> The merchant decides what kind of card to accept and how to route. It's just that customers will choose not to visit your establishment if you only accept debit, even if you have lower prices. Because they like the perks of a credit card.
Some customers. But then this leads to the problem: If you accept credit cards in order to satisfy those customers, other customers will use them in order to get the cash back.
> KYC is hardly capricious.
It is. They often cut off lawful businesses because they have disfavorable PR associations or political views, and sometimes apparently random people for undisclosed reasons. If it was easy to switch to any number of competitors without customers having to know any difference or sign up for different cards etc. that would be irrelevant, but it isn't.
> The last few years saw the development of a whole new network in BNPLs. And guess what, it's not cheaper, at all. They charge 4% or more and they don't kick any of it back to customers.
This is a loan. Naturally the customer is then paying interest. A credit card is nominally a form of credit too, but the fees are still charged to the merchant even when the buyer immediately pays off the card in full.
> What I do see is a dearth of loyalty programs, which is a tradeoff you can choose to make.
And this is the tradeoff we should make, because getting charged 2% more and then getting 2% back is useless, but has negative consequences like inducing complexity and customer ire to provide cash discounts or credit card surcharges, and causing customers to prefer the incumbent system in favor of competitors even more than they do otherwise.
Notice that the cost of "insurance" from the credit cards has to be passed on too. You like that you can issue a chargeback, but so can a scammer in order to rip off the merchant, and then merchants have to cover the cost of getting ripped off. Any disincentives to not implicitly buying that insurance when you trust the merchant and don't need it will tend to raise prices.
