Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

news.ycombinator.com

Post reply on HN
Print view View original

71–80 of 88 posts

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#71

Post by deanly »

asah wrote: post #35
jlarocco wrote: post #34

Earlier quoted context omitted.

What merchant would sign up for that?

+1 -- if anything, the trend has been for quicker payouts and fewer holdbacks.

Exactly. In an ideal world:

Merchants want zero fees, and instant payout (like cash), but "wait a minute" you might say. Don't businesses pay taxes, and how do you think those tax dollars are spent (in a non-gov't shutdown state)? Partially keeping the dollar bill presses running.

Herein lies the problem. Cash is a government-run operation, and credit card networks are privately owned. We forget that our cash system doesn't run itself and isn't free to operate, so we take cash for granted, and undervalue or ignore the "interchange" fees.

By changing their perspective, merchants might see that zero fees is unrealistic. It's an unfortunate(?) consequence of leaving the bartering days behind, and joining a money economy.

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#72

Post by deanly »

cma wrote: post #69
deanly wrote: post #66

Earlier quoted context omitted.

VISA et al can still take away a merchant's ability to charge customers' credit cards if they catch you asking for minimum payments on cards or offering discounts for cash. It doesn't happen all the time, and usually consumers don't report establishments that practice this behavior.

Minimum payments maybe. But you have the right by law to give a cash discount (and apparently the right to charge a credit card fee): http://www.interest.com/credit-cards/news/you-soon-could-be-... From that article it sounds like it was part of a lawsuit that was settled. I had thought it was through one of the consumer financial protection bills that happened after the housing bubble pop.

ah, yes, that particular angle could probably use some more research. I haven't read the consumer financial protection bills, but then again most legislators probably haven't either, and there certainly could be some loopholes that someone is trying to exploit right now.

Also important to note that most merchants opted NOT to switch to charging extra because it would have upset their customers, so really, by allowing that in the past, it primed consumers to expect the same price for both. Tricky devils...

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#73

Post by dangrossman »

tocomment wrote: post #23

I've always wondered what kind of rate a high volume company like McDonalds or Walmart could negotiate? Could they be paying pennies per transaction?

AFAIK, Wal-Mart is the only retail store that negotiates directly with Visa and MasterCard, and that only really happened after it sued both card networks a decade ago over being forced to accept cards with higher fees if it wanted to accept debit in its stores. They're still not happy with what they're paying; they urged a rejection of the settlement offer in the latest class action suits over processing fees because it still left Visa/MC's ability to raise those fees when they want intact.

So it's likely even large chains like McDonalds still pay the 1-2% interchange rates everyone else pays, just with a lower markup than average. They do pre-negotiate rates on behalf of their franchisees, which own the merchant accounts for their individual stores.

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#74

Post by dangrossman »

PeterisP wrote: post #55
alexchamberlain wrote: post #22

Earlier quoted context omitted.

Do charge backs exost in a direct debit world?

Yes, and I'd say they are even harsher than for creditcards - i.e., return cash first and ask questions later. 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).

> Yes, and I'd say they are even harsher than for creditcards - i.e., return cash first and ask questions later.

That's how it works with credit cards as well. You're always debited before you're even notified of the chargeback.

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#75

Post by amavisca »

dangrossman wrote: post #73
tocomment wrote: post #23

I've always wondered what kind of rate a high volume company like McDonalds or Walmart could negotiate? Could they be paying pennies per transaction?

AFAIK, Wal-Mart is the only retail store that negotiates directly with Visa and MasterCard, and that only really happened after it sued both card networks a decade ago over being forced to accept cards with higher fees if it wanted to accept debit in its stores. They're still not happy with what they're paying; they urged a rejection of the settlement offer in the latest class action suits over processing fees becaus…

Both of these companies process through First Data.

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#76

Post by uptown »

Osiris wrote: post #27
uptown wrote: post #19

Credit card processing fees. Dwolla gets around it by using ACH which has negligible fees.

The problem there is you have to have the money in your account. If they could find a way to do instant withdrawl/hold of funds, then people could use Dwolla to make a purchase direct from their account. As it is, you have to put money into your Dwolla account and let it sit there until you're going to spend it, making impulse shopping a lot harder to do.

They've got something in development that may be exactly that. I'm not sure though because it's not out yet:

https://realtime.dwolla.com/

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#77

Post by fredsanford »

Just an FYI...

I was recently asked to fix some code for a website that was using paypal so it could use litle.com.

I was told that litle.com was almost half the cost of paypal and without a lot of the things that make paypal obnoxious to merchants, like holding your money on a whim.

Also, the Litle dev people were way more helpful and friendly than what I've seen from paypal in the distant past.

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#78

Post by abalone »

deanly wrote: post #68
abalone wrote: post #29

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…

It's worth mentioning a specific term here, too: "card not present" That covers all ecommerce, and even some card scanning technology, too, EVEN if the card is present. As you pointed out, it's all about fraud/risk. It's easier to circumvent the credit card companies' "security" features (magnetic strip, hologram, signature on the backside of the card, the actual card itself, a chip if your card has one, etc.) when t…

That's not really the main reason. Ecommerce interchange is higher than card present but only by maybe 15-30 basis points (0.15-0.30%).

There are online processors that offer much lower rates than 2.9% + $0.30 if you meet certain qualifications as a merchant. Amazon goes as low as 1.9%.

The main reason that certain processors have such a high rate is the lax signup requirements. It allows higher-risk and outright fraudulent merchants to use them. So yes, card-not-present has a slightly higher fraud baseline, but the key factor here in the rate is the merchant qualification.

Source: http://usa.visa.com/download/merchants/visa-usa-interchange-...

Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?

#80

Post by savetz »

casca wrote: post #3

Processors have upstream costs to Visa/Mastercard/etc that are charged in similar ways. The idea behind them using a percentage is that it relates to the risk. The more you spend, the more could be fraud and might need to be written off. The $0.30 is effectively a lower bound to stop micropayments. Otherwise people could do a $0.10 transaction and only pay $0.003. This could be to avoid system load. While it might se…

PayPal has a micropayments account option that it doesn't publicize very well. If you set up a new account with their special micropayments link (google it) they charge 5 cents + 5%. Which makes it cheaper for transactions under $11.
Post reply on HN