4 ms·

Both of those are what escrow is for. A trusted and publicly audited thing where a payment is held until the services are rendered.

Filligree 8y ago
Escrow is far more expensive than chargebacks. And if we're involving a third party either way, I'd rather have the regulated, battle-tested, already existing banking system.
- wcoenen 8y ago
  Chargebacks essentially are escrow. The merchant can't stop them from happening because the money is taken from the merchant account reserve, i.e. a minimum balance that the merchant can't withdraw. Sounds similar to money held by an escrow agent doesn't it? And credit card transactions are also expensive, between 1.5% and 3% and even higher[1]. It's just that the cost is hidden from the consumer by accounting for it in a higher product price. (Some merchants like gas stations may offer a cash discount, which can be used as a rough estimate of that hidden cost.) On top of this, merchants get charged a hefty fee (on the order of $50) for each chargeback that they receive. [1] https://www.creditdonkey.com/credit-card-processing-fees.html https://www.creditdonkey.com/credit-card-processing-fees.htm...
  - adrianN 8y ago
    The EU proposed limiting transaction fees to 0.2%. I don't know whether that is law already or not.
    - thesimon 8y ago
      0.2% for debit cards, 0.3% for credit cards. Only applies to consumer cards and only the interchange (ie. the part that the bank of your card gets). MasterCard and Visa fees are still quite substantial. A regular merchant would now pay < 1%, so quite a bit cheaper than before.
    - dalore 8y ago
      Looks like it was 0.3% https://www.europeanpaymentscouncil.eu/news-insights/insight/18-months-impact-interchange-fee-regulation-european-union-cards-market https://www.europeanpaymentscouncil.eu/news-insights/insight... The outcome was that they cut back on lots of loyalty programs, and not many businesses passed on the cost savings to the consumers. So sounds like limiting the fees had an adverse effect on the consumer.
- sneak 8y ago
  That system that you use, while international, is only available to a small fraction of internet users. Entire countries, and billions of potential customers, are cut off from transacting with you under that model.
- decentralised 8y ago
  There's the possibility to have escrow without a third party using smart-contracts.
  - throwaway2048 8y ago
    The problem is that there is no way for a smart contract to actually know if goods have been received or not, so it is still subject to abuse.
    - decentralised 8y ago
      That's true but it can be made to work with oracles or a third-party arbitration (eg: check out Kleros, Truebit and Plasma) system.
      - mikeash 8y ago
        But now you’re no longer “without a third party.”
        decentralised 8y ago
        There are nuances to the type of third parties we are talking about here. The type I'm discussing, something like the Lightning Channel and Plasma operators, these are roles that have cryptoeconomic properties that don't allow them to take over your wallet or refuse your service. edit: The base premise of having a smart-contract being itself the escrow is perfectly achievable. This doesn't mean that such a setup is the best solution to every use case and I believe that we'll see plenty of developments in this area in the coming years. For now the best approaches use game theory and computer science to reduce the amount of "trust" the parties must have in each other and the system itself but they are very much under active research & development.
      - spookthesunset 8y ago
        That isn't "trustless" anymore! You gotta trust a bunch of unknown crypto startups now. Are these guys really add more value to the economy than chargebacks? I very much doubt it.
bunderbunder 8y ago
The problem there is, nobody likes using escrow for everyday things. Example: Renting a car. The rental companies want a way to recoup costs from any damage you do by, e.g., smoking in the car. They give you two options for how this can work: You can either pay with a credit card, which has a way for htem to do that built-in. Or, if you don't want to pay with a credit card, you can give them a bunch of extra money to hold in escrow. Guess which option people basically never choose, when both options are available to them. I would assume that merchants feel similarly about chargebacks vs escrow, and for similar reasons.

Filligree 8y ago

Escrow is far more expensive than chargebacks. And if we're involving a third party either way, I'd rather have the regulated, battle-tested, already existing banking system.

wcoenen 8y ago
Chargebacks essentially are escrow. The merchant can't stop them from happening because the money is taken from the merchant account reserve, i.e. a minimum balance that the merchant can't withdraw. Sounds similar to money held by an escrow agent doesn't it? And credit card transactions are also expensive, between 1.5% and 3% and even higher[1]. It's just that the cost is hidden from the consumer by accounting for it in a higher product price. (Some merchants like gas stations may offer a cash discount, which can be used as a rough estimate of that hidden cost.) On top of this, merchants get charged a hefty fee (on the order of $50) for each chargeback that they receive. [1] https://www.creditdonkey.com/credit-card-processing-fees.html https://www.creditdonkey.com/credit-card-processing-fees.htm...
- adrianN 8y ago
  The EU proposed limiting transaction fees to 0.2%. I don't know whether that is law already or not.
  - thesimon 8y ago
    0.2% for debit cards, 0.3% for credit cards. Only applies to consumer cards and only the interchange (ie. the part that the bank of your card gets). MasterCard and Visa fees are still quite substantial. A regular merchant would now pay < 1%, so quite a bit cheaper than before.
  - dalore 8y ago
    Looks like it was 0.3% https://www.europeanpaymentscouncil.eu/news-insights/insight/18-months-impact-interchange-fee-regulation-european-union-cards-market https://www.europeanpaymentscouncil.eu/news-insights/insight... The outcome was that they cut back on lots of loyalty programs, and not many businesses passed on the cost savings to the consumers. So sounds like limiting the fees had an adverse effect on the consumer.
sneak 8y ago
That system that you use, while international, is only available to a small fraction of internet users. Entire countries, and billions of potential customers, are cut off from transacting with you under that model.
decentralised 8y ago
There's the possibility to have escrow without a third party using smart-contracts.
- throwaway2048 8y ago
  The problem is that there is no way for a smart contract to actually know if goods have been received or not, so it is still subject to abuse.
  - decentralised 8y ago
    That's true but it can be made to work with oracles or a third-party arbitration (eg: check out Kleros, Truebit and Plasma) system.
    - mikeash 8y ago
      But now you’re no longer “without a third party.”
      - decentralised 8y ago
        There are nuances to the type of third parties we are talking about here. The type I'm discussing, something like the Lightning Channel and Plasma operators, these are roles that have cryptoeconomic properties that don't allow them to take over your wallet or refuse your service. edit: The base premise of having a smart-contract being itself the escrow is perfectly achievable. This doesn't mean that such a setup is the best solution to every use case and I believe that we'll see plenty of developments in this area in the coming years. For now the best approaches use game theory and computer science to reduce the amount of "trust" the parties must have in each other and the system itself but they are very much under active research & development.
    - spookthesunset 8y ago
      That isn't "trustless" anymore! You gotta trust a bunch of unknown crypto startups now. Are these guys really add more value to the economy than chargebacks? I very much doubt it.

bunderbunder 8y ago

The problem there is, nobody likes using escrow for everyday things. Example: Renting a car. The rental companies want a way to recoup costs from any damage you do by, e.g., smoking in the car. They give you two options for how this can work: You can either pay with a credit card, which has a way for htem to do that built-in. Or, if you don't want to pay with a credit card, you can give them a bunch of extra money to hold in escrow. Guess which option people basically never choose, when both options are available to them. I would assume that merchants feel similarly about chargebacks vs escrow, and for similar reasons.