Disruptions on the near horizon for Visa and Mastercard

Via Meadia talks about new tech that could go around the traditional credit card payment model: Startups Threaten Visa and MasterCard.

He mentions this article at Quartz:  Why the two hottest US startups in payments might collaborate to marginalize Visa and MasterCard

Here’s the short version:

You recall seeing the little square plug-in that some small vendors use to process credit cards? That is from an outfit called Square. Their system allows you to accept credit cards without special terminals or getting a merchant account.

Another startup called Dwolla is designed to process transactions. Using Square still requires going through the Visa or MasterCard system. Dwolla would be an alternate system.

If those two startups take off, it would be a completely new way to process credit cards at a small fraction of the current cost.

What’s involved?

Accept credit cards and you pay a fee around 2.75% of the transaction. One of my clients is paying a lot more for a web based way to accept checks and credit cards. That is a lot of money.

Cutting that by 50% or 90% (my wild guess) would make cards even easier to use and even more widely accepted.

By the way, the Quartz article says you will be seeing Square readers at all the Starbuck stores really soon.

Next step will be putting Square readers on top of an iPad.

For a little more detail, check out the Via Meadia article. For the long version, check out the Quartz story. It’s great.

Very cool.

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