[sgdread]

I understand why they do it: they trying to bring down transaction costs with payment processors. These fees on small amounts is death by thousand cuts.

But, I believe, there is a way: they can introduce wallets for $1-2 patrons: put $10 in a single transaction, then charge the wallet once it is a time to pay to creator. This should aggregate small transactions into larger ones and significantly cut the costs.

[Obi_Juan_Kenobi]

You do not understand what happened.

They did aggregate up until this point, at least for most patrons and creators. If you did a regular pledge with a monthly charge, you only made one transaction a month. Similarly, each creator got paid once a month with one transaction. The exception was per-post patronages, which do indeed have more fees and are less suited to the micro-payment model. That is NOT what this was about, though.

The real motivation was to support gated content.

They want to bring creators into their subscription system, where you pay a fee to access content. They had a problem, though, in that people could pledge, access content, and then simply cancel their pledge before getting charged. To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion about when people get charged (do you pro-rate the first charge, with or without the next month, etc.) because people would pledge a certain amount and see a different amount charged. The alternative is to have people on their own billing cycles, which is much less confusing for customers, but eliminates the possibility of aggregation.

Basically, they want to abandon the goodwill/patronage model and become a subscription service, likely because the latter model is far more lucrative.

[eridius]

You're ignoring the fact that increasing the number of distinct fees charged to Patrons translates directly to more money for Patreon (because Patreon was charging a much higher fee to Patrons than they themselves are actually paying on the transaction). Their public explanation was that a traditional subscription model is simpler, but it's obviously worse for users and the only reason to do that instead of the alternatives (such as the wallet approach) is so Patreon can get their cut of those extra fees.

[radix07]

I don't see how a 'wallet' doesn't handle the CUF... Patreon should already have the money in what is basically a pre-paid account. You just have a minimum amount that can be paid into the wallet. There should also be pay in/out schedules so things are aggregated/automated on both sides. They could even make interest off of the floating money and work a bit like a bank. This should be their bread and butter, optimizing transaction cost. Plenty of other sites do this sort of thing for real businesses, I don't see why it is so complex...

[Dylan16807]

> To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion

But if you actually ask people whether they want the first couple charges to have weird timing, or whether they want to pay significantly more in credit card fees that don't go to the creator...

[sgdread]

> They did aggregate up until this point

Still an issue if most people support 1-2 creators with $1-2 pledges.

[Kurtz79]

I really don't get the motivation of the change, aside from basic greed.

I mean, it seems like a dream business model, you basically channel donations to content creators taking a cut, collecting goodwill along the way.

Their service cannot be more than a (refined and well designed as you want) CRUD app with payment processing, it's hard to imagine having such high costs that is not profitable.

[geofft]

> I understand why they do it: they trying to bring down transaction costs with payment processors. These fees on small amounts is death by thousand cuts.

Then they should have never strayed from the original model, where they charge you once per month for all your pledges, causing only one fee paid to the payment processor.

(If they needed to accommodate people pledging small amounts to very few creators, they could have introduced some sort of quarterly, biannual, or even annual payment option instead of just monthly. I'm curious if they evaluated this option and what they concluded.)

[hinkley]

My coffee shop has a sign: $0.50 fee for card transactions under $5. I’ve seen that sign over the years at a dozen places. The idea isn’t entirely novel.

And you’re right, in that perhaps they should send $3 every three months or. $6 every six if you’re only giving to one person.

[ajkjk]

Maybe it's just me, but, I think it's so fucking stupid that it costs money (which goes to private businesses) to spend money in the modern world.

(and no, bitcoin doesn't fix that at all)

I think if we were in an alternate universe where the government managed a free utility for digital payments no one would find it strange for a second.

[spookthesunset]

It has always costed money to to spend money and there are pros and cons to each method. All that stuff isn't free even if it isn't directly measurable most of the time.

Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc.

Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc...

Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc...

It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.

[morsch]

I don't think it's stupid that it costs money, but I am surprised fees are still as high as they are. I suspect it's got something to do with how opaque the processing fee is for the customer.

If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits.

[1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-...

[2] https://www.reuters.com/article/us-mastercard-results/master...

[3] https://www.reuters.com/article/us-paypal-hldg-results/paypa...

[syshum]

I would, I in no way want to give that kind of power to government.

I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it

[otterley]

It costs money because there are significant fixed and incremental costs to handle it: Fixed because of the labor and value of the technology, and incremental because of fraud. Much of the incremental cost is fraud insurance.

[kalleboo]

Some places have systems you'd like. For instance Denmark has the "dankort" debit payment network where small merchants only play a flat annual fee and no per-transaction costs whatsoever.

[AdmiralAsshat]

They couldn't even do it with physical mail. You're paying the government every time you send a letter for the cost of that postage stamp. And the postal service in the US is pretty much constantly under-funded.

What makes you think we could do it digitally?

[drewbug]

Like Europe, right?

[betenoire]

You pay to have some handle the transaction details for you. It's a service. You are free to mail dollar bills, though you'll use a service you need to pay for there, too.

[cameldrv]

They do... It's called ACH.

[ryanatallah]

It seems very likely that the change was motivated by payment processor fees. Patreon uses Stripe to process payments, which charges a flat rate of 2.9% + $0.30 per successful charge. Compare that to the proposed fee patron fee structure of 2.9% + $0.35 — where presumably the extra $0.05 per transaction is the cut Patreon takes off the top for themselves.

[sago]

> the proposed fee patron fee structure of 2.9% + $0.35

The problem was that was per pledge. So if, like me, you support a couple dozen creators at $1-$3 each, you would expect to pay 24 x $.35. But all those payments are charged in one transaction. So they are only paying $.30. It isn't 5c per transaction they were planning to skim, but $8.

[ceejayoz]

Patreon's docs until recently noted that they get charged 1.9% by Stripe, so there's more than $0.05 being skimmed there.

[conductr]

Don't forget it's now 2.9% of $1.37 instead of $1.00. Reducing their piece by another 1 or 2 cents depending on how Stripe rounds

[dsr_]

Whereas Paypal will apparently do 5% and 0.05, which makes the dollar go to $1.10 instead of $1.38.

[breakingcups]

That's what they did before the announced fee changes. After the fee changes were supposed to go into effect they we're no longer aggregating pledges. Madness.

[viraptor]

Would that put any extra requirements on them? They're not just a middleman in that situation, they actually hold the funds. That sounds close to the PayPal for a long time: we've got accounts and transactions and deal with real money but we really really are not a bank, promise, please don't regulate us as one!

[jordanb]

Alternately they could have patrons pay in arrears: You give your donations and then you pay at the end of the month. One transaction on the card and then it gets divvied up.

[caf]

Isn't that how Apple App Store / Google Play end up working as well, though?

[protomyth]

> put $10 in a single transaction, then charge the wallet once it is a time to pay to creator

They already group the transaction on the 1st of the month for me. I use PayPal, is it different for other payment types?

[javajosh]

If you keep people's money and move it around for them, you start looking like a bank, and you get regulated like a bank. I think this is why online games let you buy tokens with real money, and the tokens sit in your account. (It's probably of critical importance that there exist no way for the tokens to be converted back into currency - which is why regulators were and are far more concerned about online gold farming than the game devs themselves. It's good to be the bank.)

[chipotle_coyote]

Having worked many years ago at There, a now defunct-in-all-but-name Second Life competitor: you're absolutely right. We could let people buy "Therebucks," but it would have been illegal for us to let them convert Therebucks back to cash.

WRT Patreon, I'm 99% sure that this is the reason they didn't propose something like a "balance card" where patrons just give them $X and both pledges and fees get deducted from that -- since that money's being held and then paid to someone else, it could end up being too close to a "money transmission service." (I'd thought there was a non-zero chance that this was a motivating factor in this change to start with, actually; coming so soon after a huge investment round sure makes it seem like there was a condition to that investment that spurred this change. Christie Koehler wrote a good post about that on her blog, although I don't have the link handy.)

[sgdread]

You can go creative (though, I'm not lawyer, nor accountant): have a minimum payment limit: 5$, for instance; if pledge is $1, then ask to pre-pay 5 units in advance (and be transparent why this has to be this way).

[LoSboccacc]

The problem if I understood correctly their previous strife is when you finance patrons across taxation boundaries. If they have to collect vat, they need separate transactions, even if that drived up transaction costd

[Denvercoder9]

> If they have to collect vat, they need separate transactions

At least in Europe that's not true. If I buy milk (6% VAT) and beer (19% VAT) in the supermarket here (The Netherlands), I don't have to split that in two transactions.