Kathryn Judge, a leading authority on banking and finance from Columbia University, joins the discussion about Visa's monopolistic grip on debit transactions. She sheds light on the Justice Department's antitrust lawsuit against Visa, alleging it suppresses competition and exploits fees. The conversation reveals how Visa's dominance stifles innovative payment solutions like Apple Pay. Judge emphasizes the intricate relationships in the middleman economy, underlining the need for a fairer and more transparent payment system for consumers.
47:01
forum Ask episode
web_stories AI Snips
view_agenda Chapters
menu_book Books
auto_awesome Transcript
info_circle Episode notes
insights INSIGHT
Middlemen: Good and Bad
Middlemen initially offer valuable services, like overcoming transaction challenges and information asymmetry.
However, this expertise can lead to outsized power, entrenching their position and disadvantaging others.
question_answer ANECDOTE
Real Estate Brokers and the MLS
US real estate brokers control the Multiple Listing Service (MLS), making it difficult for lower-cost alternatives to compete.
They even influenced legislation to ban commission rebates, harming consumers.
insights INSIGHT
Collective Solutions Needed
Individual efforts to avoid middlemen are often ineffective due to systemic incentives.
Collective solutions are necessary for structural change in these markets.
Get the Snipd Podcast app to discover more snips from this episode
In *Direct*, Kathryn Judge explores how middlemen have become central to modern capitalism, influencing consumption and investment while often undermining accountability. She argues that direct exchange can foster a more just and resilient economic system by promoting connection and community. The book offers practical guidance on how consumers can engage in more direct transactions to mitigate the negative effects of the middleman economy.
While Americans rely on debit transactions for the necessities of life, most are unaware of the networks that drive those transactions, nor are they aware that one company, Visa, has monopolized debit transactions, penalized industry participants that seek to use alternative debit networks, and co-opted innovators, technology companies, and financial institutions to forestall or snuff out threats to Visa's debit network dominance.” So begins the monopolization lawsuit filed on September 24 by the United States Department of Justice (DOJ) against the country’s largest card company, Visa Inc.
On one level, the case is simple: The DOJ alleges a clear violation of laws protecting markets against monopolies. But the case gets more complicated when looking at the details, in part because payment systems are mostly invisible part of the financial ecosystem. In effect, the DOJ alleges that Visa is pulling the levers of a really opaque and complex system to preclude competition and squeeze fees out of banks and vendors for itself.To understand the complexities and implications of the case, Bethany and Luigi are joined by Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia University. Judge is an expert on banking, financial crises, regulatory architecture, and intermediation design beyond finance. Her book, Direct: The Rise of the Middleman Economy and the Power of Going to the Source (HarperBusiness, 2022), was on the long list for the Financial Times Business Book of the Year Award. Together, the three of them discuss both the surface-level and structural issues of an economy where consumers and small businesses are shortchanged on what is essentially a private sales tax on all debit-card purchases—and how to look for collective solutions when opt-outs aren’t possible.
Capitalisn't 