7 ms·

Processing a credit card costs $0.02 per card, plus interchange of up to 3%. Debit processing is $0.22 cents plus 0.05%. Both of these are the baseline cost, yo

by posguy 6y ago

Processing a credit card costs $0.02 per card, plus interchange of up to 3%. Debit processing is $0.22 cents plus 0.05%. Both of these are the baseline cost, your merchant processor often won't be able to even get these rates for their own wholesale rates. Now try and build a micropayments ecosystem ontop of this infrastructure that is very expensive to interact with (in the context of $0.01 charges). Amazon can do it for AWS as they aggregate many small charges into one bill, resulting in the service cost not being dwarfed by the payment processing cost.

choeger 6y ago
I doubt that any transaction costs some percentage of the transaction's value. The true cost shouldn't differ whether I charge $1 or $10 (maybe large transactions incur extra costs for security measures). It's just a convenient way of pricing for the credit card company.
- lostcolony 6y ago
  That's pricing in the risk of taking the charge. The $10 transaction is 10x as risky to a credit network's bottom line as the $1 transaction. That's also why the debit percentage is lower.
- lalaithion 6y ago
  Many of the entities that process transactions do fraud monitoring. Oftentimes, the fraud monitoring has different levels of time spent depending on amount: under $10 and the system just ignores it, under $1000 and a computer uses some heuristics, and above that, it might be flagged for human review. These aren't exactly 5% of the cost of the transaction, but they do show that the cost to process the transaction does increase as the amount increases, and fraud prevention, detection, and responsibility is how companies justify charging a percentage on a transaction.
acjacobson 6y ago
The answer to this, which I am a little surprised no one has tried to implement (maybe someone has tried?), is to charge the end customer in some larger amount - say $5 or $10, and then draw down the micro transaction amount as you go. So if you could pay $5 a month (or at a time) but gain access to every article, site, video, piece of content etc, and it auto deducts from your balance then you don't have the transaction cost to manage with the CC, and you don't have the friction of purchasing. The challenge here is like any two sided marketplace - you need consumers to pay, and then you need content providers to sign on to get enough on offer for it to be worth it for both sides.
- Hamuko 6y ago
  Isn't that basically how Flattr works?
  - acjacobson 6y ago
    Kind of? Doesn't Flattr have you choose up front how you want to distribute your subscription? I was imagining a system where you don't have an upfront choice to make, but that as you consume content the subscription is drawn down.
    - bingo_cannon 6y ago
      That is how most toll systems work. You load up a balance on the card $10/$20 and it deducts every time you cross a checkpoint. The difference between this and a micropayment platform would be the fees. In the toll system, the fees are paid once. With a micropayment platform, the fees would be per transaction. There can be a "self hosted" version of such a platform that say each content-provider can host but I am not sure it will work out against the cost of maintaining it includes much more than just hosting (securty, auditing, refunds, taxes etc).
- GekkePrutser 6y ago
  There have been several projects that did exactly that. They just haven't really taken off. Like Blendle. https://en.wikipedia.org/wiki/Blendle https://en.wikipedia.org/wiki/Blendle I see they're moving to a subscription model now too in an attempt to make it more attractive.
  - telesilla 6y ago
    I have Blendle along with subscribing to a number of independent outlets, and really appreciate it. I don't want to buy a sub for all the newspapers I might read and it saves a hell of lot of time worrying about whether I've already read too many articles for the month. It's a few cents per read, and as I don't have all day to browse the papers anyway it is very good value. I hope they, or someone like them, really succeed in the long-term. It feels good to be giving money to journalists.
dheera 6y ago
I don't think this is inherently the issue. News sites could aggregate charges and bill you at the end of the month. I think the bigger issues is that if I see an article presented to me as shared on social media or in search results I assume it is free access. I click in, and if they ask for payment, it's a turnoff since I thought it was going to be free. Also, I don't like how credit card information can be continuously used by the organization. I want to be able to hand an authorization for a single one-time payment to any organization and not an authorization to charge however much they want, whenever they want. That goes for hotels too. I want to be able to say "Here's my credit card" [but I don't authorize more than $130/day].
- egty 6y ago
  Doesn't directly solve the root problem, but I use https://privacy.com https://privacy.com for all of my online purchases. It lets you create multiple virtual card numbers, so every site I pay, I give a different card number. If any single site gets hacked, I can disable just that card. And each card can have a spending limit per transaction/day/month/year. Or, you can make the card a "burner" card that automatically deactivates after the first transaction. Edit: I suppose that doesn't work as well for hotels specifically, at least in terms of giving a card for incidentals. Since it isn't a physical card, not sure if the receptionist would be keen on entering a digital card like that? But I've definitely used it to pay for rooms online.
tyingq 6y ago
I suspect there are some regulatory hurdles if the held money can be spent with companies other than the one that takes the deposit. You bleed into banking rules.
- Grustaf 6y ago
  Not at all, it's just like a prepaid phone card, or a prepaid 10-coffees card. The challenges are not legal or technical.
donclark 6y ago
Does it have to be a credit card? Could it not be crypto or some other option? And in doing so, would the fees be less? How do they do it so easily in other countries?
dmlittle 6y ago
Other companies also do aggregate payments (I assume for the same reason). If you buy several things from Apple (apps, subscriptions, or other things) you'll get a single charge 1 or 2 weeks later with all of your purchases.

by posguy 6y ago

choeger 6y ago

I doubt that any transaction costs some percentage of the transaction's value. The true cost shouldn't differ whether I charge $1 or $10 (maybe large transactions incur extra costs for security measures). It's just a convenient way of pricing for the credit card company.

lostcolony 6y ago
That's pricing in the risk of taking the charge. The $10 transaction is 10x as risky to a credit network's bottom line as the $1 transaction. That's also why the debit percentage is lower.
lalaithion 6y ago
Many of the entities that process transactions do fraud monitoring. Oftentimes, the fraud monitoring has different levels of time spent depending on amount: under $10 and the system just ignores it, under $1000 and a computer uses some heuristics, and above that, it might be flagged for human review. These aren't exactly 5% of the cost of the transaction, but they do show that the cost to process the transaction does increase as the amount increases, and fraud prevention, detection, and responsibility is how companies justify charging a percentage on a transaction.

acjacobson 6y ago

The answer to this, which I am a little surprised no one has tried to implement (maybe someone has tried?), is to charge the end customer in some larger amount - say $5 or $10, and then draw down the micro transaction amount as you go. So if you could pay $5 a month (or at a time) but gain access to every article, site, video, piece of content etc, and it auto deducts from your balance then you don't have the transaction cost to manage with the CC, and you don't have the friction of purchasing. The challenge here is like any two sided marketplace - you need consumers to pay, and then you need content providers to sign on to get enough on offer for it to be worth it for both sides.

Hamuko 6y ago
Isn't that basically how Flattr works?
- acjacobson 6y ago
  Kind of? Doesn't Flattr have you choose up front how you want to distribute your subscription? I was imagining a system where you don't have an upfront choice to make, but that as you consume content the subscription is drawn down.
  - bingo_cannon 6y ago
    That is how most toll systems work. You load up a balance on the card $10/$20 and it deducts every time you cross a checkpoint. The difference between this and a micropayment platform would be the fees. In the toll system, the fees are paid once. With a micropayment platform, the fees would be per transaction. There can be a "self hosted" version of such a platform that say each content-provider can host but I am not sure it will work out against the cost of maintaining it includes much more than just hosting (securty, auditing, refunds, taxes etc).
GekkePrutser 6y ago
There have been several projects that did exactly that. They just haven't really taken off. Like Blendle. https://en.wikipedia.org/wiki/Blendle https://en.wikipedia.org/wiki/Blendle I see they're moving to a subscription model now too in an attempt to make it more attractive.
- telesilla 6y ago
  I have Blendle along with subscribing to a number of independent outlets, and really appreciate it. I don't want to buy a sub for all the newspapers I might read and it saves a hell of lot of time worrying about whether I've already read too many articles for the month. It's a few cents per read, and as I don't have all day to browse the papers anyway it is very good value. I hope they, or someone like them, really succeed in the long-term. It feels good to be giving money to journalists.

dheera 6y ago

I don't think this is inherently the issue. News sites could aggregate charges and bill you at the end of the month. I think the bigger issues is that if I see an article presented to me as shared on social media or in search results I assume it is free access. I click in, and if they ask for payment, it's a turnoff since I thought it was going to be free. Also, I don't like how credit card information can be continuously used by the organization. I want to be able to hand an authorization for a single one-time payment to any organization and not an authorization to charge however much they want, whenever they want. That goes for hotels too. I want to be able to say "Here's my credit card" [but I don't authorize more than $130/day].

egty 6y ago
Doesn't directly solve the root problem, but I use https://privacy.com https://privacy.com for all of my online purchases. It lets you create multiple virtual card numbers, so every site I pay, I give a different card number. If any single site gets hacked, I can disable just that card. And each card can have a spending limit per transaction/day/month/year. Or, you can make the card a "burner" card that automatically deactivates after the first transaction. Edit: I suppose that doesn't work as well for hotels specifically, at least in terms of giving a card for incidentals. Since it isn't a physical card, not sure if the receptionist would be keen on entering a digital card like that? But I've definitely used it to pay for rooms online.

tyingq 6y ago

I suspect there are some regulatory hurdles if the held money can be spent with companies other than the one that takes the deposit. You bleed into banking rules.

Grustaf 6y ago
Not at all, it's just like a prepaid phone card, or a prepaid 10-coffees card. The challenges are not legal or technical.

donclark 6y ago

Does it have to be a credit card? Could it not be crypto or some other option? And in doing so, would the fees be less? How do they do it so easily in other countries?

dmlittle 6y ago

Other companies also do aggregate payments (I assume for the same reason). If you buy several things from Apple (apps, subscriptions, or other things) you'll get a single charge 1 or 2 weeks later with all of your purchases.