4 ms·

Do we still need the credit card schemes for payments? Could move to a world of bank account to bank account payments, stripping out the payment layers?

by smarri 8y ago

IshKebab 8y ago
Not quite, because of fraud.
- smarri 8y ago
  Surely a bank can offer fraud protection?
klaudius 8y ago
Yes, that's how AliPay and WechatPay work in China and they have no significant fees. There are direct debit schemes that are widely used.
- smarri 8y ago
  Agreed, Direct Debit is a very common way to pay.
ubermonkey 8y ago
We certainly COULD but I wouldn't. By having Amex between me and a whole host of recurring-billing vendors, I have a kind of firewall. Amex is on my side reflexively if there's some kind of disagreement or dispute, and will reverse the charge. If it were my debit card in play, or bank-to-bank transfer, the money would actually be GONE until I was able to convince the merchant, or the merchant's bank, to give it back.
- smarri 8y ago
  I get this. Seems like it would be a USP if a bank could offer the same level of protection? Plus the same rewards as Amex?
- Silhouette 8y ago
  By having Amex between me and a whole host of recurring-billing vendors, I have a kind of firewall. Amex is on my side reflexively if there's some kind of disagreement or dispute, and will reverse the charge. But this is a double-edged sword. There is always a cost to this kind of scheme, and one way or another it is always going to be passed on to the customer. There is also an inherent risk in this kind of scheme, in that some quasi-judicial process is making decisions about who gets to keep the money in the event of a dispute, and if it goes the wrong way in one party's view then the result is either losing out on money they think belongs to them or taking more expensive action to recover it, possibly via the courts. Ultimately I think everyone has to learn to be more responsible about these transactions. Of course it shouldn't be possible for a merchant to take money from a customer without authorisation, but equally it shouldn't be possible for a customer to arbitrarily reverse a payment several months later even if the merchant has done nothing wrong, or to cancel the payment authorisation as some sort of informal proxy for cancelling a legal contract with a merchant. Aside from the excessive time periods for challenging payments retrospectively, I think the direct debit schemes tend to be better at this sort of thing than the card schemes. Typically, you have a specific payment authorisation (which can be cancelled from the customer's side) and you also have a requirement to give advance notice of recurring payments so there is time for the customer to act if they don't agree with them for any reason.
  - smarri 8y ago
    I concur!
  - ubermonkey 8y ago
    I'm really not sure what you're saying here, which is surprising because you said so much of it. >But this is a double-edged sword. No, it's really not. Yes, I pay Amex an annual fee for the level of card I carry. I've done the math, and I get a good value back for this fee -- especially given the level of customer service AX provides. Paying for a service does not make this a double-edged sword; there's no downside for me here. >There is also an inherent risk in this kind of scheme, in that some quasi-judicial process is making decisions about who gets to keep the money in the event of a dispute, and if it goes the wrong way in one party's view then the result is either losing out on money they think belongs to them or taking more expensive action to recover it, possibly via the courts. This is true in literally any transaction, at some level. I mean, even in a cash-on-the-barrelhead scenario there's the possibility of bad faith or swindles, so I have no idea what your point is. >Ultimately I think everyone has to learn to be more responsible about these transactions. This is one of those things that sounds true and wise, but is actually just noise. >Of course it shouldn't be possible for a merchant to take money from a customer without authorisation, It will perhaps surprise you that it ISN'T, and that the disputes in discussion are generally over overbilling or billing after permission has been revoked. >but equally it shouldn't be possible for a customer to arbitrarily reverse a payment several months later even if the merchant has done nothing wrong, or to cancel the payment authorisation as some sort of informal proxy for cancelling a legal contract with a merchant. Truly, the merchants are fortunate to have such a wise defender in Silhouette! >I think the direct debit schemes tend to be better at this sort of thing than the card schemes. You have not even APPROACHED explaining why you think this, or why anyone should agree with you. As long as there are automated billing systems, there will be errors. In the scenario I outline, Amex functions as an intermediary, so a screwup doesn't literally take money from my account. This is objectively preferable to your scenario, where that's precisely what would happen.

Do we still need the credit card schemes for payments? Could move to a world of bank account to bank account payments, stripping out the payment layers?

by smarri 8y ago

Do we still need the credit card schemes for payments? Could move to a world of bank account to bank account payments, stripping out the payment layers?

IshKebab 8y ago

Not quite, because of fraud.

smarri 8y ago
Surely a bank can offer fraud protection?

klaudius 8y ago

Yes, that's how AliPay and WechatPay work in China and they have no significant fees. There are direct debit schemes that are widely used.

smarri 8y ago
Agreed, Direct Debit is a very common way to pay.

ubermonkey 8y ago

We certainly COULD but I wouldn't. By having Amex between me and a whole host of recurring-billing vendors, I have a kind of firewall. Amex is on my side reflexively if there's some kind of disagreement or dispute, and will reverse the charge. If it were my debit card in play, or bank-to-bank transfer, the money would actually be GONE until I was able to convince the merchant, or the merchant's bank, to give it back.

smarri 8y ago
I get this. Seems like it would be a USP if a bank could offer the same level of protection? Plus the same rewards as Amex?
Silhouette 8y ago
By having Amex between me and a whole host of recurring-billing vendors, I have a kind of firewall. Amex is on my side reflexively if there's some kind of disagreement or dispute, and will reverse the charge. But this is a double-edged sword. There is always a cost to this kind of scheme, and one way or another it is always going to be passed on to the customer. There is also an inherent risk in this kind of scheme, in that some quasi-judicial process is making decisions about who gets to keep the money in the event of a dispute, and if it goes the wrong way in one party's view then the result is either losing out on money they think belongs to them or taking more expensive action to recover it, possibly via the courts. Ultimately I think everyone has to learn to be more responsible about these transactions. Of course it shouldn't be possible for a merchant to take money from a customer without authorisation, but equally it shouldn't be possible for a customer to arbitrarily reverse a payment several months later even if the merchant has done nothing wrong, or to cancel the payment authorisation as some sort of informal proxy for cancelling a legal contract with a merchant. Aside from the excessive time periods for challenging payments retrospectively, I think the direct debit schemes tend to be better at this sort of thing than the card schemes. Typically, you have a specific payment authorisation (which can be cancelled from the customer's side) and you also have a requirement to give advance notice of recurring payments so there is time for the customer to act if they don't agree with them for any reason.
- smarri 8y ago
  I concur!
- ubermonkey 8y ago
  I'm really not sure what you're saying here, which is surprising because you said so much of it. >But this is a double-edged sword. No, it's really not. Yes, I pay Amex an annual fee for the level of card I carry. I've done the math, and I get a good value back for this fee -- especially given the level of customer service AX provides. Paying for a service does not make this a double-edged sword; there's no downside for me here. >There is also an inherent risk in this kind of scheme, in that some quasi-judicial process is making decisions about who gets to keep the money in the event of a dispute, and if it goes the wrong way in one party's view then the result is either losing out on money they think belongs to them or taking more expensive action to recover it, possibly via the courts. This is true in literally any transaction, at some level. I mean, even in a cash-on-the-barrelhead scenario there's the possibility of bad faith or swindles, so I have no idea what your point is. >Ultimately I think everyone has to learn to be more responsible about these transactions. This is one of those things that sounds true and wise, but is actually just noise. >Of course it shouldn't be possible for a merchant to take money from a customer without authorisation, It will perhaps surprise you that it ISN'T, and that the disputes in discussion are generally over overbilling or billing after permission has been revoked. >but equally it shouldn't be possible for a customer to arbitrarily reverse a payment several months later even if the merchant has done nothing wrong, or to cancel the payment authorisation as some sort of informal proxy for cancelling a legal contract with a merchant. Truly, the merchants are fortunate to have such a wise defender in Silhouette! >I think the direct debit schemes tend to be better at this sort of thing than the card schemes. You have not even APPROACHED explaining why you think this, or why anyone should agree with you. As long as there are automated billing systems, there will be errors. In the scenario I outline, Amex functions as an intermediary, so a screwup doesn't literally take money from my account. This is objectively preferable to your scenario, where that's precisely what would happen.