6 ms·

> To the people who think the exorbitant fees are okay: Imagine a world with no cash. Now the payment card companies decide they want 30% of all transactions. Y

by Shank 5y ago

> To the people who think the exorbitant fees are okay: Imagine a world with no cash. Now the payment card companies decide they want 30% of all transactions. You think that would be reasonable? Just so that we're talking on equal terms here, card processors and networks solve a massive amount of problems that existed with cash. Pre-card, many stores setup credit accounts with individuals, had book keeping practices to deal with, and had to chase down credit lines they themselves offered. Even with debit cards, card networks facilitate the ability to automatically move money between parties and give customers the ability to dispute/chargeback fraudulent transactions easily. If you physically hand a merchant cash, you can't claw that back without a legal process, whereas you're afforded protections by the card network. But the 30% cut is completely different from card processors. Of the 30% to Google Play or to Apple, a small fraction (2.9%ish) is actually the card overhead. The rest is split between pure profit, infrastructure, and whatever else gets tacked on. Cards definitely offer important things to facilitate transactions that are objectively better than a pure cash world for most people. But it's important to call out crazy cash grabs like 30%, which is unheard of even in the payment network world.

bmhin 5y ago
Choice is the real thing though more than actual value add. I feel like I see it less now, but recall seeing how vendors would only accept certain cards and not others (frequently, not American Express) which was as far as I know stemming mostly from higher fees they didn't want to pay. Similarly, places would not accept credit cards at all if they had razor margins and didn't want to eat the fee. I still know of a few places like that, often with an ATM near by so the customer can pay a fee if they are caught unaware. That was the thing though, a business could decline to accept particular cards or cards at all and still perform transactions. That "opportunity" has generally not extended to the app store world in a practical way. If you want to play, they had their cut and customers and vendors didn't have a whole lot of say in what was reasonable. There is no simple default transaction (like cash) that they were trying to out compete.
- lupire 5y ago
  Cash-only businesses are dodging taxes not money handling fees.
Sesse__ 5y ago
Even your 2.9% number is probably too high. Perhaps for AmEx or in super-high-risk situations you need to pay that kind of fees, but for regular MC/VISA in developed countries, even a medium-sized business can get below 1%. Large companies, like Apple, can almost certainly get it lower than that. Source: Involved in multiple such deals over the years.
- lotsofpulp 5y ago
  It is 2% to 3% in the US due to the copious rewards programs which result in minimum 2% cash back for credit card users.
  - Sesse__ 5y ago
    But those are paid for by your bank (by charging high interest rates on the percentage of people who don't pay right away), not by MC/VISA.
    - lotsofpulp 5y ago
      The banks must be getting a piece of that because MC/Visa collect more depending on the rewards tier the card is in (Infinite/Signature/World and whatever other names they have). Also, MC/Visa charge basically nothing for debit cards, and they do not take on any of the chargeback/default risk of credit cards, so I assume the rest of the fees are for the rewards for the most part. Which is why Discover/Amex fees are similar too.
- yywwbbn 5y ago
  > in developed countries, In the EU it’s legally capped at 0.3% for all transactions (0.2 for debit cards).
- mbesto 5y ago
  Can back this up. No one at that level of merchant processing is paying the rack rate of what you might see on Stripe. It's usually high 1's, or low 2's.
heavyset_go 5y ago
> But the 30% cut is completely different from card processors. Of the 30% to Google Play or to Apple, a small fraction (2.9%ish) is actually the card overhead. The rest is split between pure profit, infrastructure, and whatever else gets tacked on. As an example, Apple's profit margin on the App Store was about 80% in 2019[1]. [1] https://www.bloomberg.com/news/articles/2021-05-01/apple-s-app-store-had-78-profit-margin-in-2019-testimony-shows https://www.bloomberg.com/news/articles/2021-05-01/apple-s-a...

by Shank 5y ago

bmhin 5y ago

Choice is the real thing though more than actual value add. I feel like I see it less now, but recall seeing how vendors would only accept certain cards and not others (frequently, not American Express) which was as far as I know stemming mostly from higher fees they didn't want to pay. Similarly, places would not accept credit cards at all if they had razor margins and didn't want to eat the fee. I still know of a few places like that, often with an ATM near by so the customer can pay a fee if they are caught unaware. That was the thing though, a business could decline to accept particular cards or cards at all and still perform transactions. That "opportunity" has generally not extended to the app store world in a practical way. If you want to play, they had their cut and customers and vendors didn't have a whole lot of say in what was reasonable. There is no simple default transaction (like cash) that they were trying to out compete.

lupire 5y ago
Cash-only businesses are dodging taxes not money handling fees.

Sesse__ 5y ago

Even your 2.9% number is probably too high. Perhaps for AmEx or in super-high-risk situations you need to pay that kind of fees, but for regular MC/VISA in developed countries, even a medium-sized business can get below 1%. Large companies, like Apple, can almost certainly get it lower than that. Source: Involved in multiple such deals over the years.

lotsofpulp 5y ago
It is 2% to 3% in the US due to the copious rewards programs which result in minimum 2% cash back for credit card users.
- Sesse__ 5y ago
  But those are paid for by your bank (by charging high interest rates on the percentage of people who don't pay right away), not by MC/VISA.
  - lotsofpulp 5y ago
    The banks must be getting a piece of that because MC/Visa collect more depending on the rewards tier the card is in (Infinite/Signature/World and whatever other names they have). Also, MC/Visa charge basically nothing for debit cards, and they do not take on any of the chargeback/default risk of credit cards, so I assume the rest of the fees are for the rewards for the most part. Which is why Discover/Amex fees are similar too.
yywwbbn 5y ago
> in developed countries, In the EU it’s legally capped at 0.3% for all transactions (0.2 for debit cards).
mbesto 5y ago
Can back this up. No one at that level of merchant processing is paying the rack rate of what you might see on Stripe. It's usually high 1's, or low 2's.

heavyset_go 5y ago

> But the 30% cut is completely different from card processors. Of the 30% to Google Play or to Apple, a small fraction (2.9%ish) is actually the card overhead. The rest is split between pure profit, infrastructure, and whatever else gets tacked on. As an example, Apple's profit margin on the App Store was about 80% in 2019[1]. [1] https://www.bloomberg.com/news/articles/2021-05-01/apple-s-app-store-had-78-profit-margin-in-2019-testimony-shows https://www.bloomberg.com/news/articles/2021-05-01/apple-s-a...