come to pass, for a very simple reason - credit card companies get zero from people who cannot make payments. And while the news hasn't been covering it as much as mortgages, the default rate on credit card debt is also rising.
I would expect being public should drive credit cards to sound, sustainable business models.
I would expect that being public should at least lead to more transparent business models.
Visa isn't a credit card company, it's a transaction company.
In other words, Visa doesn't make any money from credit card customers paying interest, fees, or any such, they make their money as a direct percentage of each purchase.
Which, considering how we're transitioning to a more and more cashless society every day, means that I really should figure out how to buy a couple of stocks in Visa since the stuff will probably double, triple, etc., within a year of the IPO.
That's a very good point. How low can banks set interest rates and fees and still recoup their transaction costs? How high can Visa set merchant fees without driving them away completely?
I know that currently it is a violation of major credit card merchant agreements to specify a minimum amount of sale for credit card use, but even now I see places listing "$5 minimum for credit card sales" and things like that, violation or no. Clearly it is in Visa's best interest to be able to skim from as many transactions as possible, but at what point do more merchants risk it and set transaction minimums? We already pay ATM transaction fees several times higher than the merchant fees are, and if you use another bank's ATM, you'll pay two fees, all for the privilege of accessing your money. What happens if merchant fees go the same route?
Transaction costs are pretty minimal too, banks set interest rates at high levels because they're advancing money to people with unsecured, or effectively no collateral, but Visa gets a few cents on all those transactions.
As for what Visa charges merchants per transaction, and what is in their merchant agreements, that one is relative to both the merchant and the state. In some cases merchants pay a flat fee to Visa, MC, etc., per day as well or a few cents to a few dollars per transaction in addition to the percentage of the advance, usually between 2-5% of the transaction.
So when you buy a new $5,000 TV, the store probably gets $4,800 and Visa gets $200. Visa then splits that $200 with your bank by whatever arrangement they have, and your bank then splits their take with you by giving you back $50 in points/miles, etc.
Some transactions are going down as people use their accounts directly for electronic payments, which cuts out the Visa middleman, but there's also hug possibilities of future growth in Visa transactions if the new fad of transferring and storing money on cell phones goes viral.
I've also seen more and more banks issuing Visa debit cards. That puts Visa back in the middle for direct account withdrawals. I suppose this is natural, given that Visa has built the infrastructure, and banks are happy to let visa take a cut in exchange for piggybacking. Even better, a debit card has no risk to the bank, and no 'rewards' to split with the end consumer.
I suspect that even with cell phones being used as virtual money accounts, the cell phone itself will only operate like another credit card or debit card, and not actually store any measure of currency. It'll be another gateway to your account, and Visa will be sure to get in and build that network, so they can operate another tollbooth. People don't want to carry money, they want to carry a connection to money, so that if they lose their connector, they don't lose any real capital.
Agreed, while I have cash in my wallet, I can go weeks without touching it, making all my purchases on my Visa card.
(Which gives me back a $25 Amazon gift certificates for every $2500 I purchase, 1% coming back to me.)
Similar here. I get 1% back that I can turn into various things, usually gift cards to different stores. I'd get Amazon if I could, but as my card goes through my bank, I don't get that as an option. Then again, with a 5.9% rate and no fees at all, as well as the 1% return, I won't complain. *grin*
I still do carry cash, but it's usually for sundry food purchases throughout the week. Or when I'm going to a con. For everything else....
And how true they're trying to make that line ring....
Honestly, it's hard to see how there could be *more* pressure for higher rates and fees, which have already gotten so high that they are starting to provoke Congressional action.
My suspicion, actually, is that the reality is quite the reverse: the writing is on the wall, precisely because the existing owners have abused their power a bit too much for a bit too long. Odds are pretty good that they're either going to have to voluntarily rein things in a bit, or they'll find themselves under serious new regulation. So the private owners are using an IPO to cash out and git while the gittin' is good...
One last burst of hot air to inflate the golden balloons... er, parachutes?