>I'm definitely not thinking of wire transfers, I'm thinking of credit cards. I want Visa and Mastercard to be required to process all legal payments. If that means certain classes of high-risk transactions have to be offered without certain protections, I think that's completely fair.

So a few things.

1) A credit card is a consumer loan and by nature, there's plenty of limits on the things you can buy with loans (both crypto and fiat), so you're at a dead end there (and if it weren't Visa, it would be the bank extending you the loan that would ban the porn payment).

2) Given that, you probably are referring to debit cards in this case. Ok that's more of a dumb utility so let's run with it. What Visa does for debit (I implore you to learn more about this!) is serve as a messenger intermediary between your checking account and the merchant's account (plus they make sure the issuer gets their cut of fees, more on that later). Ultimately, they help the banks settle their accounts via inter-bank accounts. Banks themselves can/should do this! The government should force them to do this! But that's then just faster wire transfers (look at Europe).

I mean I'm very happy to be wrong here, but you need to explain to me why Visa needs to be involved for a fraud-protection-free bank-to-bank transfer when everywhere else in the world just has that via wire transfers (which is just a fancy name for settling payments via inter-bank accounts)

>Luckily that's already well under way. We should have RTP and FedNow next year.

Yeah.

>Good news! We're not, and at least in recent history we never were! :) Merchant acquirers charge high-risk merchants significantly more to cover chargeback risk. That risk isn't meaningfully transferred to your Costco run. While a Costco may pay 1-2% in interchange, your average adult video business may pay 10-12%. Sometimes more.

Ok again so a few things.

1) You are citing the entire take rate on transactions but you're calling it the wrong thing. Interchange is the fee that's paid to the issuing bank; in the US this is, on average, 70% of the fee-rate you're citing (it is a rate set by Visa, but it is passed directly through to the issuing bank). Merchant Discount is the fee that the merchant acquirers get; in the US this is, on average, 15% of the fee-rate you're citing (but as you rightly point out, it can be anything since its a contract between a bank and a business for service). Network fees are the fees that Visa collects; in the US this is, on average, 15% of the fee-rate you're citing (Visa makes $30bn of revenue $10tn of transactions processed). Since it is acquirers who can choose to set their merchant discount at whatever they want, it is again a banking issue not a Visa issue (Visa doesn't even see the merchant discount)

2) Now that we understand who charges what to whom, you'll see that in fact, Visa does not charge a different rate for porn [1], they instead collect a pretty small fee on all transactions to support infrastructure that disproportionally serves porn users who regret buying porn. Sure sounds like a subsidy to me!

So yeah anyway, faster wires.

[1] https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...