David Rosenthal: belief

Transcript context

…It is worth pointing out, the system today is pretty tough to change absent government intervention. Consumers who spend the most love the system the way that it is. A huge amount of the fees that merchants pay come back to these consumers in the form of rewards. The issuers and the networks end up with the consumer as their advocate for the system as it exists today. Meanwhile, no retailer owns enough of the total transactions to actually go invent their own better system. When merchants have tried to go and get consumers to go direct and give them their bank account information, typically consumers won't do it unless they get some very high number of percent back, and that's actually more expensive than the interchange. The way that you end up having to pay your consumers in order to change their behavior away from credit cards that they love the rewards so much on is to do something non economic. You have to believe that there's some long-term benefit to doing it. Famously, Walmart and Target too, I think, have been trying to do this for years and years and years, and they never can make it work. The reason is basically, no one can ever figure out how to incentivize all the parties that need to change behavior, enough to change the behavior.…

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