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I am an online merchant. The visa Mastercard fees are enormously high, so not. We are not "happy to pay it". The 3% is not to cover any consumer protection, tha

I am an online merchant. The visa Mastercard fees are enormously high, so not. We are not "happy to pay it". The 3% is not to cover any consumer protection, that cost is born by the merchants. When a dispute is made by a customer, the merchant is assessed a fee, and almost always loses the dispute. The fees are so high that credit card companies give extremely high rewards back, which is in effect a regressive tax. In addition, visa Mastercard can cut off any business from doing commerce, and often do for political reasons. A much better system is one with: - extreme low fees (like 0.1%) - consumers can dispute anything within x days and merchants have to issue a refund. No administration. - any merchant with a bank account can use it (or similarly broadly available)

scarface74 4y ago
Every study shows that consumers are willing to spend more on a credit card than when they are using cash. Taxi cabs drivers for instance were against being forced to use credit cards until they realized they got larger tips.
- nobody9999 4y ago
  >Taxi cabs drivers for instance were against being forced to use credit cards until they realized they got larger tips. I only have anecdata about this, but every taxi driver (50+) I've ever discussed CC vs. cash (this is in NYC and limited to medallion taxis) has said they prefer cash every single time. That's mostly because of the 5% CC processing fees on every transaction, as well as delays in receiving their money from CC transactions. I imagine it's different elsewhere, but not (at least AFAICT) where I live.
  - scarface74 4y ago
    https://www.nytimes.com/2009/11/08/nyregion/08taxi.html https://www.nytimes.com/2009/11/08/nyregion/08taxi.html
  - deznu 4y ago
    You're forgetting about taxes though. A lot of cash-based transactions are not declared. Edit: rather, it's easier to not declare cash income, than income from credit cards. Also keep in mind that the taxi company may take a cut of the revenue too.
    - nobody9999 4y ago
      >You're forgetting about taxes though. A lot of cash-based transactions are not declared. In NYC medallion cabs, all taxi rides are recorded by the taxi meter in each car. It records the distance and the fare charged, regardless of payment method. So that's not really the issue.
philip1209 4y ago
Would you mind sharing your approximate gross profit margin? And, can you share info about your marketing spend as a percent of gross sales? I ask because most lower-margin businesses tend to be brick-and-mortar and service-based, like a restaurant. If a typical restaurant's profit margin is ~3-5%, then going from 3% credit card fees to 0.1% fees could conceivably increase their profits by 60-100%. So, if your margins are <10%, then I understand how transformative lower network fees could be hugely impactful. For ads: Many ecommerce businesses spend far more than 3% of their gross revenue on acquisition/marketing costs. So, in some ways the 3% credit card fee is closer to a marketing expense that increases conversion rates - and payment network fees are often less than overall facebook/google ad spend. So, if you're spending >3% of your gross revenue on ads, then the high conversion rates of credit cards factor into your advertising acquisition costs.
dalyons 4y ago
> consumers can dispute anything within x days and merchants have to issue a refund. No administration. Er merchants will get instantly crushed with first party fraud. As soon as people realize they can acquire a good and then get an instantly approved dispute the day after, game over. Unless thats not what you mean?
- crote 4y ago
  Which is currently already happening. I work at a small online store, and we are extremely lenient when it comes to cancelling, returning, or warranty. And yet some customers decide to just do a chargeback instead, which costs us a significant amount of money. Almost all of the time we would've happily send them a replacement or given them a refund! As a merchant, credit cards suck.
  - dalyons 4y ago
    There’s at least some disincentive to doing this with card networks (have to talk to someone, do it too many times and they’ll cancel your card , etc). Automatic, no questions asked unarbitrated disputes would collapse the system very quickly, it’s an unlimited free stuff hack.
  - wink 4y ago
    To be fair, you seem to be in the minority. The amount of time I've wasted by just trying to get my money back for items that never arrived, arrived broken... No matter how you argue, the people who do not abuse the system and are honest to the degree of hurting themselves will always be at a disadvantage versus the people who either refuse to replace an item or just file a chargeback instead of even contacting the merchant. Or the customer support is so bad that you enjoy filing a chargeback. "Hello, the tracking site says the item was delivered. It was NOT delivered and I asked the neighbors, it's not here." "Thank you for contacting us, the tracking site says the item was delivered. Have a nice day!"
celestialcheese 4y ago
> The fees are so high that credit card companies give extremely high rewards back, which is in effect a regressive tax. This. There's so much incentive to encourage shitty consumer behaviour on the CC side and it destroys margins on ecomm. Those who are interested in learning more should read this article[1] on a cycling ecomm company and their issues with fraud and chargebacks. It's very accurate with what I've experienced. 1 - https://cyclingtips.com/2022/07/interview-silca-on-amazon-e-commerce-fraud-theft-returns/ https://cyclingtips.com/2022/07/interview-silca-on-amazon-e-...
baxuz 4y ago
It should be like that in the EU (https://ec.europa.eu/commission/presscorner/detail/de/MEMO_13_719 https://ec.europa.eu/commission/presscorner/detail/de/MEMO_1...) 2.1 Why does the proposed Regulation cap interchange fees at 0.2% and 0.3% for debit and credit card transactions respectively? The 0.2% and 0.3% caps were proposed by schemes (Visa Europe, MasterCard, Groupement des Cartes Bancaires2) in competition proceedings and appear practical as providing legal certainty while not threatening the viability of these schemes. These levels are based on an estimate of the fee at which a merchant would be indifferent between being paid by card or in cash. The figures have been developed using data from the central banks of Belgium, the Netherlands and Sweden on the cost of payment instruments. However in practice, fees are still 3%-5% for merchants. No idea why.
- krade 4y ago
  because people (intentionally) keep conflating interchange, card scheme fees as well as fees paid to the merchant's acquiring bank in order to make US/UK fees seem more outrageous. Just going off of Stripe pricing, the processing fee is 1.3% for EEA issued cards compared to 2.9% in the US.
danieltanfh95 4y ago
thats the chinese system basically and why the chinese online merchants ecosystem is much bigger
nomay 4y ago
Paypal charges the seller $8 fee for every dispute, $16 if the dispute rate higher than 1.5%. And $2500 dispute fee for each order deemed against their Acceptable Use Policy.

scarface74 4y ago

Every study shows that consumers are willing to spend more on a credit card than when they are using cash. Taxi cabs drivers for instance were against being forced to use credit cards until they realized they got larger tips.

nobody9999 4y ago
>Taxi cabs drivers for instance were against being forced to use credit cards until they realized they got larger tips. I only have anecdata about this, but every taxi driver (50+) I've ever discussed CC vs. cash (this is in NYC and limited to medallion taxis) has said they prefer cash every single time. That's mostly because of the 5% CC processing fees on every transaction, as well as delays in receiving their money from CC transactions. I imagine it's different elsewhere, but not (at least AFAICT) where I live.
- scarface74 4y ago
  https://www.nytimes.com/2009/11/08/nyregion/08taxi.html https://www.nytimes.com/2009/11/08/nyregion/08taxi.html
- deznu 4y ago
  You're forgetting about taxes though. A lot of cash-based transactions are not declared. Edit: rather, it's easier to not declare cash income, than income from credit cards. Also keep in mind that the taxi company may take a cut of the revenue too.
  - nobody9999 4y ago
    >You're forgetting about taxes though. A lot of cash-based transactions are not declared. In NYC medallion cabs, all taxi rides are recorded by the taxi meter in each car. It records the distance and the fare charged, regardless of payment method. So that's not really the issue.

philip1209 4y ago

Would you mind sharing your approximate gross profit margin? And, can you share info about your marketing spend as a percent of gross sales? I ask because most lower-margin businesses tend to be brick-and-mortar and service-based, like a restaurant. If a typical restaurant's profit margin is ~3-5%, then going from 3% credit card fees to 0.1% fees could conceivably increase their profits by 60-100%. So, if your margins are <10%, then I understand how transformative lower network fees could be hugely impactful. For ads: Many ecommerce businesses spend far more than 3% of their gross revenue on acquisition/marketing costs. So, in some ways the 3% credit card fee is closer to a marketing expense that increases conversion rates - and payment network fees are often less than overall facebook/google ad spend. So, if you're spending >3% of your gross revenue on ads, then the high conversion rates of credit cards factor into your advertising acquisition costs.

dalyons 4y ago

> consumers can dispute anything within x days and merchants have to issue a refund. No administration. Er merchants will get instantly crushed with first party fraud. As soon as people realize they can acquire a good and then get an instantly approved dispute the day after, game over. Unless thats not what you mean?

crote 4y ago
Which is currently already happening. I work at a small online store, and we are extremely lenient when it comes to cancelling, returning, or warranty. And yet some customers decide to just do a chargeback instead, which costs us a significant amount of money. Almost all of the time we would've happily send them a replacement or given them a refund! As a merchant, credit cards suck.
- dalyons 4y ago
  There’s at least some disincentive to doing this with card networks (have to talk to someone, do it too many times and they’ll cancel your card , etc). Automatic, no questions asked unarbitrated disputes would collapse the system very quickly, it’s an unlimited free stuff hack.
- wink 4y ago
  To be fair, you seem to be in the minority. The amount of time I've wasted by just trying to get my money back for items that never arrived, arrived broken... No matter how you argue, the people who do not abuse the system and are honest to the degree of hurting themselves will always be at a disadvantage versus the people who either refuse to replace an item or just file a chargeback instead of even contacting the merchant. Or the customer support is so bad that you enjoy filing a chargeback. "Hello, the tracking site says the item was delivered. It was NOT delivered and I asked the neighbors, it's not here." "Thank you for contacting us, the tracking site says the item was delivered. Have a nice day!"

celestialcheese 4y ago

> The fees are so high that credit card companies give extremely high rewards back, which is in effect a regressive tax. This. There's so much incentive to encourage shitty consumer behaviour on the CC side and it destroys margins on ecomm. Those who are interested in learning more should read this article[1] on a cycling ecomm company and their issues with fraud and chargebacks. It's very accurate with what I've experienced. 1 - https://cyclingtips.com/2022/07/interview-silca-on-amazon-e-commerce-fraud-theft-returns/ https://cyclingtips.com/2022/07/interview-silca-on-amazon-e-...

baxuz 4y ago

It should be like that in the EU (https://ec.europa.eu/commission/presscorner/detail/de/MEMO_13_719 https://ec.europa.eu/commission/presscorner/detail/de/MEMO_1...) 2.1 Why does the proposed Regulation cap interchange fees at 0.2% and 0.3% for debit and credit card transactions respectively? The 0.2% and 0.3% caps were proposed by schemes (Visa Europe, MasterCard, Groupement des Cartes Bancaires2) in competition proceedings and appear practical as providing legal certainty while not threatening the viability of these schemes. These levels are based on an estimate of the fee at which a merchant would be indifferent between being paid by card or in cash. The figures have been developed using data from the central banks of Belgium, the Netherlands and Sweden on the cost of payment instruments. However in practice, fees are still 3%-5% for merchants. No idea why.

krade 4y ago
because people (intentionally) keep conflating interchange, card scheme fees as well as fees paid to the merchant's acquiring bank in order to make US/UK fees seem more outrageous. Just going off of Stripe pricing, the processing fee is 1.3% for EEA issued cards compared to 2.9% in the US.

danieltanfh95 4y ago

thats the chinese system basically and why the chinese online merchants ecosystem is much bigger

nomay 4y ago

Paypal charges the seller $8 fee for every dispute, $16 if the dispute rate higher than 1.5%. And $2500 dispute fee for each order deemed against their Acceptable Use Policy.