8 ms·

I'm sure they've thought about it. However, as others have found, getting through the amount of fraud out there with a margin less than the ~3% that credit car

• draw_down 8y ago
  > getting through the amount of fraud out there with a margin less than the ~3% that credit card companies charge, is really hard It is hard. Wonder if they're doing anything about that...
• jimnotgym 8y ago
  > without getting eaten alive by fraud. Because fraudulent use of cards is charged back to the merchant, the card companies are less exposed to it than you might imagine. Where they are exposed is if a merchant goes bankrupt without delivering, and the purchase was on credit card. The merchant account holder would then be liable
  • rossdavidh 8y ago
    But, they have to maintain a system to deal with that. Also, if they pass all fraud back to the merchants, at the levels that would happen if they had no good fraud detection, then merchants would stop allowing credit cards. We take for granted that most transactions are valid. If the credit card companies did not invest a lot in automatic fraud detection, the percentage of fraudulent transactions would be something like the percentage of email which is spam.
    • jimnotgym 8y ago
      They still leave much of the risk to the merchant. Turn on 3d secure, watch how the banks often don't even respond, and watch the conversions plummet as your hard won customers get caught in a whirling loop. Turn on all the fraud tools and watch how nobody ever checks-out again...
      • jjeaff 8y ago
        Ya, depending on your type of business, you really may not need any fraud tools at all. I deal in b2b SaaS. We had to work to get any and all fraud tools turned off because we have essentially zero fraud (companies that you work closely with tend not to try to pay their monthly recurring fees with stolen credit cards.)
  • inertial 8y ago
    This is a serious issue, especially for small merchants dealing with digital products. A chargeback is too much work to fight and rarely in favor of the merchant.
• kondro 8y ago
  The average card present transaction charge in Australia for scheme cards is less than 1.5%, even for small turnover merchants. With higher turnover businesses getting to about 1%. Banks don’t need to charge 3% to deal with fraud. Merchant agreements effectively make it their responsibility to bear the brunt of any chargebacks anyway.
  • rossdavidh 8y ago
    For sure the banks make good money, but the question is whether or not a company that is new at it, would be able to make a profit on 3%. I submit that it is a difficult task, and a new company would struggle. Not saying it's impossible, just that it's hard.
  • tracker1 8y ago
    It's more that U.S. companies have various rewards programs (travel points to cash back). One of my cards gets 2% back on nearly everything, and 5% back on their quarterly promotions. I tend to use it for most of may day to day spending, and try to pay it off every month. That's why the merchant fees are so high... much less an extent to fraud handling.
• segmondy 8y ago
  The card brands are nothing more but a network. That's it. They have no skin in the game. All fraudulent charges move like this card issuer(bank) ---> processor (square) ------> merchant
  • pbreit 8y ago
    Not quite true. First, some fraud gets eaten by the processor. Second, the merchant underwriter is on the hook for a merchant who goes bust before fulfilling what has been paid for.
    • segmondy 8y ago
      Actually, if you want me to make it detailed it goes like this. card issuer(bank) ---> processor (square) ------> ISO ------> merchant ---> customer | | | V V V card network underwriting bank the only way the processor will ever eat the cost is if the ISO couldn't cover the loss, bankrupt. The only way the ISO can't collect from the merchant is the same or if the merchant stops processing. If the merchant can't beat the chargeback and isn't fraudulent, their only option is to sue the customer for fraud. But usually the ISO will take the merchant to collections. Disputes are like hot potatoes, everyone keeps tossing it till there's no one to catch it. With that said the underwriting bank doesn't eat any of the chargeback on behalf of the merchant. The underwriting bank will only eat loss that they underwrote for a processor or an ISO acting like a PayFac At least this much I know from my side of the industry, perhaps you work for a bank that eats the cost. I do like to know their name and become a customer!
      • jjeaff 8y ago
        Do you have a source for any of that? I don't believe ISOs take on any risk. They are "independent sales organizations" and they are a dime a dozen. They are signing up companies directly to the merchant banks each with their own underwritten merchant account. And they are a dime a dozen. They aren't taking on any risk. Just the effort to onboard new customers.
• mmckelvy 8y ago
  I've always thought fraud would be much more preventable if credit card companies would simply send you a text or verification code each time your card was charged, or require a PIN. It seems this is difficult for the big credit card companies and banks (which is why it hasn't happened), but I wonder if it might be easier for Stripe to incorporate something like this into their Issuing product.
  • rossdavidh 8y ago
    I think it is/was difficult when the product was just a plastic card. I agree that, as the "card" is increasingly becoming a smartphone, something better should be possible.
  • markdown 8y ago
    My bank, Westpac, calls me up every time I make an online payment with my VISA card or when my card is used at point of sale or at an ATM in a country I haven't notified them that I'm visiting.
    • jjeaff 8y ago
      My bank will let through thousands of dollars in ATM withdrawals in a country I've never been too. Then lock my card up when I'm trying to buy $12 of groceries in my hometown and force me to call and wait on hold to get it unlocked.
      • mgkimsal 8y ago
        similar here - from US, had a few trips to russia and china over a few years. never told the bank. went over there, used my cards, no issues, ever. came back home. no issues. bought $12 from a merchant in sweden - a merchant I'd purchased the exact service from multiple times before - entire account locked for 'fraudulent activity'. Checks bounced, payments blocked, etc. Annoying as shit. Took a couple days to sort out (happened on a friday afternoon, of course). They refunded all charges, but... damn. I think things are better now (this was... 2014 IIRC).
  • 8y ago
• jacurtis 8y ago
  I am continuously shocked by the amount of defense that people have towards Stripe. I remember mentioning Stripe's 3% fee being too high for me the other day at a community event and I was attacked by people defending Stripe and their fee. These are people that don't work there, and have no true involvement with them (other than using their APIs). Sorry everyone, but you really don't understand that Stripe's position is literally the middleman of everything. Their "product" is the API. Simplifying and unifying what the various processors have done and marketing the hell out of it. That 3% fee that everyone defends is truly almost pure profit for them. I currently work with another payment processor (one of the top three largest in the world) and our credit card fees are measured in basis points. For those that don't know... a basis point is one-hundredth of a percent. The fees we are charged by our processor isn't even whole percentage points, it is measured in basis points. Granted it is more complicated because there are different fees for AMEX, Mastercard, Visa, etc. But it is still all totaled out to fractions of a percent. Keep in mind that my credit processor is still making money while charging me in basis points (and they have way more employees than Stripe does). Stripe is a competitor to this processor. So if this processor makes money charging fees in basis points, than Stripe could make money charging in basis points too. And before people think that I work for Walmart. I'll just say we charge about 2M a month in credit cards which is relatively small. I promise that Stripe is doing very well off their 3% charge. I am not saying that they aren't allowed to make good money, but I really hate when people defend them like they are barely scraping by. Stripe is laughing their way to the bank with your 3% processing fee. They laugh even harder when they read you defending their outrageous fees.
  • rossdavidh 8y ago
    Uh, that 3% includes the amount they are passing on to the credit card company. Which, for a little guy like me, is around 3%. It is literally no more expensive to go with Stripe than to roll my own.
    • slobotron 8y ago
      Yes. Years back we moved from Elavon to Stripe since 2.9% on each transaction sure beat uncertain 1.9-5% we were getting based on what card customer was using (corporate and point cards carried bigger fee).
• plumeria 8y ago
  We are in a country where Stripe isn't available and pay 5.5% to our local processor here (and no fixed fee). So yes 3% is pretty good. They also offer custom pricing depending on your business model (e.g. micropayments).
  • rossdavidh 8y ago
    Interesting point. Out of curiousity, is it ok to tell us what country that is? I am always interested to hear about how these things work differently in different parts of the world.
    • plumeria 8y ago
      Sure, we are in Costa Rica.