[BLOG] Barry Coetzee Column: Protection Money
Probably the most misunderstood companies (from a consumer point of view) must be Visa and MasterCard. We all know of the companies and most of us carry a card with one or both of their brands on them. Yet, if you arrive at the offices of either of them and ask to apply for a card, you would politely be turned away. Even employees of both Visa and MasterCard get their Visa and MasterCards, not from Visa or MasterCard, but from one of their licensees.
If you get a Visa or MasterCard from your bank there would most likely be fees associated. Then there is the infamous 5% that merchants get charged for accepting a card from either Visa or MasterCard. So, these products are not cheap either, but a good sized number of the world’s population pays up on a regular basis and this in turn makes both Visa and MasterCard very profitable and successful companies.
Why? Why do we pay the fees? Why do we aspire to these products we cannot even get directly from the companies?
I do not want to give you all the features and benefits here as I am sure that Visa and MasterCard and all their licensees will do a much more comprehensive job of it. However, I think there are two issues which standout: convenience and protection. Convenience is obvious. There is always a value to convenience. The more convenient something is the greater its value versus its cost.
The protection angle I feel is probably lost on most people. Operating inside the world of Visa and MasterCard offers two different types of protection to the two different concerned parties – cardholders and card acceptors (merchants).
For their annual card fees, cardholders get protection from loss of the card, fraud and non-delivery of goods. This is a fantastic deal compared to cash, electronic funds transfer and cheques. If you lose your wallet your cash is gone. Irrecoverable. However, you can get a new card issued and pick up where you left off. Further, if you buy something with your card and the seller does not deliver the item you purchased, Visa and MasterCard have the processes are in place for you to get refunded. You would be left to your own devices if you had the same issues with any other payment type.
On the other side of the counter, if a merchant is offered a Visa or a MasterCard for payment, they know that they will receive their money directly into their account. They also know that every now and then a transaction might be fraudulent, but this will be no worse than the experience for any other form of payment. The fees that they pay on each transaction cover them for all the costs of moving the money safely into their bank account. With cash, merchants do not have the card fees, but they have all the hassle of storing, protecting and banking, which all have costs that make cash far more expensive than card.
I stress that I am not newly employed by the marketing departments of the card companies. However, I am becoming more and more a fan of paying for the protection of my money. While I may not fully understand the complexities that make up the empires if Visa and MasterCard, you would have to use a lot of persuasion (probably force as well) to pry my cards away from me.
Author: Barry Coetzee,
South Africa
Barry Coetzee is a regular columnist on Africa Business Communities
