Block sues Visa and Mastercard 😳; Wise keeps crushing it 🚀; BNPL is still hot 🔥
FinTech is Eating the World, 18 July
Hey Everyone,
Happy Tuesday! Today’s issue is a spicy one as we’re going to look at Block that just sued Visa and Mastercard over interchange fees (how big this is, what’s next + a deep dive into Visa), Wise that keeps crushing it (a look at their latest numbers & why I’m super bullish on the FinTech champion), and BNPL which is still hot (latest data, the upcoming challenges + a deeper dive into Affirm and its masterclass in partnerships). Let’s jump straight into the hot stuff 🌶
Block sues Visa and Mastercard 😳
The news 🗞 FinTech heavyweight Block SQ 0.00%↑ is suing card network giants Mastercard MA 0.00%↑ and Visa V 0.00%↑ over the interchange and other fees imposed by the duopoly on the Square payments platform.
The news was rather unexpected so let’s take a look at how big this really is.
More on this 👉 Block claims that Visa and Mastercard conspired to fix inflated “interchange” fees and maintain market power, according to a suit filed July 14 in the US District Court for the Eastern District of New York, Bloomberg reported.
Square, which charges users fees for payments passed over its platform, directly pays the interchange charges levied by the card schemes.
The effect of these artificially inflated fees — assessed to and paid by Square — is higher retail prices paid by consumers economy-wide. As retail prices increase in response to inflated fees, consumers can afford less and thus purchase less, reducing output (Block).
On top of that, Block has also complained about separate charges applied by Visa and Mastercard that are determined by merchant locations and size, arguing that the fee is "highly complex, difficult to calculate, and unavoidable".
✈️ THE TAKEAWAY
What does this mean? 🤔 First, we have to realize that these accusations are not the first of their kind for Visa and Mastercard, as they have already been swept up in an antitrust case stemming from interchange fees in the United Kingdom. Further, various FinTech & FinServ companies are probably going to be suing Visa and Mastercard over interchange fees until the end of time… But is this even worth it? Well, one thing has been proven wrong over and over again - retailers never (or in 99% of the cases) lower(ed) prices. On the other hand, the complaint about separate complex charges applied by Visa and Mastercard could be interesting court material. Zooming out, while it remains to be seen how the court system will act on Block's accusations, this is sure to be a case to watch closely in the days to come. So stay tuned!
ICYMI: Prospering amid economic weakness: Visa acquires Brazil's Pismo in one of the largest FinTech M&A deals in LatAm 🤝💰 [deep dive into Visa & my investment thesis]