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Most of the answers will be variants of: Payment processors have to pay interchange, and then will mark it up. The question arises: Why are the interchange fees immune to competition?
Most of the answers will be variants of: Payment processors have to pay interchange, and then will mark it up. The question arises: Why are the interchange fees immune to competition?
If Visa or Mastercard would say '0% interchange' then that would make them not competitive - banks wouldn't market those cards much and wouldn't offer any rewards/points on them; merchants would benefit but customers wouldn't, since merchants wouldn't be allowed to give discounts to the 'cheap card' anyway - the rule is 'same price or you can't take our cards at all and you'll get less customers'.
Earlier quoted context omitted.
"extra 1%" on month > 12% APR.
Why 'on month'? You'd get a 1% discount at most; if you 'buy' that discount by freezing all funds for the whole chargeback period (90-120 days) then it's 3-4% APR. [edit] the thinking is, if your revenue is $100/year, then in (A) scenario with higher rate you pay $1/year more in fees; in (B) scenario with delayed funds you need a permanent loan of ~$25 which will cost you more than that unless you can get an APR of l…
Most of the answers will be variants of: Payment processors have to pay interchange, and then will mark it up. The question arises: Why are the interchange fees immune to competition?
Technically, they aren't. If you're willing to start a new credit card company, and get enough people on board, you could compete on interchange fees. However, how are you going to convince the consumer that they want a credit card issued by you?
Earlier quoted context omitted.
What is your experience with GoCardless? How do they handle chargebacks?
Do charge backs exost in a direct debit world?
The DD system doesn't do dispute resolution - you can make DD's easily, but the customer can revert anything he 'didn't agree to' and that's it; and the EU rules allow doing that for at least 13 months (UK says unlimited, I'm not sure on that).
It's not quite true that all payment processors charge 2.9% + $0.30. In the real world you'll find rates almost half that for brick and mortar merchants, more like 1.8% + $0.15, which is very close to a processor's wholesale cost (called "interchange"). It's specifically ecommerce processors that are easy for anyone to sign up with. There are two main reasons "no hassle / developer-friendly" ecommerce processors char…
Take a look at the more do-it-yourself solutions, and you'll see different numbers. For instance, we have a merchant account with Merchant e-Solutions. The base rate is 2.19% + $.20/transaction. I say "base rate" because there are other costs that depend on the particular card.
For example, for Visa there are these:
• "Acquirer Processing Fee", $0.0195/transaction.
• AVS fee, $0.01/transaction, only applies to transactions that make use of the address verification service.
• 0.097% if the card is a commercial rewards card. (10% of the cards)
• 0.45% "international acquiring fee" if the card is international, and 0.40% "international service assessment" on top of that.
• 2.39% labeled as "VISA NON-QUAL". I have no idea what the criteria for this is, but it gets applied to about 5% of the cards.
So, the actual cost of a transaction for a particular Visa card can be as low as 2.19% + $0.2195, and as high as 6.4% + $0.2295.
Last time I ran the numbers, it worked out that for Visa cards it averaged out to 2.62% + $0.23/transaction, and for MasterCard 2.80% + $0.23/transaction.
The downside to this is that providers that offer this kind of fine grained pricing tend to be targeted toward merchants who are looking for low level solutions--merchants handling their own credit card storage, doing their own recurring billing, and so on.
That is probably not a road you want to go down, especially if you are small and just starting out, and doubly especially if your servers are not servers you own. Doing PCI complaint credit card handling in the cloud on something like AWS is difficult and not something you want to deal with while dealing with the other aspects of a young business, like developing and promoting and supporting your product.
I hope they fix up the EU pricing so it's less confusing and with no monthly minimum as they have with the US.
Earlier quoted context omitted.
"extra 1%" on month > 12% APR.
Why 'on month'? You'd get a 1% discount at most; if you 'buy' that discount by freezing all funds for the whole chargeback period (90-120 days) then it's 3-4% APR. [edit] the thinking is, if your revenue is $100/year, then in (A) scenario with higher rate you pay $1/year more in fees; in (B) scenario with delayed funds you need a permanent loan of ~$25 which will cost you more than that unless you can get an APR of l…
Good question +1
They don't add anything to the discussion and it's redundant after you upvote.
Thanks! :)