7 ms·

It seems to me that Apple can offer reduced fees due to the fact that they'll have less fraud as a result of requiring touch/face ID for every purchase. While

by ajra 8y ago

It seems to me that Apple can offer reduced fees due to the fact that they'll have less fraud as a result of requiring touch/face ID for every purchase. While interesting, it doesn't come close to solving what I feel is the largest problem with cards in the US today -- interchange fees.

onlyrealcuzzo 8y ago
I know this is a MasterCard, but it'd be more interesting if they were able to take out the $0.35 transaction fee on every transaction. This is the bread and butter of every payment processor, and it's complete rent seeking, AND supposedly all the major processors are going to RAISE it at roughly the same time in the coming months. Eliminating the set transaction fee could open up so many potential businesses. But I'm not sure what incentive Apple has of getting rid of it. It's a cash cow.
- dpark 8y ago
  Indeed, why would Apple want to eliminate that fee? But also, how is this rent seeking? Rent seeking is defined as attempting to take a larger share of existing wealth without increasing total wealth. Electronic payment systems absolutely add to total wealth.
  - weberc2 8y ago
    I'm not one to cry foul every time a company turns a profit, but this industry seems pretty anticompetitive if it's not outright rent seeking.
- ajra 8y ago
  Sounds awfully cartel-like. Unfortunately I agree with you regarding the lack of incentives Apple has. IIRC, the money for cash back rewards comes out of the interchange fee. How do you get consumers to adopt a card that's opaquely better for businesses and immediately worse for themselves?
  - zaphirplane 8y ago
    Make the card a novelty, some companies have tried cute colours and shapes. Using your iPhone is also very very novel
  - IOT_Apprentice 8y ago
    If you are looking for a cartel, look no further than experian, transunion et al. Those firms define your credit worthiness and are hacked at will, spilling out all you credit and PII info.
- ceejayoz 8y ago
  Why is the per-transaction fee the rent-seeking part? I get why MC/Visa have a per-transaction fee. I don't understand why there's a percentage of the transaction on top of that. It's not any more work for a $1 transaction versus a $1,000,000 one on their end.
  - elefantastisch 8y ago
    Wouldn't the risk of fraud make a $1 million transaction much more expensive to handle?
    - onlyrealcuzzo 8y ago
      Yes. This is roughly half of the transaction fee. The other half is to self-fund the rewards illusion that gets customers to use the card.
      - matwood 8y ago
        > rewards illusion Maybe if you don't pay your balance every month, but the rewards are very real for me.
        ceejayoz 8y ago
        The rewards may be real, but so are the cost increases the merchants gradually put in place to offset them.
        jl6 8y ago
        We can’t pay merchants less by paying cash, so we may as well try to grab a slice of the fee via the reward. 2% sounds pretty good.
        r00fus 8y ago
        Some local merchants offer bonuses for cash usage. Of course, those only take Debit cards if not cash.
- lol768 8y ago
  >Eliminating the set transaction fee could open up so many potential businesses. But I'm not sure what incentive Apple has of getting rid of it. It's a cash cow. It doesn't necessarily need to be eliminated, but it should be regulated: see https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32015R0751 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32... and the effect it has had in the EU.
- nielsbot 8y ago
  Doesn't Square already do that? https://squareup.com/help/us/en/article/5068-what-are-square-s-fees https://squareup.com/help/us/en/article/5068-what-are-square...
naravara 8y ago
>It seems to me that Apple can offer reduced fees due to the fact that they'll have less fraud as a result of requiring touch/face ID for every purchase. I don't think that's a big component of it. It's probably has more to do with Apple users being inherently more credit-worthy. If you're well-heeled enough to be neck deep in the Apple ecosystem in the first place, you're probably less likely to be in credit default.
- Tomte 8y ago
  I'm not sure about that since smartphones are a major driver for unsustainable borrowing (edit, was: loaning).
bob_theslob646 8y ago
> the largest problem with cards in the US today -- interchange fees. To the non-expert, what are interchange fees and why are they a problem?
benhurmarcel 8y ago
If they removed interchange fees, they wouldn't be able to offer any kind of significant cashback.
seizethecheese 8y ago
A significant proportion of interchange fees goes to covering fraud chargebacks.
foobarbazetc 8y ago
This really isn’t why. Fraud cost is negligible. Apple literally gets a cut out of every NFC transaction. So they get to double dip here.
- kerbalspacepro 8y ago
  Why do you think "Fraud cost is negligible"?
  - kradroy 8y ago
    The merchants eat it all, basically.
- deleted 8y ago
  [deleted]
- stock_toaster 8y ago
  Goldman Sachs is taking their cut /for sure/.

by ajra 8y ago

onlyrealcuzzo 8y ago

I know this is a MasterCard, but it'd be more interesting if they were able to take out the $0.35 transaction fee on every transaction. This is the bread and butter of every payment processor, and it's complete rent seeking, AND supposedly all the major processors are going to RAISE it at roughly the same time in the coming months. Eliminating the set transaction fee could open up so many potential businesses. But I'm not sure what incentive Apple has of getting rid of it. It's a cash cow.

dpark 8y ago
Indeed, why would Apple want to eliminate that fee? But also, how is this rent seeking? Rent seeking is defined as attempting to take a larger share of existing wealth without increasing total wealth. Electronic payment systems absolutely add to total wealth.
- weberc2 8y ago
  I'm not one to cry foul every time a company turns a profit, but this industry seems pretty anticompetitive if it's not outright rent seeking.
ajra 8y ago
Sounds awfully cartel-like. Unfortunately I agree with you regarding the lack of incentives Apple has. IIRC, the money for cash back rewards comes out of the interchange fee. How do you get consumers to adopt a card that's opaquely better for businesses and immediately worse for themselves?
- zaphirplane 8y ago
  Make the card a novelty, some companies have tried cute colours and shapes. Using your iPhone is also very very novel
- IOT_Apprentice 8y ago
  If you are looking for a cartel, look no further than experian, transunion et al. Those firms define your credit worthiness and are hacked at will, spilling out all you credit and PII info.
ceejayoz 8y ago
Why is the per-transaction fee the rent-seeking part? I get why MC/Visa have a per-transaction fee. I don't understand why there's a percentage of the transaction on top of that. It's not any more work for a $1 transaction versus a $1,000,000 one on their end.
- elefantastisch 8y ago
  Wouldn't the risk of fraud make a $1 million transaction much more expensive to handle?
  - onlyrealcuzzo 8y ago
    Yes. This is roughly half of the transaction fee. The other half is to self-fund the rewards illusion that gets customers to use the card.
    - matwood 8y ago
      > rewards illusion Maybe if you don't pay your balance every month, but the rewards are very real for me.
      - ceejayoz 8y ago
        The rewards may be real, but so are the cost increases the merchants gradually put in place to offset them.
        jl6 8y ago
        We can’t pay merchants less by paying cash, so we may as well try to grab a slice of the fee via the reward. 2% sounds pretty good.
        r00fus 8y ago
        Some local merchants offer bonuses for cash usage. Of course, those only take Debit cards if not cash.
lol768 8y ago
>Eliminating the set transaction fee could open up so many potential businesses. But I'm not sure what incentive Apple has of getting rid of it. It's a cash cow. It doesn't necessarily need to be eliminated, but it should be regulated: see https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32015R0751 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32... and the effect it has had in the EU.
nielsbot 8y ago
Doesn't Square already do that? https://squareup.com/help/us/en/article/5068-what-are-square-s-fees https://squareup.com/help/us/en/article/5068-what-are-square...

naravara 8y ago

>It seems to me that Apple can offer reduced fees due to the fact that they'll have less fraud as a result of requiring touch/face ID for every purchase. I don't think that's a big component of it. It's probably has more to do with Apple users being inherently more credit-worthy. If you're well-heeled enough to be neck deep in the Apple ecosystem in the first place, you're probably less likely to be in credit default.

Tomte 8y ago
I'm not sure about that since smartphones are a major driver for unsustainable borrowing (edit, was: loaning).

bob_theslob646 8y ago

> the largest problem with cards in the US today -- interchange fees. To the non-expert, what are interchange fees and why are they a problem?

benhurmarcel 8y ago

If they removed interchange fees, they wouldn't be able to offer any kind of significant cashback.

seizethecheese 8y ago

A significant proportion of interchange fees goes to covering fraud chargebacks.

foobarbazetc 8y ago

This really isn’t why. Fraud cost is negligible. Apple literally gets a cut out of every NFC transaction. So they get to double dip here.

kerbalspacepro 8y ago
Why do you think "Fraud cost is negligible"?
- kradroy 8y ago
  The merchants eat it all, basically.
deleted 8y ago
[deleted]
stock_toaster 8y ago
Goldman Sachs is taking their cut /for sure/.