I've wondered this for a while – could it simply be competition? Nobody wants to drop below that mark?
Wouldn't dropping below the mark let you beat the pants off the competition?
Not if costs are prohibitive.
Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
11–20 of 88 posts
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#12I've wondered this for a while – could it simply be competition? Nobody wants to drop below that mark?
Wouldn't dropping below the mark let you beat the pants off the competition?
Depends on what margin of this is profit. If they're not making money through nonpayment then they would be losing money each transaction.
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#13Processors 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…
Are you from the US? If so, that stuff about merchant accounts isn't true. While they're backed by a bank (acquiring bank), you don't have to go to a consumer bank to get one. You can go through any company called an ISO. In my opinion banks are the worst place to get one. We do merchant accounts with a monthly fee of $5/mo and instant setup (you can start processing in less than 2 minutes from when you complete the form). All backed by our friendly customer service team in Ohio.
Now if you're in the UK...things are very different :).
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#14This is what PayPal have charged for as long as I can remember. I always assumed that later entrants (Stripe etc) adopted that price point to be competitive with PayPal.
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#15It doesn't quite answer the question, but we use GoCardless to handle payments from our sellers on our marketplace and that's 1% per transaction - the difference is that it's processing direct debit payments (withdrawals direct from one bank account to another) instead of credit cards. It seems to be partially down to the underlying costs of processing credit cards and partially down to competition.
What is your experience with GoCardless? How do they handle chargebacks?
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#16I've wondered this for a while – could it simply be competition? Nobody wants to drop below that mark?
Of course it can drop below that mark, but that is usually a negotiation between a vendor and the payment processor. If you are small and unlikely to drive much business, you will have a hard time getting a lower number. Where I work, we get 2.3% and do several million dollars a year in transactions. We are also a government institution, so it's likely that the processor sees us as a lower risk (though most of the risk comes from the card holder) hence we get the lower rate.
I'd bet that WalMart pays significantly lower fees due to volume.
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#17Dwolla doesn't charge that but I have no idea who uses them
Dwolla doesn't charge that way because they're not billing credit cards. You give them your bank details and they do an ACH transfer with them, IIRC. I've heard both good and bad about them, but they don't have large use yet.
You are right. From my POV their problem is that you cannot use them for international projects (non US customers cannot use ACH; non us businesses cannot get their money out of Dwolla)
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#18Interestingly, Plastiq charges the consumer instead of the merchant and they only charge 1.99% (to as high as 2.49%)
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#19Credit card processing fees. Dwolla gets around it by using ACH which has negligible fees.
Re: Ask HN: Why do all payment processors charge 2.9% + $0.30 per transaction?
#20It doesn't quite answer the question, but we use GoCardless to handle payments from our sellers on our marketplace and that's 1% per transaction - the difference is that it's processing direct debit payments (withdrawals direct from one bank account to another) instead of credit cards. It seems to be partially down to the underlying costs of processing credit cards and partially down to competition.
WePay also charge lower fees for direct bank account debit than credit or debit cards. Not sure Stripe offers this.