How does Card processing work? With Marshall Greenwald, Founder of Ionia

Konstantin Dubovitskiy
This is the AFT podcast. And today, as a guest speaker, we have Marshall Greenwald, founder of Ionia. And in this episode, we are going to talk about card acceptance, card processing, how do banks communicate with each other, how the transactions actually happen, and what goes on the back end after you swipe your card at a store. So, Marshall, let's kick it off easy. Tell us more about yourself, about Ionia, and your general background in the fintech space. 

Marshall Greenwald
Thanks, Gon. Thanks for having me here. Yeah, so I've been in payments since the 90s. I'm really dating myself here, but really started as. As a ISO, you know, selling merchant services to businesses. And then somewhere along the way kind of pivoted into creating technologies to solve problems for merchants. But, you know, this. This era, I think there's a lot more that we can do to help merchants with technology than what we're doing today. So I'm excited to talk a little bit more about that. 

Konstantin Dubovitskiy
Absolutely. And again, in this episode, we'll be covering the existing system, and obviously we're going to slightly dip into how Ionia is going to be changing this existing system into something better. So let's start with the rough outline of how the current credit debit card processing looks like. So whenever I go to a store, say, my good old favorite Trader Joe's, tap my cards, it says approved. What actually happens on the back end? Who is involved? Just brief outline of the flow funds there. 

Marshall Greenwald
Yeah. You know, it's funny because even those in the space might not think about all the steps on a regular basis. There's, you know, sometimes eight or ten companies involved in just moving money from a consumer's bank account or credit line to a merchant's bank account. And, you know, it's pretty much the old ACH system that's been around forever with an authorization on top. Right. The card networks give you an authorization, but that's really an IOU to the merchant. So they get a promise of the funds. It gets there in two to three days because it goes through all these different parties. Right. So, you know, starting with the merchant side, we've got the. 

Marshall Greenwald
Their pos, their gateway, whatever they're using to connect to, they're acquiring systems, which goes to a processor, which goes to the network, which goes to a processor on the issuer side, which then goes to the issuer, and then it goes back through that in reverse. And it's kind of a maze, right, when you look at the actual diagram. So a lot of different steps, and every one of the steps Introduces delays, cost and risk. Right. Because the different intermediaries don't have visibility to the full transaction. 

Konstantin Dubovitskiy
Right. That is very true. And today we're going to really take a deep dive into where those faults come in and most importantly, where the costs occur the most. But for now, let's talk about one thing that you just mentioned, which is the network issuing an IOU to the merchant. Can you expand on that a little bit? Because I did not quite understand what that means. 

Marshall Greenwald
Sure, yeah. So, you know, from a consumer's perspective, let's just say you walk into a retail store, you pick your products, you go to the register, you tap your card, you walk out of there. In your mind that transaction's been completed as a consumer, but for the business, it's just now started. Right. We've now got an authorization. We now have what I call an iou. It's basically a promise to send the funds, but they don't have the merchants don't have the funds. Right. It's going to arrive by ACH two to three business days later. And that doesn't sound like a long time, but in today's day and age, you know, you can send money to a friend or a family member on a peer to peer network and they can have that money instantly. But merchant systems just haven't had that capability. 

Marshall Greenwald
Everything kind of settles on the traditional two to three day, you know, two to three business day cycle, which over the course of a year with holidays and weekends is more like four days on average. 

Konstantin Dubovitskiy
Yep. Sometimes even more obviously, but on average you are absolutely right, that amount. So why is the ACH involved there at all? Who is the final party that is sending out the ACH to the merchant? And why is it a freaking ACH and not something instant? 

Marshall Greenwald
You know, it's actually kind of a necessity. Right. Think about how amazing it is that you can tap a card at almost any business in the whole world and have it approved in, call it sub 2 seconds. So we're talking about tens of thousands of financial institutions all connected together through a handful of Networks. Call it four major networks. But I guess globally you're talking maybe seven or eight major networks. But here in the US we're talking Visa, MasterCard, Amex, Discover and then the debit networks kind of smaller than that. But if you think about the money movement for, from a US consumer to a US merchant, ACH is really the only thing that can support every financial institution that's a part of the network. 

Marshall Greenwald
So the money's going to come via ACH from, let's just say I have a debit card at, I don't know, J.P. Morgan or whatever. That money as a consumer is going to come out of my account. It's going to then go via ACH to the network. The network sends a file off to the merchants acquirer and who then in turn sends an ACH to the merchant. So there are a lot of moving parts, but they're all interconnected through one network, which necessarily is the ACH system. Because you can imagine trying to change that for, you know, 32 million U.S. Merchants, you know, who may have any one of, you know, 11,000 financial institutions as their receiving bank. And then you've got, you know, hundreds of millions of U.S. 

Marshall Greenwald
Consumers and you know, potentially any one of those 11, 12,000 financial institutions on their side of the transaction. So it's a very complicated thing to connect all of that together and make it work. 

Konstantin Dubovitskiy
Absolutely. And now it actually makes sense why ECH is so prevalent there. I mean, 50ish years old, whenever the system came up, ACH was the first one to support those communications. So you've mentioned the fact that their credit networks and debit networks, and you said that the debit processing networks are smaller. How are they different or is it processed by different organizations? What is going on there? So what's the difference between me typing my credit versus my debit card? 

Marshall Greenwald
Sure. And actually, interestingly, you know, the consumers today aren't even going to have to worry about that because almost every debit card is going to carry one of the major credit network logos. Right. It's going to be their MasterCard, most likely. And so today you used to see a lot where merchants would have to ask you if it was debit or not and you would enter a PIN or not enter a pin. Today it's not really that different. And so the consumers might transact and have no idea that went through Visa versus that went through Pulse or Star or, you know, AFFN or whichever regional debit network it might have gone through. All they know is that the money comes out of their debit card, off their checking account, they tap their card and the money comes out. That's all. 

Marshall Greenwald
That's all they really have to worry about. But behind the scenes there's a lot more complexity. Right. That transaction might be routing to a different network based on least cost routing from the merchant system, or maybe it's routing to a different network because of how the transaction was entered. So there's a lot of complexity, kind of Hidden. And I think that's necessary to hide it because consumers don't have a lot of patience for friction at the point of sale. They want it to be simple to buy something, right? 

Konstantin Dubovitskiy
Yep, yep. I remember the days when, or well it still actually happens and my brother always makes fun of it that the system does not know if we're using debit or credit card specifically like old school gas stations. Always gets a kick out of him. But let's talk about the complexity that usually results in higher fees. Processing credit cards. Debit cards is always one of the most expensive rails out there, beyond maybe wires. Why is that? Where does most of the cost come from? Is it just from the fact that there are so many parties involved in the communication or is it associated specifically with the risk of transaction failing Somewhere along the lines? 

Marshall Greenwald
You know, I think it's a combination. Right. So there's a risk that the transaction was not authorized by the cardholder. And that's fundamentally a critical problem that's growing very rapidly. You know, with AI getting better and better. It doesn't just help us, you know, on the good guy side, it also helps the guys, the people who are out, you know, using cards fraudulently to look more and more human at scale thoughts. And so they anticipate fraud will grow another 43 to 46% by the end of 2026 and it's already at its all time highs. Right. So it's a big problem that definitely has some cost factored into there. And then we've got, you know, multiple parties, like I said, 8 to 10 different companies involved in every payment and everyone takes, you know, a little piece of that. 

Marshall Greenwald
So you know, by using the existing systems, merchants get all the conveniences. But the cost, like you said, is probably their highest cost center for any payment type. They do and like consumer facing businesses. Right, because they're not usually doing wires and international transactions and stuff like that. So it is going to on average cost them about 3% for most industries, you know, to accept a card payment from a consumer. The bulk of that though doesn't actually go to the card networks. Visa, MasterCard, you know, take, you know, what we call assessments, fees, dues and assessments basically. So they have a small piece of that of course, but the majority of the funds that the merchant pays go to the card issuer. And a lot of that's to support things like the rewards card programs, corporate card benefits. 

Marshall Greenwald
But also the risk profile of a system that, you know, inherently has a lot of risk inherent in the system. 

Konstantin Dubovitskiy
Understood? Understood. All right, we'll not be digging deep into the way that the card networks incentivize banks to be onboarded with their providers. That is way too complex and none of our business. For today's discussion, let's talk about the. You know, once again, I want to dip into the costs associated with the system. Is it partially related to the length that the consumer has to dispute the transaction? So for example, I can pay for something today with my credit card and then 50 days later I can mark it on my bank statement as fraudulent. It's going to be automatically pushed back to my account while it's being reviewed. The merchant loses the funds. What is going on there? And well, let's start this two part question with just one question, which is that part of the cost that. 

Marshall Greenwald
Is baked in 100%? It's a part of the cost. I mean it has to be. Right? If you're, let's just say you start a regional or state bank and you want to issue cards to consumers at any given time you have some portion of those that are going to get disputed and you have to account for that. Right. You have to account for the fact that, you know, it could be, depending on your volume, it could be millions or billions of dollars that at any given time somebody could dispute. And so you have to carry some portion of that as a liability on your books for, you know, funds and you have to have reserves for that. And yeah, there's a cost for all of that. So it definitely impacts it. 

Marshall Greenwald
And then you can see that over time, as fraud rates have risen, so has interchange, which is the fees paid to the banks for processing these transactions. 

Konstantin Dubovitskiy
What's the current interchange rate roughly? I know it's different based on the network, but out of curiosity, I want to go a little bit into that space. It's very interesting and specifically the debate between Visa versus mastercard processing oligopoly. It's very interesting. So we'll go into there a little bit. 

Marshall Greenwald
Yeah, well, you know, interesting. There's, last I counted it was about 1200 different interchange rates between the four major brands. 

Konstantin Dubovitskiy
Oh my God. 

Marshall Greenwald
Yeah. So it's anything but simple. Right. And, and I like the idea of telling merchants you're going to charge them interchange plus a small margin. But it's like Greek to them. They don't understand what it means to say interchange. And so you have to really be able to master it in a way that you can then explain it to Somebody who, you know, isn't going to spend much time trying to understand it. So you've got to be able to break it down into its core components. I would say for retail, you know, debit cards are much, you know, they're growing in popularity, so that helps reduce the cost. 

Marshall Greenwald
They're, they're less in general than credit cards, but you have anywhere from 0.05%, which is very low on regulated debit, plus 21 cents, up to, you know, 2.4, 2.6% for corporate credit cards and rewards cards. So there's a really big range for interchange. And then you have the fees dues and assessments to the network, and then you have the markup from the processor. So all in, you know, on average it's about 3% for a business to accept a card today. 

Konstantin Dubovitskiy
That's beautiful and very confusing, which is exciting. The more confusing, the more fun it is to dig into. And the more you go into it, the more you understand. Anyways, I'm not going to dwell on that right now, but let's talk a little bit more about how the interchange fees work and how the fact that Visa and MasterCard control basically almost the entire market in the United States at the very least, and pretty much essentially globally. The argument there that I've heard is that since there are two of them, actually, they're incentivized to increase the interchange fees rather than decrease it, because the more they increase it, the more kickback they can offer to the banks. The more banks can offer kickback to their customers through the reward systems that we've discussed. Is that the case? 

Konstantin Dubovitskiy
And why are we not seeing interchange fees being 5 or 7% then? 

Marshall Greenwald
Yeah, I mean, I think there's pressures against it, and I think that's. And it's not competitive pressure. As you pointed out, there's really just two major networks, especially when you come to debit cards. That's 99.5% of debit cards or something ridiculous. Right? 

Konstantin Dubovitskiy
Oh, my God. 

Marshall Greenwald
On those two rails. Right? So it's almost the entire market. Obviously there's another network on each debit card. Right. So there's Poll Star Cirrus, there are other networks, but they all carry a Visa MasterCard logo for the most part. You know, practically speaking. So there's pressure for it to go up. Right. Because the banks want higher interchange. And interchange really just stands for interbank exchange for those who aren't familiar with it. And it made a lot of sense it's maybe a little outdated, but the idea was to incentivize the issuing bank to participate in this network. They need to generate revenue. They do have some risk and they have some costs. And so the, this, these fees are paid from one bank to another. 

Marshall Greenwald
So the one bank that's paying it being the acquiring bank, the merchants bank that's processing their transactions, and the recipient is the issuer, the consumer's bank that's processing the transaction to send the money to authorize and then send it. So the issuing bank gets the vast majority of the total fees to a merchant because interchange is the biggest piece of it. So why isn't it 5 or 7 or 8%? And the reason for that is there are merchant groups that fight against it. And you've probably heard about the highly publicized settlement between one of these groups and the card networks. That was in 2024. There was a settlement reach the judge. The, the courts are still kind of fighting on it. But anyway, there is a settlement coming eventually on that. 

Marshall Greenwald
But then you also have the governmental pressure and outside of the United States market, this is highly regulated. Right. And the eu, you know, I'm not an expert on interchange there, but from what I understand, there's basically a, a mandated interchange on debit and mandated interchange on credit that's either in the UK or the eu. Forgive me, I'm not, I'm more of a US Payments guy, but much more. We have the beginnings of that right. The Durbin amendment to the Frank Dodd act years ago minimized the, and fixed the rate that large banks can get paid on interchange on debit card transactions. That's that, you know, in that range that I gave you.05% to 2.4, that's of course, the lowest one, that.05% that's coming from government intercepting these issues and saying, yes, we're going to mandate this. 

Marshall Greenwald
There's a proposed, a second version of this that would actually regulate the credit transaction interchange. So there is a lot of pressure from merchant groups and from the government against the card networks. And the card networks have to kind of play that game of trying to keep everybody happy, try to keep the issuers, you know, happy, try to keep the merchants happy. So they do have, you know, pressures both directions. But I think what we'll see over time is continued regulation as well as continued competition. I believe there will be other networks that will rise to the top and process more and more volume and that will put some competitive pressure on the networks as well. 

Konstantin Dubovitskiy
There better be. I'm looking forward to it. You've also mentioned the thing that I completely am not understanding so far, the difference between debit and credit card processing. You've said that for debit card processing there are other networks beyond, you know, Visa, mastercards, but they still carry the logo of Visa and mastercard. What does that mean? 

Marshall Greenwald
Yeah, so imagine you remember the, the 32 million merchants that could bank anywhere, and we've got the, you know, hundreds of millions of consumers who could bank anywhere. And that connectivity, there's the big networks, right? The Visa, MasterCard, Amex, Discover Networks are the four largest here in the States. And then we've got these, what we call regional debit networks. And these are large networks as well, but they're not as interconnected. There aren't as many merchants who can accept them and there aren't as many connections to financial institutions on both sides of that connectivity chart. If you try to picture like a massive tangle of these connections, line to line, point to point. So what happens is there's necessarily larger networks on these cards, otherwise the consumers would have a very limited use case. 

Marshall Greenwald
So for example, you might go to an ATM and find that it doesn't support, I don't know, Star Network, which is actually a very large network, but let's just say it wasn't supported, right? You can still use your card there, right? It's going to use a different network to make that connection. So in short, you think of these networks that might have a lower cost, might have some benefits to the merchant to run the transaction through them, but it's not going to work on every transaction. And so, you know, having these larger networks logos on the card means that you can connect basically every consumer contract can transact with every merchant, regardless of which debit network their cards associated with. 

Konstantin Dubovitskiy
Gotcha. And question out of curiosity here, those smaller networks, why are they not connected to everything? Is it just because it takes a long time to formulate the relationship slash? Do they have to integrate with the system? Do they have to get certain permissions from the banks that they're trying to connect to, or why are they not as powerful as Visa or MasterCard or Amex? 

Marshall Greenwald
I think the question about why they're not as powerful might be a little more esoteric. But to get the leads on why they're not prevalent everywhere, why doesn't every bank participate? I think you and I both have experience in our careers working with banks and because of all the red tape that they have to deal with. From a regulatory perspective, making any change at a bank is a heavy lift. And so trying to get a bank, any one individual financial institution to participate in your debit network, it's a long sales cycle and a long implementation cycle. I mean, it could be years to make that transition and now try to do that with 11,000 financial institutions. It's, it's daunting. It's so daunting. 

Marshall Greenwald
I doubt anyone ever created a debit network and said, we're going to be connected to all of the brand, all of the financial institutions. Excuse me. It's, it's so much easier to say, okay, we're going to partner with Visa and we're going to go, you know, tap into, you know, 10, 20 of the debit issuers and try to get them on board. And then everything else will still work. We'll pay a little bit higher fees, but we'll be able to get ubiquity from the consumer's perspective by piggybacking on these large networks that already exist. 

Konstantin Dubovitskiy
Makes a lot of sense. Okay, now I understand why you said that, you know, those smaller networks still carry, more frequently carry the logo, the bigger network. Makes complete sense. Understood. All right, that's one question that was resolved. I'm very happy to see that it was done. So let's go back a little bit to the debit networks and the costs associated with it. So credits networks seems like a good chunk of it is just the complexity. Same as debit network. What's the main difference between the two in terms of the costs associated for the processing parties? Because for me, it seems like for credit cards, it has potential of the user defaulting on their credit card or filing a fraudulent claim, saying that was not them, essentially that the card was stolen. Right. Same issues can be seen with debit cards. 

Konstantin Dubovitskiy
But also on top of that, you could get a not sufficient fund return when you're, when the acquiring side is going to be pulling the funds from that debit card. Is that the case? Am I missing something here? It seems like debit card processing should be even more expensive than credit card processing. 

Marshall Greenwald
I see. Yeah. I mean, I think there's a couple of pros and cons. If you position yourself, think about yourself as a bank that's deciding, you know, should we launch a debit card program, should we launch a credit card program? There's, there's pros and cons. If you want to compare the two you like from the consumer experience, it's fundamentally the same from a funds flow perspective. It's, it's the same except instead of taking it from a bank account belonging to a consumer, the funds come from the bank themselves. From that they have to aggregate funds that don't belong to consumers. So, so the risk of default that you mentioned, that is actually a very substantial consideration when it comes to cost of credit. There are other costs that help offset that. Those are also heavy, heavily regulated right now. 

Marshall Greenwald
But you know, think about, you might have annual fee, interest rate, you know, late payment fees, all of that, but none of that's going to offset if you ran up $100,000 in credit card debt and didn't pay it. 

Konstantin Dubovitskiy
Right. 

Marshall Greenwald
And so the cost on credit is necessarily higher. The banks will necessarily have higher interchange rates on credit transactions and debit in almost all cases. Not always the case, but almost always. And then you have things that are not typical on re. On debit cards, such as rewards, which are another cost center to the issuer. It's an interesting dynamic that like, you know, the banks are kind of expected, if you're a consumer with good credit, they're pretty much expected to give you in the range of 1 to 3% back on your transactions, either in the form of points or cash back or miles or whatever format they're using. And there's a game there too where they try to get the cost of those rewards for as little cost as possible. So it has high perceived value but low actual cost. 

Marshall Greenwald
But regardless, let's just say 1 to 3% is going to go get funded into some sort of rewards program. And that has to be paid for out of the interchange fees that they generate, plus the direct consumer cost that they generate. So that would be the interest rate, late fees, annual fees, et cetera. And then that has to offset all the losses across the portfolio for transactions that are debt that is not paid for. Now, contrasting that to debit cards, it's a much simpler environment. We don't generally see rewards, very few rewards programs on debit. We don't have to worry about default payments. We do have overdraft potential, but although that's a much smaller percentage of the time that happens because the authorization is holding those funds. 

Marshall Greenwald
And, and banks today generally won't let you overspend or if they do, they charge you know, substantial overdraft NSF fees per transaction. But a consumer has a lot of make that. Right, right. If this is your general checking account and you've overdrafted it by 100 bucks. You, you can't buy anything right now. So, you know, you've got a really strong incentive to go get that rectified with your bank. Yeah. So I, I think there's going to be always higher losses on credit for people who have defaults and can't pay it. And then they might even seek bankruptcy protections and things like that, you know, in the US and so there's, there should be huge write offs for the banks on credit, whereas on debit, you know, much less likely that they're going to have a substantial loss for overdrafts or anything like that. 

Konstantin Dubovitskiy
It makes a lot of sense. I'm so proud of myself for stumbling randomly into the default issue that I have not considered previously while I was preparing for this interview. Genius, Absolute genius. Patting myself on the back quite hard right now. Anyways, let's talk just a little bit more about how the debit card is processed. So when you tap it for credit cards, you get approval from the network saying basically that the user has enough funds or has enough of a credit line. Right. So bank fronts the funds. When it comes to the debit card processing, when you tap it, does the acquiring site essentially look into your account to see if it's overdrawn, if it has enough funds? 

Konstantin Dubovitskiy
Because from my perspective, it's a, essentially an ach pool from the account that belongs to that debit card and you'll find out if that account has enough funds or not. Only in two business days. Is that how it works or am I missing a piece? 

Marshall Greenwald
You know, that's the core innovation that made these networks so successful. The challenge was multiple, multiple areas. But the two biggest challenges of saying I want to, you know, spend money from one bank to pay a business in a different bank. Right. The fundamental challenges there are, number one, how would the merchant know whether I have the money or the credit available to pay for this purchase? And then secondarily, how do we actually move that money from one bank to another? So that ach part solves that second half of it fairly well. I mean, like I said, it's slow, it's a bit dated, but it's connected to everybody. So there was a solution there. 

Marshall Greenwald
What the networks did that I think was really ingenious and really allowed them to become the behomoths they are today, is they figured out if we connect all these banks through our network, if we are the go between bank A and bank B, then everybody has to use us in order to know at bank B for bank B to know whether there's money at bank A for this purchase. So this authorization is what we refer to is the kind of the network's iou, the promise that yes, this money is available and it's being held for you. That's the key differentiation between ach, where like you said, you won't even know if the money's there or even if it was a valid account number. Right away they can say, yes, this money, this is good, it's in good standing. 

Marshall Greenwald
There's money there and we will hold it for you. And here's a five or six digit code for you to come claim this. So that's the authorization. And then the end of the day the merchant says, okay, I'm going to submit to my processing company. I'm going to submit what we call a batch, basically a list of transactions that have authorization codes and dollar amounts and card numbers, etc. And then they process. The processor sends that through the network and then that goes through the network back to all of these various issuers and collects on those IOUs. 

Konstantin Dubovitskiy
This is indeed ingenious. Love it. Thank you for explaining the system. That's exactly what I was looking for. 

Marshall Greenwald
Absolutely. 

Konstantin Dubovitskiy
I'm betting that roughly 98% of our listeners had no clue this is how it works. So this is amazing. Beautiful. 

Marshall Greenwald
I mean, unless you're a payments geek, you wouldn't really have a reason to know the inner workings of this. You just know I walk into a store, I tap my card and I get my product. 

Konstantin Dubovitskiy
Right, Correct. And later on, I'm sure we'll bring someone who is in the tap payment space to figure out how tapping works. That's a whole different story. I have no clue how it operates. And so I'm sure most of our listeners. In that case, let's summarize. Essentially, the current system is very convoluted. I mean, we've spent 30ish minutes discussing it. I'm still a little bit confused. Most parts are clear, but it's clear how confusing it is. That's kind of the clarity that I'm getting here so far. 

Marshall Greenwald
That's the key takeaway, right? 

Konstantin Dubovitskiy
It certainly is. So a lot of issues float for the merchants. Potential issues with the networks, where four networks hold essentially all the power. And of course for the consumer, they get some kickback, but essentially they get hit by the network Fees as well in the form of either some stores just upcharge you for using credit cards like gas stations or you get higher prices. That's it. 

Marshall Greenwald
That's right. 

Konstantin Dubovitskiy
System is slot obviously. What are the solutions that you're seeing right now? You've mentioned that some smaller networks might become bigger with time and will become actual competitors to the existing top four behemoths in the system. What are the solutions that you're seeing? 

Marshall Greenwald
You know it's interesting because there's been a shift in the last, call it five years really, but five to 10 years. The banks and the networks have so much leverage and so much connectivity and so they're necessary pieces. I mean you have to have a bank on both sides of the transaction for this thing to work. Right. But there's been a layer added that's now growing dramatically quickly which is fintech and these are companies like mine, like Ionia, that you know, partner with banks. But the banks recognize they, these fintech companies can move much more quickly, can do something much more innovative at speed to keep up with the demands of consumers and merchants. And so I'm seeing a lot of innovation that really sits outside of the existing financial institutions but partners with them. 

Marshall Greenwald
So it's a, there's still got to be that connectivity whether they're going through Visa, MasterCard, whether they're partnering directly with the bank. And I see a multiple types of solutions. Some of them have a lot of traction, some of them are a little bit slower. So let's talk about a couple of them. So one that I see as very promising for the next, you know, the next decade I think will grow really quickly and get a lot of market share are bank solutions. And all this means is they're not actually using the card networks. The, the consumer is either logging into their bank or providing their bank details and saying yes, I'm going to do an ach to this merchant for this amount. 

Marshall Greenwald
But the fintechs can layer in similarly to the card networks and say yes, the money's there and we can go ahead and start to move it now. So, so that it's being kind of quote unquote reserved for the merchant. It's not exactly, it's not a perfect corollary to the authorization system of the card networks and that's why they haven't picked up quite as much speed. But I think there's a lot of potential there. You've got consumer driven payment options. This would be things like buy now, pay later and other finance at the point of sale. Those have grown very rapidly and will continue to do so I think because it gives consumer choice. Again, they're not really, there's a mix. Some of them use card network, some of them just are direct to bank. So there's kind of a mix there. 

Marshall Greenwald
But I think that will continue to grow and innovate and then you see like up and coming companies that are really innovative and you know, just to kind of, you know, put it out there. Ionia, you know, is one of those, I think what we've got is, has the potential to change the entire payments ecosystem very rapidly because it uses some of the existing infrastructure for all the conveniences consumers want, all the protections they want, but it gives merchants better outcomes than every payment. So there's kind of a lot of categories of innovation happening right now and I think we'll see that pace continue to pick up 100%. 

Konstantin Dubovitskiy
And that's exactly how I ran into Marshall in the first place. I was listening to a different podcast which I by the way, highly recommend the Payments professor or sorry, the Payments Podium is hosted by the Payments Professor. And I was writing down some questions just out of curiosity to Google after listening to the episode. And one of them was why are not all merchants using this so far? So I guess that was the answer and I'm very excited to see how it plays out. The future is certainly very exciting. And on this extraordinarily positive note, let's get to the rep question. If there was one thing in the payment space that you could teach the entire world about, what would it be? 

Marshall Greenwald
It's an interesting question. By the way. I love that podcast with Kevin. That was a lot of fun. He's, he's got a lot of experience and connections here and great questions and I'm so glad that you reached out after listening to it. So I think for, I think what merchants are facing is a situation where they feel like they're stuck in a win lose scenario. And until recently there haven't, there hasn't been any promise of a way out. And what I mean by that is if you go start a consumer, you know, products or services company today, you have to accept electronic payments with cards like you just in almost every instance, you wouldn't be able to compete without that. It's so there. So it's necessary. 

Marshall Greenwald
And secondarily the outcome on every transaction is that the consumer gets instant products and services delivery and they get protection against any potential Fraud, they get rewards, points, they get miles, they get whatever. So the consumer always wins. Like it's not a bad deal for consumers to pay on card. That's why it's so in demand. And then merchants have slow funding, high risk that the transaction will be disputed down the road and that could be weeks or months down the road and they have to pay on average 3% to do it. It's just there is a fundamental misalignment between the consumer benefits of paying with their card and the merchants perceived benefits of accepting the card and the cost to do so. So it's just, there's just some misalignment. 

Marshall Greenwald
This is why we see things like a 19 year litigation between huge merchants and the networks because there's a lot of parties to consider. Consumers want all these benefits that they've come to expect from their card payment systems and then all of the downside to merchants that is basically invisible. Until recently it was really the headlines about this settlement I think really helped everybody in the public domain become aware that merchants actually pay fees to take your card and they actually pay a lot and they also have to wait for it and they also have to take all the fraud risk like it, it put it more in a public domain than it's been up till now. And I think that's a good thing. 

Marshall Greenwald
I think it's good for people to know that there's a fundamental misalignment between the merchants and the consumers and what they get out of a payment system today. 

Konstantin Dubovitskiy
Absolutely. It's a great rap point. Not as optimistic as previously, but it's a very real world approach. So with that being said, couple updates or well, couple notifications for the future. First of all we have an interview coming up from someone at MasterCard where we are going to talk about specifically their rewards point system. Exactly what Marshall touched upon, which is, you know, the benefit to the consumer versus the downside for the merchant. And, and on top of all that we also have Patrick Dees, another person from Ionia who's going to be joining us and talking about specifically entering the FinTech space. Key learnings for the, I'm not going to say rookie because it sounds demeaning but for people who are just entering the space versus you know, Marshall's sake, who is a veteran, clearly in the space. 

Konstantin Dubovitskiy
So tune in, stay up to date, follow. I don't remember actually if you click the bell button or something like that to stay updated but don't forget to follow and as always have a great day.