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You can't cut out the cc companies. Both Stripe and Square are riding on their rails. The best they can do is try to negotiate the rates down and either keep a

You can't cut out the cc companies. Both Stripe and Square are riding on their rails. The best they can do is try to negotiate the rates down and either keep a higher percentage for themselves or pass on the savings to their customers.

wbronitsky 8y ago
I think the interesting idea is what happens when you use a Stripe issued card[0] on a Stripe API powered terminal. The system, somewhere, will know it is a Stripe card based off the number, but I'm willing to bet the CC networks are protected from being cut out. At least for now. Great job team! Looking forward to more of this in the future \o/ [0] https://stripe.com/issuing https://stripe.com/issuing
- Domenic_S 8y ago
  They're protected from being cut out because they are the networks on which the credit card system runs. If you look at a stripe-issued card, you'll see there's still a visa or mc logo in the corner.
  - wbronitsky 8y ago
    I understand how the system works; the requests hit the API before the credit card network. Hence the ability to cut out the network if Stripe is willing to take the chargeback/fraud risk.
    - docker_up 8y ago
      No, they would need to become money transmitters according to what you wrote above. AFAIK they aren't money transmitters yet.
      - wbronitsky 8y ago
        It depends on the jurisdiction, but they are in many! It is something they have been working towards for quite some time.
      - screature2 8y ago
        They list themselves as having money transmitter licenses across the US. see e.g. https://stripe.com/us/payments https://stripe.com/us/payments and https://stripe.com/connect https://stripe.com/connect (under "Rigorous Compliance" and "Compliance respectively"). You'll also find them on CA's directory of money transmitters. http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra...
    - Domenic_S 8y ago
      You're saying Stripe would process directly when their own card is used on their own network, and then outside the network they'd process through visa/mc?
      - password03 8y ago
        Well something like that depending on the Stripe infrastructure. That currently happens when an issuer card is used in a merchant that is acquired/processed with the same issuing bank. It is called an "on us" transaction and doesn't need to fire through the card scheme rails.
        jjeaff 8y ago
        I assume that still incurs a visa fee. Perhaps just bypasses the underwriting. Otherwise, I can't imagine visa would allow this.
        password03 8y ago
        I can't see how they could disallow it to be honest. That would be seriously anti-competitive.
- docker_up 8y ago
  There's a whole infrastructure of liability for payer and merchant that exists below the surface of every transaction. This is why, unfortunately, credit card companies can charge the fees that they do. For example, the issuing banks take on liability if payers don't pay, for example. I don't think Stripe is willing to get in the business of this unless they want to turn into a bank.
  - wbronitsky 8y ago
    I think you might be surprised how much risk Stripe is willing to take on when they can gain hundreds of basis points on cutting out the networks. Only time will tell though :)
    - docker_up 8y ago
      Not if it means having to turn into a bank. The repercussions on their business will be draconian. Although I would be surprised if they haven't already explored or fully gone through a money transmitter license for a subsidiary.
      - deleted 8y ago
        [deleted]
      - qaq 8y ago
        Can't they just buy a Bank?
        rossdavidh 8y ago
        Almost certainly they would, and there might be some small banks out there they could buy or merge with. That would get them out of a lot of legal issues, and also buy them some relevant legal expertise. However, I seem to recall WalMart investigating this option a while back, and it never happened. It may be that the more you look at the option of becoming a bank, the more it looks like it would take over your life/business. Also, there are doubtless many lobbyists who the existing banks employ who would try to stop it.
- clairity 8y ago
  nordstrom used to do this, back when it was also a bank and issued their own line of credit cards. they also negotiated more favorable terms with visa because of it. they marketed the crap out of their own cards so they could keep more of the fees. but the regulatory environment tightened up and being both a bank and a retailer became less appealing, and consumers found store branded credit cards less appealing, so they sold the bank portion.
BillinghamJ 8y ago
Yeah, you can. I'd expect PSD2 legislation will all-but destroy CC companies across the EU within 3 years (just for online use initially). Strong Customer Authentication (SCA) requirements coming into force in Sept 2019 are making card payments increasingly unattractive. Payment Initiation (via PISPs, which Stripe undoubtedly will become) will offer free, instant, seamless push-based payments where fraud is essentially impossible (and the merchant isn't liable anyway). Imagine having Cuvva's payment button pop you out to the Monzo app, hit accept, then immediately pop back and have paid. No card networks or fees involved. Just a simple Faster Payment directly from the customer's bank account to ours. For in-person payments, I'd imagine a similar arrangement could be facilitated via Apple Pay. May take non-EU countries a while to follow, but they surely will eventually. The days of CC companies are numbered.
- joelhaasnoot 8y ago
  Your example of the payment button is exactly how Dutch-only iDeal works and has adapted well to mobile. The pop-out however is to your own bank's app/website, which works cause there are just 10 banks. Transaction fees? < 0.50 € per transaction
- jellicle 8y ago
  Credit cards will never disappear as long as they offer the ability to chargeback if the goods are unsatisfactory, and competing systems do not offer that.
  - newhere420 8y ago
    In the UK, debit cards can chargeback. While this is currently implemented over MasterCard/Visa network, it's the bank that performs it and there's no reason to expect that would change if something replaced the plastic. Something similar (but not quite identical) exists for direct debits called the direct debit guarantee.
  - BillinghamJ 8y ago
    They already are disappearing in the UK. None of the new banks are offering credit cards.

wbronitsky 8y ago

I think the interesting idea is what happens when you use a Stripe issued card[0] on a Stripe API powered terminal. The system, somewhere, will know it is a Stripe card based off the number, but I'm willing to bet the CC networks are protected from being cut out. At least for now. Great job team! Looking forward to more of this in the future \o/ [0] https://stripe.com/issuing https://stripe.com/issuing

Domenic_S 8y ago
They're protected from being cut out because they are the networks on which the credit card system runs. If you look at a stripe-issued card, you'll see there's still a visa or mc logo in the corner.
- wbronitsky 8y ago
  I understand how the system works; the requests hit the API before the credit card network. Hence the ability to cut out the network if Stripe is willing to take the chargeback/fraud risk.
  - docker_up 8y ago
    No, they would need to become money transmitters according to what you wrote above. AFAIK they aren't money transmitters yet.
    - wbronitsky 8y ago
      It depends on the jurisdiction, but they are in many! It is something they have been working towards for quite some time.
    - screature2 8y ago
      They list themselves as having money transmitter licenses across the US. see e.g. https://stripe.com/us/payments https://stripe.com/us/payments and https://stripe.com/connect https://stripe.com/connect (under "Rigorous Compliance" and "Compliance respectively"). You'll also find them on CA's directory of money transmitters. http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra...
  - Domenic_S 8y ago
    You're saying Stripe would process directly when their own card is used on their own network, and then outside the network they'd process through visa/mc?
    - password03 8y ago
      Well something like that depending on the Stripe infrastructure. That currently happens when an issuer card is used in a merchant that is acquired/processed with the same issuing bank. It is called an "on us" transaction and doesn't need to fire through the card scheme rails.
      - jjeaff 8y ago
        I assume that still incurs a visa fee. Perhaps just bypasses the underwriting. Otherwise, I can't imagine visa would allow this.
        password03 8y ago
        I can't see how they could disallow it to be honest. That would be seriously anti-competitive.
docker_up 8y ago
There's a whole infrastructure of liability for payer and merchant that exists below the surface of every transaction. This is why, unfortunately, credit card companies can charge the fees that they do. For example, the issuing banks take on liability if payers don't pay, for example. I don't think Stripe is willing to get in the business of this unless they want to turn into a bank.
- wbronitsky 8y ago
  I think you might be surprised how much risk Stripe is willing to take on when they can gain hundreds of basis points on cutting out the networks. Only time will tell though :)
  - docker_up 8y ago
    Not if it means having to turn into a bank. The repercussions on their business will be draconian. Although I would be surprised if they haven't already explored or fully gone through a money transmitter license for a subsidiary.
    - deleted 8y ago
      [deleted]
    - qaq 8y ago
      Can't they just buy a Bank?
      - rossdavidh 8y ago
        Almost certainly they would, and there might be some small banks out there they could buy or merge with. That would get them out of a lot of legal issues, and also buy them some relevant legal expertise. However, I seem to recall WalMart investigating this option a while back, and it never happened. It may be that the more you look at the option of becoming a bank, the more it looks like it would take over your life/business. Also, there are doubtless many lobbyists who the existing banks employ who would try to stop it.
clairity 8y ago
nordstrom used to do this, back when it was also a bank and issued their own line of credit cards. they also negotiated more favorable terms with visa because of it. they marketed the crap out of their own cards so they could keep more of the fees. but the regulatory environment tightened up and being both a bank and a retailer became less appealing, and consumers found store branded credit cards less appealing, so they sold the bank portion.

BillinghamJ 8y ago

Yeah, you can. I'd expect PSD2 legislation will all-but destroy CC companies across the EU within 3 years (just for online use initially). Strong Customer Authentication (SCA) requirements coming into force in Sept 2019 are making card payments increasingly unattractive. Payment Initiation (via PISPs, which Stripe undoubtedly will become) will offer free, instant, seamless push-based payments where fraud is essentially impossible (and the merchant isn't liable anyway). Imagine having Cuvva's payment button pop you out to the Monzo app, hit accept, then immediately pop back and have paid. No card networks or fees involved. Just a simple Faster Payment directly from the customer's bank account to ours. For in-person payments, I'd imagine a similar arrangement could be facilitated via Apple Pay. May take non-EU countries a while to follow, but they surely will eventually. The days of CC companies are numbered.

joelhaasnoot 8y ago
Your example of the payment button is exactly how Dutch-only iDeal works and has adapted well to mobile. The pop-out however is to your own bank's app/website, which works cause there are just 10 banks. Transaction fees? < 0.50 € per transaction
jellicle 8y ago
Credit cards will never disappear as long as they offer the ability to chargeback if the goods are unsatisfactory, and competing systems do not offer that.
- newhere420 8y ago
  In the UK, debit cards can chargeback. While this is currently implemented over MasterCard/Visa network, it's the bank that performs it and there's no reason to expect that would change if something replaced the plastic. Something similar (but not quite identical) exists for direct debits called the direct debit guarantee.
- BillinghamJ 8y ago
  They already are disappearing in the UK. None of the new banks are offering credit cards.