21 ms·

These numbers are not public, but the grapevine is that visa/mastercard keeps about a third of all interchange. Credit card rewards are a regressive tax on the

These numbers are not public, but the grapevine is that visa/mastercard keeps about a third of all interchange. Credit card rewards are a regressive tax on the poor -- literally, only those like us here on HN with good credit can get 2% cashback on everything, the rest who pay with debit/cash effectively subsidise our 2% discount. I enjoy my 2% cashback, but really would rather see a world where, like the EU, interchange got slashed to 30bps and it all went away. Take a look around the rest of the world -- Alipay in China is 55bps, TNG is Malaysia is 50, Pix in Brazil (I can't find concrete numbers, but seems to be around 22bps), etc. 2-300 bps is outrageous, we should demand better. I don't know what's the solution here. I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here -- force each card to be available over multiple networks and for them to bid the interchange per transaction? Durbin amendment style caps? I don't know. But I do know that the status quo cannot stand. Edit: see the classic Boston Fed paper https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... for a more through explanation of my point

arcticbull 3y ago
I think the EU model - and as you say the Durbin model - is completely reasonable. I will say the Durbin exemption for banks with under $10B in assets is pretty silly.
- Scoundreller 3y ago
  Are there some abusers of the exemption out there? I kinda like smaller orgs getting a small leg up against bigger ones. Discourages excessive consolidation. It’s like an anti-oligopoly provision.
  - arcticbull 3y ago
    Before Durbin there used to be a lot of banks that offered points-earning debit cards. After Durbin, for many years SunTrust had a debit card that earned Delta miles. I think that's since moved to Truist. [1] I guess it depends on what you mean by 'abuse.' Is Truist abusing non-Durbin status by giving out points for PIN debit transactions? Or are all the other non-Durbin banks who give back nothing abusing the exemption by keeping the interchange? [1] https://www.truist.com/checking/debit-cards https://www.truist.com/checking/debit-cards
    - hiatus 3y ago
      Being non-Durbin enables Truist to compete with bigger banks by being able to offer things like cash back on debit. That seems less like abuse and more things working as intended.
    - Scoundreller 3y ago
      From what I can tell, the exempt interchange fees were unregulated. So don’t know if they went out of control or not. But even Durbin wasn’t perfect: before many cards would charge more of a percentage model, but after Durbin, raised them per swipe fee to the max. Which can be unfortunate for small purchases.
AmericanChopper 3y ago
> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus on that single element of the system you could just as reasonably say that credit cards are a progressive tax on the rich.
- jonhohle 3y ago
  Do you mean high debtors? A good number of high spenders rinse all of their transactions through credit cards to collect the rewards and then pay them off every month. I haven’t paid a fee in at least 18 years, and typically collect several hundred dollars a year in rewards on spending I would do anyway. When local vendors give me a cash discount, it’s typically 3%, better than most rewards programs, and I take that. The few cards that offer 5% in other categories have to be getting that from interest payments or promotional retail agreements as opposed to transaction fees. Hitting one of those on a high spending category is like hitting the lottery!
  - AmericanChopper 3y ago
    Well that too, but there’s plenty of money made off the transaction processing fees. My point is that if you want to make comments about a complex system, that you can’t just take one component of that system and ignore everything else. If you wanted to make claims about what income brackets contribute what revenue (and what liabilities), and to who by using credit cards, then create a model to show your work. Focusing only on one component that you might find objectionable isn’t enough to draw such a conclusion.
- gostsamo 3y ago
  Actually, what you say is that the middle class pays for the cashbacks of the top spenders and for the defaults of the most poor. Unless somehow you get the cashback and you are still the one paying for the credit risk of others?
wanttocomment 3y ago
Studies show you buy more with a credit card than cash. You think you're saving 1-3% but you would easily save that with slightly more conservative spending. It's also worth mentioning the real business is analyzing the consumer data you give them for pennies.
- danpalmer 3y ago
  I'd love to see the distribution on this. My bet is that most people don't spend more and a minority spend a lot more.
  - wanttocomment 3y ago
    It's something as small as throwing in a milk shake with lunch. you don't experience the money leaving.
    - danpalmer 3y ago
      I'm still not sure. I don't use a credit card for most purchases, only big things, and I think a lot of people are in that boat.
mdasen 3y ago
> I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here Instead of capping prices, you could simply require any fees to be paid by the cardholder. Combine that with a standard for payment processing so that lots of companies could compete for payment processing and fees would drop really fast. If someone is using a POS terminal like Toast or Square, it should be trivial for them to support lots of new payment companies if they're all adhering to a standard. If consumers have to pay the fee, they're going to shop around for the lowest-fee card (just as many shop around for the highest-reward card now). You wouldn't need government caps. You could tell stores "once you accept payments with the new system, the consumer is responsible for the fees." This would drop fees really fast - even for stores that didn't upgrade their credit card machines. If Walmart, Target, CVS, etc. all update their machines quickly, I'm going to find a card with a low fee. Then when I use that card at a non-upgraded shop, they have to pay the fee, but it's a much lower fee since I had shopped around for a low fee. The issue right now is that the person choosing the card doesn't feel any of the pain. As the article notes, Visa (Canada) charges 1.25% for a regular consumer card or 2.08% for a premium card. I will pay with a premium card since it will give me nice rewards and I don't feel the additional 0.83% that the store has to pay. If I did have to feel it, I would make different decisions. If you're looking to change behavior, align people's incentives. Another commenter said that they're capped at 0.3% in Europe. Consumers might hate the idea of paying 0.3% additional, but I think credit card companies would drop below that cap if consumers had to pay it. I think they'd look to make it up on interest or other things. As you note, credit cards can come with 2% rewards so they're essentially giving you the whole interchange fee back already. Make consumers shop around for the lowest fee cards. The problem is that stores need to take the cards that consumers have with little option to forgo the fees. If Bank of America had a no-fee card while Chase charged 1.5%, consumers would move to BofA if they felt the fee.
- ivan_gammel 3y ago
  You won’t sell this idea in Europe. Here the price tag for anything is the full amount you pay - including all commissions and taxes. People use debit cards, the paid amount is immediately deducted from bank account. If customers are forced to calculate how much they actually will spend on each transaction, they will instantly switch back to cash.
pbreit 3y ago
Visa & Mastercard do not keep any of the interchange fee. It all goes to the issuer of the card. Visa & MC charge "scheme fees" which are much lower (except for cross-border txns). Interchange is public information: https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...
- e63f67dd-065b 3y ago
  Maximum interchange is public, but most of those numbers are lies -- big merchants negotiate their own rates, and big merchants are a big chunk of most CC spend (Amazon does not pay a number that appears on that sheet, for example). Costco (in)famously negotiated that number down to basically zero. It's true that Visa/MC technically doesn't keep any of the interchange -- but the interchange goes to the issuing bank, and then visa/mc turns around and charges their scheme/network fees, which basically means that the issuing bank only gets to keep about 2/3rds of the interchange (that was set and negotiated by Visa/MC). You can dice it up into the processor fee, the network fee, the whatever fees, but I believe that the general consensus is that the networks keep about a third. I don't quite remember where I read that, so if you have better info please let me know.
  - deleted 3y ago
    [deleted]
  - arcticbull 3y ago
    I’m pretty sure their average take is the number I provided from their FY2022 statement.
    - e63f67dd-065b 3y ago
      The link shows their consolidated revenue across the entire world. If you have a source that breaks it down to the US, and specifically US revenue on their credit products (Visa is by far the largest issuer of debit cards, for example, and debit cards got their fees capped by the Durbin amendment), I would love to take a look.
adrr 3y ago
Cash is more expensive to take as a payment method than interchange unless you’re cheating on taxes.
- ramraj07 3y ago
  Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee, you pay for the fucking coffee. Not a million equations of cashback and miles with perverse incentives.
  - godelski 3y ago
    > Nationalize a universal payment interface like india did > a very corrupt, bureaucratic place with billions of people did it. You're not making a great sell here... you're just saying that this is a thing that a corrupt country does and therefor others should.
    - ramraj07 3y ago
      I said it’s something even a corrupt country was able to do that is universally loved and accepted. The fact that the US isn’t able to do it suggests it’s in someways far more corrupt than even India.
      - rhaway84773 3y ago
        The U.S. has legalized corruption in the form of lobbying. This wasn’t so bad as long as donations to politicians were capped, but since Cotizens United there is no limit, so the corruption has gone through the roof as well.
      - godelski 3y ago
        > I said it’s something even a corrupt country was able to do that is universally loved and accepted. I still don't understand why this is a convincing argument. As an example, many countries with dictatorships have people that love and support the dictator (no matter how cruel they are). Dictators will also try to make this look universal. This isn't a comment on the banking system (or even India), this is a comment on your argument. You're trying to convince others that a thing is good by connecting it with corruption. For me, this just doesn't follow.
cardosof 3y ago
+1 for Pix. It's great, amazing that the Brazil Central Bank pulled that off, it's better than what people have in most developed countries.
polotics 3y ago
You are talking about fractions of a percent, for transactions where banks in aggregate take some risk, while Google and Apple keep their 30.000/100.000 ransom on all transactions...
- ztrww 3y ago
  Because it’s a relatively insignificant market? However it’s pretty remarkable that Apple only makes a few billion less than Visa from its AppStore despite of the processed amount being 100x+ lower. I guess the problem with the 30% is that it seemed like a very good deal for developers back in ~2010 compared to all other options.. but well it there is no incentive to lower it even more since there is no competition Then again Steam and GOG for instance can still take 30% despite operating on perfectly open platforms so they must provide some value.
- rjmunro 3y ago
  This is a bank to bank fee. The merchant's bank will charge the merchant a higher fee than this. The banks take no risk here because normally they any fraud get's paid by the merchant through charge back. The only risk is that the merchant goes away completely, but banks have to deal with that possibility all the time.
  - eru 3y ago
    The payout to the merchant is delayed, isn't it? So if they go away, they don't get paid anyway?
    - rjmunro 3y ago
      That's one of the ways merchant's banks mitigate the risk, yes. But you have 120 days to make a chargeback, and I think most banks don't delay the payment that long. I believe bigger merchants with better credit ratings can normally negotiate faster repayments.
jiggywiggy 3y ago
Still don't understand why US is so obsessed with credit cards. Debit is much more easy and straight forward, it's the standard in EU. Most of us only have cc to purchase stuff from US sites. Why such a complicated solution? Looks like a bank product.
- crooked-v 3y ago
  You can't use a US debit card online, because functionality for that just doesn't exist in the US banking system. Edit, for clarity: You can't use it as a debit transaction. You can plug it into credit card systems, where it's run as a credit card transaction and interchange fees apply.
  - arcticbull 3y ago
    [edit] Edit, for clarity: You can't use it as a debit transaction. You can plug it into credit card systems, where it's run as a credit card transaction and interchange fees apply. That's not actually true. Card-not-present debit is a separate transaction category than card-not-present credit. Durbin requires that debit routing be available for all debit transactions, not just PIN debit. Further, as of October 2022 the Fed amended the Regulation II rule to extend Durbin debit least-cost routing to card-not-present transactions. [2] [1] https://www.cardrates.com/advice/atm-card-vs-debit-card-vs-credit-card/ https://www.cardrates.com/advice/atm-card-vs-debit-card-vs-c... [2] https://cmspi.com/nam/en/resources/content/card-not-present-routing-the-3-billion-opportunity-for-merchants/ https://cmspi.com/nam/en/resources/content/card-not-present-...
  - CapstanRoller 3y ago
    You absolutely can use USAmerican debit cards for online purchases. You just expose yourself to massive risk by doing so (e.g. getting your checking account drained).
    - arcticbull 3y ago
      Your liability is strictly limited in this case - similarly to credit cards, but not identically. Unfortunately you're out the funds until a resolution is reached which can be challenging to say the least.
eru 3y ago
Yes, I'd like to see a world without silly credit card cashbacks, too. And ideally they'd slay that beast by removing regulations, not by piling more on top. > I don't know what's the solution here. I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here -- force each card to be available over multiple networks and for them to bid the interchange per transaction? Durbin amendment style caps? I don't know. But I do know that the status quo cannot stand. Perhaps make it easier for new payment providers to enter the market? Here in Asia we have lots of alternatives popping up (like Grab pay). And merchants are happy to support them, because they typically charge lower fees than Visa and Mastercard.
- flangola7 3y ago
  I don't see why everyone in thread is so allergic to regulating it. I vote for the representatives I do precisely because I want these types of practices controlled.
londons_explore 3y ago
I think there is a strong case for credit card fees to be zero for all involved, and the government paying some fixed amount for the running of basic payment processing systems. Just like the government pays to produce bank notes and coins today.
- hiatus 3y ago
  Brazil does just that with Pix. https://en.m.wikipedia.org/wiki/Pix_(payment_system) https://en.m.wikipedia.org/wiki/Pix_(payment_system)
acchow 3y ago
They charge more yes, but make of the credit cards in the US also provide a lot more: travel insurance, Trip interruption insurance, purchase protection, extended warranty, etc.
- bmitc 3y ago
  For people who can obtain such cards and pay them off, yes.
bmitc 3y ago
What is bps?
- hiatus 3y ago
  Basis points.
  - bmitc 3y ago
    Thank you!
eliseumds 3y ago
You're correct about Pix, it averages at 0.22% [1]. It's free for personal transactions and some card/POS machines have zeroed the fees when you scan a Pix QR code to pay at small shops. It's currently the most popular payment method in Brazil (credit card is second) [2]. It's slower than just tapping my Apple Watch to pay, but tap-to-pay with Pix is in development and I can't wait for it. Installments are also coming. Our Banco Central is really pushing it and the big banks are not liking it, at all. Good. A nice side-effect of it all is that many credit cards are offering great rewards without any annual fee. I get year-round access to VIP lounges at any airport here, car/travel insurance AND cashback/miles for $0, it's a very different scenario from say 5 years ago. [1] https://www.infomoney.com.br/minhas-financas/pix-e-mais-barato-que-pagamentos-por-cartoes-de-credito-e-debito-para-lojista-dizem-economistas-do-bc/ https://www.infomoney.com.br/minhas-financas/pix-e-mais-bara... [2] https://febrabantech.febraban.org.br/temas/meios-de-pagamento/pix-e-o-meio-de-pagamento-mais-usado-no-brasil-em-2022-ted-lidera-em-valores-transacionados https://febrabantech.febraban.org.br/temas/meios-de-pagament...
rhaway84773 3y ago
India could be a good model here. Basically, the likes of Venmo/Zelle have replaced everything. They are not allowed to charge a transaction fee (I’m pretty sure…and if they are, it’s set very low), and they are required to work across platforms (so a Venmo user should be able to pay a Zelle user directly without having to download Zelle).
throwawayy1224 3y ago
Pix and other types of instant payments systems are very different products from credit cards. I'm not sure if it is a fair comparison.

arcticbull 3y ago

I think the EU model - and as you say the Durbin model - is completely reasonable. I will say the Durbin exemption for banks with under $10B in assets is pretty silly.

Scoundreller 3y ago
Are there some abusers of the exemption out there? I kinda like smaller orgs getting a small leg up against bigger ones. Discourages excessive consolidation. It’s like an anti-oligopoly provision.
- arcticbull 3y ago
  Before Durbin there used to be a lot of banks that offered points-earning debit cards. After Durbin, for many years SunTrust had a debit card that earned Delta miles. I think that's since moved to Truist. [1] I guess it depends on what you mean by 'abuse.' Is Truist abusing non-Durbin status by giving out points for PIN debit transactions? Or are all the other non-Durbin banks who give back nothing abusing the exemption by keeping the interchange? [1] https://www.truist.com/checking/debit-cards https://www.truist.com/checking/debit-cards
  - hiatus 3y ago
    Being non-Durbin enables Truist to compete with bigger banks by being able to offer things like cash back on debit. That seems less like abuse and more things working as intended.
  - Scoundreller 3y ago
    From what I can tell, the exempt interchange fees were unregulated. So don’t know if they went out of control or not. But even Durbin wasn’t perfect: before many cards would charge more of a percentage model, but after Durbin, raised them per swipe fee to the max. Which can be unfortunate for small purchases.

AmericanChopper 3y ago

> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus on that single element of the system you could just as reasonably say that credit cards are a progressive tax on the rich.

jonhohle 3y ago
Do you mean high debtors? A good number of high spenders rinse all of their transactions through credit cards to collect the rewards and then pay them off every month. I haven’t paid a fee in at least 18 years, and typically collect several hundred dollars a year in rewards on spending I would do anyway. When local vendors give me a cash discount, it’s typically 3%, better than most rewards programs, and I take that. The few cards that offer 5% in other categories have to be getting that from interest payments or promotional retail agreements as opposed to transaction fees. Hitting one of those on a high spending category is like hitting the lottery!
- AmericanChopper 3y ago
  Well that too, but there’s plenty of money made off the transaction processing fees. My point is that if you want to make comments about a complex system, that you can’t just take one component of that system and ignore everything else. If you wanted to make claims about what income brackets contribute what revenue (and what liabilities), and to who by using credit cards, then create a model to show your work. Focusing only on one component that you might find objectionable isn’t enough to draw such a conclusion.
gostsamo 3y ago
Actually, what you say is that the middle class pays for the cashbacks of the top spenders and for the defaults of the most poor. Unless somehow you get the cashback and you are still the one paying for the credit risk of others?

wanttocomment 3y ago

Studies show you buy more with a credit card than cash. You think you're saving 1-3% but you would easily save that with slightly more conservative spending. It's also worth mentioning the real business is analyzing the consumer data you give them for pennies.

danpalmer 3y ago
I'd love to see the distribution on this. My bet is that most people don't spend more and a minority spend a lot more.
- wanttocomment 3y ago
  It's something as small as throwing in a milk shake with lunch. you don't experience the money leaving.
  - danpalmer 3y ago
    I'm still not sure. I don't use a credit card for most purchases, only big things, and I think a lot of people are in that boat.

mdasen 3y ago

> I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here Instead of capping prices, you could simply require any fees to be paid by the cardholder. Combine that with a standard for payment processing so that lots of companies could compete for payment processing and fees would drop really fast. If someone is using a POS terminal like Toast or Square, it should be trivial for them to support lots of new payment companies if they're all adhering to a standard. If consumers have to pay the fee, they're going to shop around for the lowest-fee card (just as many shop around for the highest-reward card now). You wouldn't need government caps. You could tell stores "once you accept payments with the new system, the consumer is responsible for the fees." This would drop fees really fast - even for stores that didn't upgrade their credit card machines. If Walmart, Target, CVS, etc. all update their machines quickly, I'm going to find a card with a low fee. Then when I use that card at a non-upgraded shop, they have to pay the fee, but it's a much lower fee since I had shopped around for a low fee. The issue right now is that the person choosing the card doesn't feel any of the pain. As the article notes, Visa (Canada) charges 1.25% for a regular consumer card or 2.08% for a premium card. I will pay with a premium card since it will give me nice rewards and I don't feel the additional 0.83% that the store has to pay. If I did have to feel it, I would make different decisions. If you're looking to change behavior, align people's incentives. Another commenter said that they're capped at 0.3% in Europe. Consumers might hate the idea of paying 0.3% additional, but I think credit card companies would drop below that cap if consumers had to pay it. I think they'd look to make it up on interest or other things. As you note, credit cards can come with 2% rewards so they're essentially giving you the whole interchange fee back already. Make consumers shop around for the lowest fee cards. The problem is that stores need to take the cards that consumers have with little option to forgo the fees. If Bank of America had a no-fee card while Chase charged 1.5%, consumers would move to BofA if they felt the fee.

ivan_gammel 3y ago
You won’t sell this idea in Europe. Here the price tag for anything is the full amount you pay - including all commissions and taxes. People use debit cards, the paid amount is immediately deducted from bank account. If customers are forced to calculate how much they actually will spend on each transaction, they will instantly switch back to cash.

pbreit 3y ago

Visa & Mastercard do not keep any of the interchange fee. It all goes to the issuer of the card. Visa & MC charge "scheme fees" which are much lower (except for cross-border txns). Interchange is public information: https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...

e63f67dd-065b 3y ago
Maximum interchange is public, but most of those numbers are lies -- big merchants negotiate their own rates, and big merchants are a big chunk of most CC spend (Amazon does not pay a number that appears on that sheet, for example). Costco (in)famously negotiated that number down to basically zero. It's true that Visa/MC technically doesn't keep any of the interchange -- but the interchange goes to the issuing bank, and then visa/mc turns around and charges their scheme/network fees, which basically means that the issuing bank only gets to keep about 2/3rds of the interchange (that was set and negotiated by Visa/MC). You can dice it up into the processor fee, the network fee, the whatever fees, but I believe that the general consensus is that the networks keep about a third. I don't quite remember where I read that, so if you have better info please let me know.
- deleted 3y ago
  [deleted]
- arcticbull 3y ago
  I’m pretty sure their average take is the number I provided from their FY2022 statement.
  - e63f67dd-065b 3y ago
    The link shows their consolidated revenue across the entire world. If you have a source that breaks it down to the US, and specifically US revenue on their credit products (Visa is by far the largest issuer of debit cards, for example, and debit cards got their fees capped by the Durbin amendment), I would love to take a look.

adrr 3y ago

Cash is more expensive to take as a payment method than interchange unless you’re cheating on taxes.

ramraj07 3y ago
Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee, you pay for the fucking coffee. Not a million equations of cashback and miles with perverse incentives.
- godelski 3y ago
  > Nationalize a universal payment interface like india did > a very corrupt, bureaucratic place with billions of people did it. You're not making a great sell here... you're just saying that this is a thing that a corrupt country does and therefor others should.
  - ramraj07 3y ago
    I said it’s something even a corrupt country was able to do that is universally loved and accepted. The fact that the US isn’t able to do it suggests it’s in someways far more corrupt than even India.
    - rhaway84773 3y ago
      The U.S. has legalized corruption in the form of lobbying. This wasn’t so bad as long as donations to politicians were capped, but since Cotizens United there is no limit, so the corruption has gone through the roof as well.
    - godelski 3y ago
      > I said it’s something even a corrupt country was able to do that is universally loved and accepted. I still don't understand why this is a convincing argument. As an example, many countries with dictatorships have people that love and support the dictator (no matter how cruel they are). Dictators will also try to make this look universal. This isn't a comment on the banking system (or even India), this is a comment on your argument. You're trying to convince others that a thing is good by connecting it with corruption. For me, this just doesn't follow.

cardosof 3y ago

+1 for Pix. It's great, amazing that the Brazil Central Bank pulled that off, it's better than what people have in most developed countries.

polotics 3y ago

You are talking about fractions of a percent, for transactions where banks in aggregate take some risk, while Google and Apple keep their 30.000/100.000 ransom on all transactions...

ztrww 3y ago
Because it’s a relatively insignificant market? However it’s pretty remarkable that Apple only makes a few billion less than Visa from its AppStore despite of the processed amount being 100x+ lower. I guess the problem with the 30% is that it seemed like a very good deal for developers back in ~2010 compared to all other options.. but well it there is no incentive to lower it even more since there is no competition Then again Steam and GOG for instance can still take 30% despite operating on perfectly open platforms so they must provide some value.
rjmunro 3y ago
This is a bank to bank fee. The merchant's bank will charge the merchant a higher fee than this. The banks take no risk here because normally they any fraud get's paid by the merchant through charge back. The only risk is that the merchant goes away completely, but banks have to deal with that possibility all the time.
- eru 3y ago
  The payout to the merchant is delayed, isn't it? So if they go away, they don't get paid anyway?
  - rjmunro 3y ago
    That's one of the ways merchant's banks mitigate the risk, yes. But you have 120 days to make a chargeback, and I think most banks don't delay the payment that long. I believe bigger merchants with better credit ratings can normally negotiate faster repayments.

jiggywiggy 3y ago

Still don't understand why US is so obsessed with credit cards. Debit is much more easy and straight forward, it's the standard in EU. Most of us only have cc to purchase stuff from US sites. Why such a complicated solution? Looks like a bank product.

crooked-v 3y ago
You can't use a US debit card online, because functionality for that just doesn't exist in the US banking system. Edit, for clarity: You can't use it as a debit transaction. You can plug it into credit card systems, where it's run as a credit card transaction and interchange fees apply.
- arcticbull 3y ago
  [edit] Edit, for clarity: You can't use it as a debit transaction. You can plug it into credit card systems, where it's run as a credit card transaction and interchange fees apply. That's not actually true. Card-not-present debit is a separate transaction category than card-not-present credit. Durbin requires that debit routing be available for all debit transactions, not just PIN debit. Further, as of October 2022 the Fed amended the Regulation II rule to extend Durbin debit least-cost routing to card-not-present transactions. [2] [1] https://www.cardrates.com/advice/atm-card-vs-debit-card-vs-credit-card/ https://www.cardrates.com/advice/atm-card-vs-debit-card-vs-c... [2] https://cmspi.com/nam/en/resources/content/card-not-present-routing-the-3-billion-opportunity-for-merchants/ https://cmspi.com/nam/en/resources/content/card-not-present-...
- CapstanRoller 3y ago
  You absolutely can use USAmerican debit cards for online purchases. You just expose yourself to massive risk by doing so (e.g. getting your checking account drained).
  - arcticbull 3y ago
    Your liability is strictly limited in this case - similarly to credit cards, but not identically. Unfortunately you're out the funds until a resolution is reached which can be challenging to say the least.

eru 3y ago

Yes, I'd like to see a world without silly credit card cashbacks, too. And ideally they'd slay that beast by removing regulations, not by piling more on top. > I don't know what's the solution here. I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here -- force each card to be available over multiple networks and for them to bid the interchange per transaction? Durbin amendment style caps? I don't know. But I do know that the status quo cannot stand. Perhaps make it easier for new payment providers to enter the market? Here in Asia we have lots of alternatives popping up (like Grab pay). And merchants are happy to support them, because they typically charge lower fees than Visa and Mastercard.

flangola7 3y ago
I don't see why everyone in thread is so allergic to regulating it. I vote for the representatives I do precisely because I want these types of practices controlled.

londons_explore 3y ago

I think there is a strong case for credit card fees to be zero for all involved, and the government paying some fixed amount for the running of basic payment processing systems. Just like the government pays to produce bank notes and coins today.

hiatus 3y ago
Brazil does just that with Pix. https://en.m.wikipedia.org/wiki/Pix_(payment_system) https://en.m.wikipedia.org/wiki/Pix_(payment_system)

acchow 3y ago

They charge more yes, but make of the credit cards in the US also provide a lot more: travel insurance, Trip interruption insurance, purchase protection, extended warranty, etc.

bmitc 3y ago
For people who can obtain such cards and pay them off, yes.

bmitc 3y ago

What is bps?

hiatus 3y ago
Basis points.
- bmitc 3y ago
  Thank you!

eliseumds 3y ago

You're correct about Pix, it averages at 0.22% [1]. It's free for personal transactions and some card/POS machines have zeroed the fees when you scan a Pix QR code to pay at small shops. It's currently the most popular payment method in Brazil (credit card is second) [2]. It's slower than just tapping my Apple Watch to pay, but tap-to-pay with Pix is in development and I can't wait for it. Installments are also coming. Our Banco Central is really pushing it and the big banks are not liking it, at all. Good. A nice side-effect of it all is that many credit cards are offering great rewards without any annual fee. I get year-round access to VIP lounges at any airport here, car/travel insurance AND cashback/miles for $0, it's a very different scenario from say 5 years ago. [1] https://www.infomoney.com.br/minhas-financas/pix-e-mais-barato-que-pagamentos-por-cartoes-de-credito-e-debito-para-lojista-dizem-economistas-do-bc/ https://www.infomoney.com.br/minhas-financas/pix-e-mais-bara... [2] https://febrabantech.febraban.org.br/temas/meios-de-pagamento/pix-e-o-meio-de-pagamento-mais-usado-no-brasil-em-2022-ted-lidera-em-valores-transacionados https://febrabantech.febraban.org.br/temas/meios-de-pagament...

rhaway84773 3y ago

India could be a good model here. Basically, the likes of Venmo/Zelle have replaced everything. They are not allowed to charge a transaction fee (I’m pretty sure…and if they are, it’s set very low), and they are required to work across platforms (so a Venmo user should be able to pay a Zelle user directly without having to download Zelle).

throwawayy1224 3y ago

Pix and other types of instant payments systems are very different products from credit cards. I'm not sure if it is a fair comparison.