8 ms·

Maybe it's just me, but, I think it's so fucking stupid that it costs money (which goes to private businesses) to spend money in the modern world. (and no, bit

by ajkjk 9y ago

Maybe it's just me, but, I think it's so fucking stupid that it costs money (which goes to private businesses) to spend money in the modern world. (and no, bitcoin doesn't fix that at all) I think if we were in an alternate universe where the government managed a free utility for digital payments no one would find it strange for a second.

spookthesunset 9y ago
It has always costed money to to spend money and there are pros and cons to each method. All that stuff isn't free even if it isn't directly measurable most of the time. Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc. Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc... Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc... It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.
- jimmaswell 9y ago
  >Credit cards are super quick to use at the register. At least they used to be. Chips ruined that. Now I have to stand there staring at the screen for half a minute waiting to respond to prompts and to pull the card out at the end. For most transactions, cash is probably faster than using a chip.
  - jarrettch 9y ago
    It's even worse when your chip starts to fail, as one of my has started to do very recently. You have to put the card in three times(and wait for it to fail 3 times) before you're allowed to use the swipe function. Took longer than cash.
    - jimmaswell 9y ago
      Recently I tried the chip and it failed, then I tried the swipe and it said to use the chip, then I used the chip and it said I had to use the swipe, and finally the swipe worked. First time I ever had a chip fail, and it's a pretty much brand new card, so it was most likely the machine's fault.
      - jjuhl 9y ago
        I don't see the problem. If waiting a little is such a big deal then you are in too much of a hurry already and/or too stressed out. Relax. Take it easy.
  - bbarn 9y ago
    Where are you, out of curiousity? I find most of the chips are no slower than using a swipe card was before.
    - jimmaswell 9y ago
      The US
    - btilly 9y ago
      I have the same experience in Orange County. Everyone hates the chip.
    - Miredly 9y ago
      I lived in Spain for a year, and everyone had chips there. My US card always drew eyerolls as they had to find the /old/ machine and dust it off and find someone who remembered how to use it. I was excited that we were getting chips here in the US, but of course they fucked it up and for whatever reason it takes ages for your chip to be read, and there are frequent chip read errors.
- nojvek 9y ago
  Yeah but a >1% fee is ridiculous. We all know visa, Mastercard, PayPal are drowning in cash. I had high hopes for bitcoin like currency having a flat fee in cents and an optional percentage few for insurance if you do want a charge back and other nice credit card like features. But bitcoin is riddled with its own charge mania nowadays.
- Retric 9y ago
  With the new chip system I swapped to cash for many transactions because it's faster.
  - aquadrop 9y ago
    I use contactless chipped card everywhere and it literally takes less than a second for most payments.
    - Retric 9y ago
      I am not going to use such an insecure payment method.
      - aquadrop 9y ago
        What's insecure about it? Heard of a lot of cases where money were stolen from people banks accounts/cards using scamming, viruses etc (and witnessed one right when it was happening), never heard of problems because of card being contactless. It also lets you not to flash your pin in front of the whole store for many of the payments. I think on the convenience/security scale it's very high.
        Retric 9y ago
        They limit it to low value transactions specifically because it's not as secure. Feel free to dig into it if you don't trust the industry's assessment.
        aquadrop 9y ago
        They limit it to make it secure and make it pointless for the thieves to try exploit it, at the same time covering many quick payment needs - convinience/security balance I mentioned and you ignored. And feel free to think about industry's assessment - they make more and more cards with contactless payment capabilities and it's used very extensively in some countries of the world already.
- FireBeyond 9y ago
  And in the meantime, banks are making money on investing, lending out funds deposited. And not doing too badly: http://money.cnn.com/2017/03/03/investing/bank-profits-record-high-dodd-frank/index.html http://money.cnn.com/2017/03/03/investing/bank-profits-recor... Major US banks made $171B _profit_ last year. Lets not pretend that they're already bending over backwards to lower costs on transaction processing.
  - spookthesunset 9y ago
    > Lets not pretend that they're already bending over backwards to lower costs on transaction processing. It's a free market and you as a merchant are free to pick your vendor. In addition, you don't even have to accept credit cards if you want--you can just take cash or check, or even just cash. Of course people entering your store might not buy anything from you because who the hell carries around cash or checks anymore, but no jackbooted thugs will force you at gunpoint to accept credit cards. The credit card industry is a huge, highly competitive industry with little barriers to entry. Massive market forces are at work squeezing the margins for transaction processing fees to as little as possible. My bet is that transaction fees are priced at what they are because: - its cheaper than handling cash or checks - it results in more revenue, even with the "cash back" discount given to CC users. - it is more traceable and easier for your bookkeepers to manage And to be honest, I believe many small business who take cash only do so because they aren't reporting all their income. When it is off the books cash-only, you can pocket the sales tax, underreport income tax, pay your vendors cash under the table, etc. I also believe that if their margins are so thin they can't afford a 2% transaction fee they probably have no business staying in business anyway. Whatever they are doing is more likely than not a value-destroying NPV-negative project to begin with. (see also: just about every business shown on those "save my bar / save my restaurant / save my hotel" TV shows)
- musage 9y ago
  > Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. Holy God. I might as well say it's all equally free, since when the heat death of the universe is done with, there will be no difference between something having existed or taken place or not.
otterley 9y ago
It costs money because there are significant fixed and incremental costs to handle it: Fixed because of the labor and value of the technology, and incremental because of fraud. Much of the incremental cost is fraud insurance.
- FireBeyond 9y ago
  And yet somehow US banks manage to struggle by not even making it to $200B/year profit, having to survive on $170B or so...
  - vonmoltke 9y ago
    Can you name an American consumer financing company that even breaks $100B in revenue?
- kalleboo 9y ago
  There are many ways banks could reduce the fraud, but US banks don't need to since nobody is protesting the fees. In Europe however, where interchange fees are regulated to low levels, they have been quick to adopt/mandate features like chip-and-PIN and 3DSecure that lower fraud.
AdmiralAsshat 9y ago
They couldn't even do it with physical mail. You're paying the government every time you send a letter for the cost of that postage stamp. And the postal service in the US is pretty much constantly under-funded. What makes you think we could do it digitally?
syshum 9y ago
I would, I in no way want to give that kind of power to government. I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it
- nojvek 9y ago
  I'm still optimistic that we'll have a digital currency solving this problem well in the future. Distributed, auditable, scalable, international transactions at ridiculously low fees.
- wahern 9y ago
  If you receive your paycheck electronically, the transfer likely occurs over the ACH system, the primary operator of which is the Federal Reserve. The Fed also runs FedWire. The Federal Reserve has actually been at the forefront of electronic payment and settlement systems since their advent. Though, the Federal Reserve is quasi-public/quasi-private. But for any systemically important transactional system you can be sure that the government is plugged in one way or another. The Clearing House company is the main alternative to the Federal Reserve electronic systems for interbank transfers (they're the "private" ACH operator), and they're heavily regulated, with the Federal Reserve given substantial oversight authorities.
  - syshum 9y ago
    Ok, And. Just because the current system sucks and needs to be replace, does not mean that replacement should be another Government Run System. As I stated in my original comment the government is too closly integrated to today's electronic systems as it is I want the government out, not more ingrained
drewbug 9y ago
Like Europe, right?
- mdemare 9y ago
  Payment costs in the Netherlands (ABNAMRO bank, english): https://www.abnamro.nl/nl/images/Content/022_Zakelijk_nieuwe_structuur/000_Gedeelde_documenten/pdf_tarieven_zakelijk_betalingsverkeer_2018_en.pdf https://www.abnamro.nl/nl/images/Content/022_Zakelijk_nieuwe... Note that nearly all fees are flat fees.
cameldrv 9y ago
They do... It's called ACH.
- nojvek 9y ago
  The only reliable way to do large transactions internationally without percentage based fees are wire transfers. Even they have a $15 fee and sometimes a $15 receiving fee as well. Ideally you'd have zero fees for transactions under $5. $5-$X0000 would have a percentage based fee and thereafter a flat fee for large transactions.
  - thedirt0115 9y ago
    Then people would game the system. If someone wanted to send $100, they'd send 20 payments of $4.99 and 1 payment of $0.20... at least I would :)
  - PeterisP 9y ago
    USA wire transfers have so high fees because banks don't want to offer such payment methods, so they charge extreme markup (their cost is less than 1$, so 15$ is 1400% markup) on that. In general, real time payments for large amounts can be made for <1$ (both fedwire system for its participants and various EUR systems do that), and consumer payments that can be (a) batched and sent in bulk and (b) get delivered e.g. at the end of day, not in real time, those have a cost of ~$0.01 (perhaps 0.02 in case of small volumes) to the bank. So, in EU, everyone has access to something that's pretty much equivalent to USA "wire transfer", and it might cost e.g. some 40 cents or can be offered to consumers either "for free" as part of a common services bundle/maintenance fee.
    - nojvek 9y ago
      EU blows my mind at so many levels. Many countries with different cultures and languages working together for common good of citizens. I have really hopes for the Euro
morsch 9y ago
I don't think it's stupid that it costs money, but I am surprised fees are still as high as they are. I suspect it's got something to do with how opaque the processing fee is for the customer. If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits. [1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-11-percent.html https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-... [2] https://www.reuters.com/article/us-mastercard-results/mastercard-posts-record-profit-on-higher-global-spending-idUSKBN1D01KG https://www.reuters.com/article/us-mastercard-results/master... [3] https://www.reuters.com/article/us-paypal-hldg-results/paypal-tops-profit-estimates-lifts-target-on-mobile-payments-growth-idUSKBN1CO2ZW https://www.reuters.com/article/us-paypal-hldg-results/paypa...
- jarrettch 9y ago
  Merchants absolutely can pass on the fees or give "discounts" for cash, at least in the USA. Gas stations are one of the major businesses that practice this. Anecdotally, I worked at a company store years ago where we would charge customers paying with cards a 2.75% fee, which is what we were paying. And that store was operated by a Fortune 500 company. Also, virtually every small private business I go to in Los Angeles charges some fee, or has stipulations, for credit card transactions.
  - wpietri 9y ago
    This wasn't originally the case. Passing on the fee was for a long time against most merchant agreements. Which makes sense from the credit card company's point of view: they don't want shoppers to have any reason not to whip out the card. The big change came in January 2013 after a big court judgment. Adding fees, though, is still illegal in some states: https://www.creditcards.com/credit-card-news/business-surcharge-card-customers-1585.php https://www.creditcards.com/credit-card-news/business-surcha...
    - jarrettch 9y ago
betenoire 9y ago
You pay to have some handle the transaction details for you. It's a service. You are free to mail dollar bills, though you'll use a service you need to pay for there, too.
kalleboo 9y ago
Some places have systems you'd like. For instance Denmark has the "dankort" debit payment network where small merchants only play a flat annual fee and no per-transaction costs whatsoever.

by ajkjk 9y ago

spookthesunset 9y ago

It has always costed money to to spend money and there are pros and cons to each method. All that stuff isn't free even if it isn't directly measurable most of the time. Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc. Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc... Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc... It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.

jimmaswell 9y ago
>Credit cards are super quick to use at the register. At least they used to be. Chips ruined that. Now I have to stand there staring at the screen for half a minute waiting to respond to prompts and to pull the card out at the end. For most transactions, cash is probably faster than using a chip.
- jarrettch 9y ago
  It's even worse when your chip starts to fail, as one of my has started to do very recently. You have to put the card in three times(and wait for it to fail 3 times) before you're allowed to use the swipe function. Took longer than cash.
  - jimmaswell 9y ago
    Recently I tried the chip and it failed, then I tried the swipe and it said to use the chip, then I used the chip and it said I had to use the swipe, and finally the swipe worked. First time I ever had a chip fail, and it's a pretty much brand new card, so it was most likely the machine's fault.
    - jjuhl 9y ago
      I don't see the problem. If waiting a little is such a big deal then you are in too much of a hurry already and/or too stressed out. Relax. Take it easy.
- bbarn 9y ago
  Where are you, out of curiousity? I find most of the chips are no slower than using a swipe card was before.
  - jimmaswell 9y ago
    The US
  - btilly 9y ago
    I have the same experience in Orange County. Everyone hates the chip.
  - Miredly 9y ago
    I lived in Spain for a year, and everyone had chips there. My US card always drew eyerolls as they had to find the /old/ machine and dust it off and find someone who remembered how to use it. I was excited that we were getting chips here in the US, but of course they fucked it up and for whatever reason it takes ages for your chip to be read, and there are frequent chip read errors.
nojvek 9y ago
Yeah but a >1% fee is ridiculous. We all know visa, Mastercard, PayPal are drowning in cash. I had high hopes for bitcoin like currency having a flat fee in cents and an optional percentage few for insurance if you do want a charge back and other nice credit card like features. But bitcoin is riddled with its own charge mania nowadays.
Retric 9y ago
With the new chip system I swapped to cash for many transactions because it's faster.
- aquadrop 9y ago
  I use contactless chipped card everywhere and it literally takes less than a second for most payments.
  - Retric 9y ago
    I am not going to use such an insecure payment method.
    - aquadrop 9y ago
      What's insecure about it? Heard of a lot of cases where money were stolen from people banks accounts/cards using scamming, viruses etc (and witnessed one right when it was happening), never heard of problems because of card being contactless. It also lets you not to flash your pin in front of the whole store for many of the payments. I think on the convenience/security scale it's very high.
      - Retric 9y ago
        They limit it to low value transactions specifically because it's not as secure. Feel free to dig into it if you don't trust the industry's assessment.
        aquadrop 9y ago
        They limit it to make it secure and make it pointless for the thieves to try exploit it, at the same time covering many quick payment needs - convinience/security balance I mentioned and you ignored. And feel free to think about industry's assessment - they make more and more cards with contactless payment capabilities and it's used very extensively in some countries of the world already.
FireBeyond 9y ago
And in the meantime, banks are making money on investing, lending out funds deposited. And not doing too badly: http://money.cnn.com/2017/03/03/investing/bank-profits-record-high-dodd-frank/index.html http://money.cnn.com/2017/03/03/investing/bank-profits-recor... Major US banks made $171B _profit_ last year. Lets not pretend that they're already bending over backwards to lower costs on transaction processing.
- spookthesunset 9y ago
  > Lets not pretend that they're already bending over backwards to lower costs on transaction processing. It's a free market and you as a merchant are free to pick your vendor. In addition, you don't even have to accept credit cards if you want--you can just take cash or check, or even just cash. Of course people entering your store might not buy anything from you because who the hell carries around cash or checks anymore, but no jackbooted thugs will force you at gunpoint to accept credit cards. The credit card industry is a huge, highly competitive industry with little barriers to entry. Massive market forces are at work squeezing the margins for transaction processing fees to as little as possible. My bet is that transaction fees are priced at what they are because: - its cheaper than handling cash or checks - it results in more revenue, even with the "cash back" discount given to CC users. - it is more traceable and easier for your bookkeepers to manage And to be honest, I believe many small business who take cash only do so because they aren't reporting all their income. When it is off the books cash-only, you can pocket the sales tax, underreport income tax, pay your vendors cash under the table, etc. I also believe that if their margins are so thin they can't afford a 2% transaction fee they probably have no business staying in business anyway. Whatever they are doing is more likely than not a value-destroying NPV-negative project to begin with. (see also: just about every business shown on those "save my bar / save my restaurant / save my hotel" TV shows)
musage 9y ago
> Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. Holy God. I might as well say it's all equally free, since when the heat death of the universe is done with, there will be no difference between something having existed or taken place or not.

otterley 9y ago

It costs money because there are significant fixed and incremental costs to handle it: Fixed because of the labor and value of the technology, and incremental because of fraud. Much of the incremental cost is fraud insurance.

FireBeyond 9y ago
And yet somehow US banks manage to struggle by not even making it to $200B/year profit, having to survive on $170B or so...
- vonmoltke 9y ago
  Can you name an American consumer financing company that even breaks $100B in revenue?
kalleboo 9y ago
There are many ways banks could reduce the fraud, but US banks don't need to since nobody is protesting the fees. In Europe however, where interchange fees are regulated to low levels, they have been quick to adopt/mandate features like chip-and-PIN and 3DSecure that lower fraud.

AdmiralAsshat 9y ago

They couldn't even do it with physical mail. You're paying the government every time you send a letter for the cost of that postage stamp. And the postal service in the US is pretty much constantly under-funded. What makes you think we could do it digitally?

syshum 9y ago

I would, I in no way want to give that kind of power to government. I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it

nojvek 9y ago
I'm still optimistic that we'll have a digital currency solving this problem well in the future. Distributed, auditable, scalable, international transactions at ridiculously low fees.
wahern 9y ago
If you receive your paycheck electronically, the transfer likely occurs over the ACH system, the primary operator of which is the Federal Reserve. The Fed also runs FedWire. The Federal Reserve has actually been at the forefront of electronic payment and settlement systems since their advent. Though, the Federal Reserve is quasi-public/quasi-private. But for any systemically important transactional system you can be sure that the government is plugged in one way or another. The Clearing House company is the main alternative to the Federal Reserve electronic systems for interbank transfers (they're the "private" ACH operator), and they're heavily regulated, with the Federal Reserve given substantial oversight authorities.
- syshum 9y ago
  Ok, And. Just because the current system sucks and needs to be replace, does not mean that replacement should be another Government Run System. As I stated in my original comment the government is too closly integrated to today's electronic systems as it is I want the government out, not more ingrained

drewbug 9y ago

Like Europe, right?

mdemare 9y ago
Payment costs in the Netherlands (ABNAMRO bank, english): https://www.abnamro.nl/nl/images/Content/022_Zakelijk_nieuwe_structuur/000_Gedeelde_documenten/pdf_tarieven_zakelijk_betalingsverkeer_2018_en.pdf https://www.abnamro.nl/nl/images/Content/022_Zakelijk_nieuwe... Note that nearly all fees are flat fees.

cameldrv 9y ago

They do... It's called ACH.

nojvek 9y ago
The only reliable way to do large transactions internationally without percentage based fees are wire transfers. Even they have a $15 fee and sometimes a $15 receiving fee as well. Ideally you'd have zero fees for transactions under $5. $5-$X0000 would have a percentage based fee and thereafter a flat fee for large transactions.
- thedirt0115 9y ago
  Then people would game the system. If someone wanted to send $100, they'd send 20 payments of $4.99 and 1 payment of $0.20... at least I would :)
- PeterisP 9y ago
  USA wire transfers have so high fees because banks don't want to offer such payment methods, so they charge extreme markup (their cost is less than 1$, so 15$ is 1400% markup) on that. In general, real time payments for large amounts can be made for <1$ (both fedwire system for its participants and various EUR systems do that), and consumer payments that can be (a) batched and sent in bulk and (b) get delivered e.g. at the end of day, not in real time, those have a cost of ~$0.01 (perhaps 0.02 in case of small volumes) to the bank. So, in EU, everyone has access to something that's pretty much equivalent to USA "wire transfer", and it might cost e.g. some 40 cents or can be offered to consumers either "for free" as part of a common services bundle/maintenance fee.
  - nojvek 9y ago
    EU blows my mind at so many levels. Many countries with different cultures and languages working together for common good of citizens. I have really hopes for the Euro

morsch 9y ago

I don't think it's stupid that it costs money, but I am surprised fees are still as high as they are. I suspect it's got something to do with how opaque the processing fee is for the customer. If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits. [1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-11-percent.html https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-... [2] https://www.reuters.com/article/us-mastercard-results/mastercard-posts-record-profit-on-higher-global-spending-idUSKBN1D01KG https://www.reuters.com/article/us-mastercard-results/master... [3] https://www.reuters.com/article/us-paypal-hldg-results/paypal-tops-profit-estimates-lifts-target-on-mobile-payments-growth-idUSKBN1CO2ZW https://www.reuters.com/article/us-paypal-hldg-results/paypa...

jarrettch 9y ago
Merchants absolutely can pass on the fees or give "discounts" for cash, at least in the USA. Gas stations are one of the major businesses that practice this. Anecdotally, I worked at a company store years ago where we would charge customers paying with cards a 2.75% fee, which is what we were paying. And that store was operated by a Fortune 500 company. Also, virtually every small private business I go to in Los Angeles charges some fee, or has stipulations, for credit card transactions.
- wpietri 9y ago
  This wasn't originally the case. Passing on the fee was for a long time against most merchant agreements. Which makes sense from the credit card company's point of view: they don't want shoppers to have any reason not to whip out the card. The big change came in January 2013 after a big court judgment. Adding fees, though, is still illegal in some states: https://www.creditcards.com/credit-card-news/business-surcharge-card-customers-1585.php https://www.creditcards.com/credit-card-news/business-surcha...
  - jarrettch 9y ago

betenoire 9y ago

You pay to have some handle the transaction details for you. It's a service. You are free to mail dollar bills, though you'll use a service you need to pay for there, too.

kalleboo 9y ago

Some places have systems you'd like. For instance Denmark has the "dankort" debit payment network where small merchants only play a flat annual fee and no per-transaction costs whatsoever.