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I have a credit card that gives me 1.5% cash back on every transaction. I'm reading that Visa typically charges 2.3% to merchants, and Stripe charges 2.9%, igno

I have a credit card that gives me 1.5% cash back on every transaction. I'm reading that Visa typically charges 2.3% to merchants, and Stripe charges 2.9%, ignoring per-transaction fees. So Stripe itself probably gets around 0.6% of each transaction, and at least on average 1% of each transaction goes to cardholder bonuses, and the card issuer gets around 1.3%. Of course both Stripe and the issuer have some fraud prevention built-in, I don't know how much that amounts to (and how much more effective China is at combating fraud, though it's possible WeChat simply doesn't accept as much liability as American payment processors do.)

aeternum 7y ago
Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud. To use square as an example, card present is 2.6% whereas card not present is 3.5%.
AdieuToLogic 7y ago
Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers). While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint. > I'm reading that Visa typically charges 2.3% to merchants ... The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things. > ... at least on average 1% of each transaction goes to cardholder bonuses ... Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d...
- nitrogen 7y ago
  Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. If this is true, then where does the cash back come from if not as a cut of the merchant fees?
  - AdieuToLogic 7y ago
    > > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. > If this is true, then where does the cash back come from if not as a cut of the merchant fees? Interest rates + membership fees charged by issuers to Card Holders.
    - rstupek 7y ago
      I don't think that is correct. Merchants are charged different rates based on the cash back rates of a given card. Merchants have to eat most of that cash back being given to the card holders.
- ceejayoz 7y ago
  Interchange fees are higher on premium (rewards) cards. The merchant may contractually pay a fixed percentage that accounts for the expected mix of cards, but those rewards absolutely come from merchant fees.
rwmurrayVT 7y ago
There are entire organized crime rings and many, many individuals that specialize in merchant account fraud. In the early 2010's people were creating stripe accounts and processing up to $100,000 fraudulently. I'm not sure who ate that, but it surely had an impact on their bottom line. I had screenshots from Alphabay of over $5,000,000 in fraudulent charges on merchant accounts. If Stripe only makes 1% of transaction cost and has to eat the fraud then they'd have to charge $500,000,000 to just make up what was posted in a single "mastermind group". That is crazy...
MuffinFlavored 7y ago
From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%
dehrmann 7y ago
> I have a credit card that gives me 1.5% cash back on every transaction Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.

aeternum 7y ago

Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud. To use square as an example, card present is 2.6% whereas card not present is 3.5%.

AdieuToLogic 7y ago

Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers). While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint. > I'm reading that Visa typically charges 2.3% to merchants ... The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things. > ... at least on average 1% of each transaction goes to cardholder bonuses ... Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d...

nitrogen 7y ago
Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. If this is true, then where does the cash back come from if not as a cut of the merchant fees?
- AdieuToLogic 7y ago
  > > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. > If this is true, then where does the cash back come from if not as a cut of the merchant fees? Interest rates + membership fees charged by issuers to Card Holders.
  - rstupek 7y ago
    I don't think that is correct. Merchants are charged different rates based on the cash back rates of a given card. Merchants have to eat most of that cash back being given to the card holders.
ceejayoz 7y ago
Interchange fees are higher on premium (rewards) cards. The merchant may contractually pay a fixed percentage that accounts for the expected mix of cards, but those rewards absolutely come from merchant fees.

rwmurrayVT 7y ago

There are entire organized crime rings and many, many individuals that specialize in merchant account fraud. In the early 2010's people were creating stripe accounts and processing up to $100,000 fraudulently. I'm not sure who ate that, but it surely had an impact on their bottom line. I had screenshots from Alphabay of over $5,000,000 in fraudulent charges on merchant accounts. If Stripe only makes 1% of transaction cost and has to eat the fraud then they'd have to charge $500,000,000 to just make up what was posted in a single "mastermind group". That is crazy...

MuffinFlavored 7y ago

From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%

dehrmann 7y ago

> I have a credit card that gives me 1.5% cash back on every transaction Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.