I have been pondering transaction costs lately. Seems like this is an area where intervention could have massive impact: these costs are effectively a tax that incurs deadweight loss so according to prevailing economic theory if we can reduce it the whole economy should be catalysed.
IIUC governments already introduce price caps for certain elements of this market but I think we could be doing more? Like mandating incumbents to implement open standards and subsidising their competitors?
Dunno though I'm not very informed about the topic, just suddenly discovered recently how much of my income is just funding a fairly small number of payment providers.
The EU introduced price caps on interchange in 2015 capping interchange on credit cards at 0.3% and debit cards at 0.2%.
That’s almost an order-of-magnitude lower than interchange fees in the US, which are usually around the 1%-2% level.
This is big part of the reason you don’t see high value reward cards or cashback program in the EU. There simply isn’t the interchange revenue to fund them, which is good thing, because high interchange + cashback creates a nasty regressive tax that transfers vast amounts on wealth from those with poor credit ratings (usually the least well off society) to those with high credit ratings (usually the most well off in society).
Stripe provides value-added 'premium' service which competes with merchant banking solutions offered by most EU banks, and Stripe does not have a dominant position. But in general, yes, EU does place a LOT of attention to these deadweight transaction costs, and has had large interventions - for example, if you look at the price listed in this very article, the reason why 'international cards' have 3.25% fee and 'standard EU cards' have a 1.5% fee is primarily caused by EU-imposed changes to interchange fees which get paid by the acquiring/merchant institution (including Stripe) to the issuing bank.
My years in fintech have taught me that it'll be very difficult to get these charges down without legislation. What they are is, essentially, insurance.
For Visa/MC, "running the network" at cost is possible on much less money, but the network involves a lot of elements along the chain that can get transactions reverted. The "insurance" (1-3% of tx) pays for the legal-adjacent issues related to handling those transactions being contested.
Go to a restaurant, use a US terminal? Great, the restaurant owner can modify the transactions after it's been authorized and long after you're gone, "because tip". There's zero checks on this, it's a matter of "it works because most people don't do it". So when it happens, sometimes the payer notices and issues a dispute and the dispute management is part of the network. This is where a lot of costs go.
Anyway, the network is ridiculously bad. The fraud/aml checks are not usually shared among payment providers, because they can just milk each other instead by selling their checks. No wonder it's hard to get the transaction fees down.
And yeah, it's a duopoly. The solution by the way isn't to directly try to build a global visa/mc competitor; with the moat, that's impossible.
Rather, it's to build on top of what European countries are doing. EU countries have built their local competitors (Bancontact, EPS, BLIK, iDEAL, Sofort, ...). Those have lower costs, and so would any locally-targeted provider because they each have to deal with less risk and complexity. Any aggregator (like Stripe is, by the way) can take payments for all of them and push people away from card payments. The problem with that very last part is a UX issue, people like paying by card.
It's a difficult problem. What makes it especially difficult IMO is that once you're down this path and become successful, it takes some very specific, very early business choices in order to be able to turn down the mountains of cash that show up to your doorstep in the form of "align your fees with the rest of the industry".
I wish those transaction cost would be made visible.
Imo the seller should not care which card the client use, if it's more expensive to use a "premium" card then it should be made visible to the client and he should be the one to pay the overhead.
On the other hand, transaction networks clearly add massive value, so it’s very likely that net of fees (without which the network may not exist at all) these networks still add value.
So it’s more a question of finding the optimal equilibrium rather than viewing fees as “deadweight”.
I don't see a reason something as critical as transaction networks should remain privatized, it should be operated by society (via democratic government), not private interests.
We don't have private corporations operate highways or the federal mail system. They may operate (heavily regulated) airlines, but not the traffic control that manages their interactions.
Imagine having to pay a "takeoff clearance fee" or a toll station at every highway on-ramp.
I assumed it was mostly to pay for chargebacks and fraud. What I think is crazy is basically anything < $10 doesn't need chargebacks, fraud protection, etc, and the fee is inordinately burdensome for those transactions.
On a $1 itunes song it would have been an >30% cut, you can forget about selling any small digital thing worth less than that.
> IIUC governments already introduce price caps for certain elements of this market but I think we could be doing more? Like mandating incumbents to implement open standards and subsidising their competitors?
This is a very dangerous path to go down. Direct price control by governments usually leads to unforeseen consequences and often to disaster. Mandating open standards is probably a good idea.
UK/EEA businesses who are paying out in USD to a US-domiciled bank account will now incur a 1% fee, with a minimum fee of US$2.50.
My business does most of it's sales in USD and pays out to a US bank account, I don't understand this fee at all. Just because they can I guess? Stripe is really becoming the new PayPal. Will definitely be exploring options to move to Adyen or continue moving more customers over to Paddle as we've found Stripe to be increasingly frustrating to deal with.
Now we're looking at 3.25% + £0.20 for the card payment in the US, 0.5% for Billing to handle subscriptions, 1% to payout, 0.4% if you want invoices, 0.5% if you need to handle sales tax. Already at 5.65% + £0.20 - that's without any of the paid radar tools.
I thought just the base fee was high but these rates are insane. Where I live, the taxes we pay are less than this. It's not like stripe needs this money to build roads, they are just moving digits.
> Dispute fees (also known as chargebacks) will increase from €15 to €20. Due to costs for managing dispute evidence submissions (regardless of outcome), we'll no longer refund this fee if the customer's bank resolves the dispute in your favor.
> If you or your users have an account located in an EEA country that has not adopted the Euro, here are the fixed fees of €20 in local currencies: Bulgaria: ЛВ40; Czech Republic: 550Kč; Denmark: 200kr; Hungary: 7,000Ft; Liechtenstein: 20CHF, Poland: 90zł; Romania: 100LEU, Sweden: 200kr.
200 DKK is almost 27 EUR. This seems a bit expensive considering that you don't get refunded if you're in the right anymore.
That merchants hold almost 100% of the liability for fraud even if they do everything "right" to vet a transaction is crazy to me. The other parties (issuing bank, payment processor, payment network) are in a much better position to combat and detect fraud, since they see ALL the transactions. But the incentive to do better is low, since the merchant not only holds the bag, but sends them a penalty fee.
It makes taking cards via Stripe completely untenable as anyone can dispute a legit charge and you're still out of pocket - imagine being charged 20 EUR for a 3 eur order even if the customer actually ordered it and just felt like being a dick
They're claiming that it costs them 20 euros to manage evidence that the merchant uploads? What does this process entail, other than forwarding that evidence on to the customer's bank?
I find the dispute fees to be high already, since a customer can initiate a dispute with near-zero effort, but then I have to run around and gather evidence showing that their claim (for which they have to provide zero evidence) is not true. If someone has a subscription with me and it's renewed for several years, and then they decide they don't want it anymore (but don't tell us), they can initiate a "fraud" claim with their bank, which means that I have to prove it wasn't someone else who used their card — with their email address — to set up the account years ago.
I have usually been able to email the customer, ask if/when they asked to terminate their account, and submit that as evidence that no request was made prior to the fraud allegation.
But there should be a higher standard for the initial claim (some evidence should be required, which would at least ensure that claims are correctly categorized as "third party fraud" versus "I forgot this was a subscription").
It says something when traditional banks are basically the same price now and are almost as good in features (and many other card processors are cheaper, especially if eg you stick to a processor in the EU for EU cards) - I'm not sure why anyone would pick Stripe anymore, especially as they have just as many "hidden" costs as others (eg fraud stuff)
Stripe stopped being competitive when they began keeping all of the transaction fees, including a percentage of the entire transaction, when issuing refunds. A customer changed their mind... well you just lost a lot of money.
Imagine you sold a product on the internet, you paid Fedex to ship it. Your customer decides they don't want your product anymore. You refund them their money, but then you have to refund them the shipping cost. Not just the cost to ship it to them, but they want you to handle the return for free. Yeah, that costs money. Transaction fees are not free. Stripe doesn't own the credit card network.
I agree but to be fair, that was always an expense to them. They just took it on the chin and used it as a competitive advantage/point of differentiation and it helped them grow. Especially makes sense as they initially targeted markets where software trials were being sold.
The carding ecosystem is going down. In the last two years, I saw a surprising uptick in the number of businesses that will charge a 2-3% fee if you pay with card. This is from the US to Europe to SEA.
My guess is that most commerce will start offloading this cost to customers especially as new payment methods become available (ie: wallets)
Lest government impose cards monopoly and force transactions with them, I think we have reached/are close to the peak of mastercard/visa.
Iirc in the US at least the gov’t finally struck down the “must charge same as cash” requirement that the credit card companies were forcing on everyone.
And inflation has given them incentive to start actually doing it - at least two restaurants here have a cash discount now.
> Dispute fees (also known as chargebacks) will increase from €15 to €20. We’ll also no longer refund this fee if the customer’s bank resolves the dispute in your favor, due to the costs Stripe incurs for managing dispute evidence submissions (regardless of the outcome).
Is Stripe testing dispute fees for all chargebacks out in EU before rolling out in the US?
1) This is gonna be bad for NGOs
2) So now people can just DDOS an org with chargebacks to put them in the red?
I wondered if it's a practice run for the US, although it's possible the process for "managing dispute evidence submissions" is more involved in the EU. They seem to do next to nothing in the US — just forward the docs you upload to the customer bank, I assume.
I agree with 2 — this would be really bad if a business were targeted with chargebacks. There would need to be some defensive mechanism that kicks in and retroactively refunds all these fees in such cases.
I also wonder if this is just a way to pump up their margins in advance of an IPO.
We had someone try to use hundreds of stolen credit cards on our nonprofit's donation form to test them. What a nightmare! I really hope these fees don't get charged to nonprofits.
It’s interesting how these fees slowly inch up. It’s a slippery slope argument or more like a glacier. But once the market stabilizes, I think there’s lots of pressure to eat these fees over time.
I wonder if everyone will end up with the apple model of only getting 70% and letting some huge conglomerate fight over fees, or just vertically integrate.
I’m not a fan of government regulation but this is an area where it may be worth having some digital cash mediated exchange where the transaction fees are meant to be absurdly low, like 1% or 5 cents whichever is lower. It would provide all the insurances of cash, so none, but would be a strong financial infrastructure that helps consumers and business.
This has been my hope for crypto since 2009, but the fees have always been higher than visa for consumer purchases.
I don't know how Stripe can justify these pricing, except for "oh we can extract more money, let's do that!". In other (non-Western) countries pricing for local payment systems can be less than half of what Stripe charges, e. g. Alipay (one of the biggest Chinese payment services) charges about 0.55% merchant fee without per-transaction cost.
Even in the EEA if you only care about payments, nothing stops you from going to a cheaper alternative. For instance https://www.stancer.com/en/pricing
And I don't know the rates big players negotiate with Adyen but it's probably similar.
Yeah but it's not the same economy of scale, you'll reckon. Alipay is also completely systemic in China and cant exactly be considered a private entreprise anymore: they're "more famous than Jesus" in their own way.
I barely ever heard of Stripe as a European, and now that I live in China, it's almost mandatory to have alipay.
Why don't Stripe customers shift to Alipay? I don't know anything about the service, but that seems like a pretty straightforward win, if they're as similar as you suggest.
Everyone is increasing prices in Europe. Inflation in the UK is crazy. I'm standing in my local coffee place and a basic Americano went up £0.50 overnight
It's crazy and a lot of gouging is happening (not so much these smaller companies. They do have it tough. The owner does drive an expensive BMW though)
> premium cards [are] commercial, corporate, or business cards issued by Visa and Mastercard [and attract more expensive fees, even compared to Amex]
Does anyone know more about that? Why are they more expensive? Is there a different underlying cost structure, or simply price discrimination by some intermediary?
There's more information on "premium cards" here[0], but it doesn't explain the price difference or why a separate category is needed.
About 85% of payment fees are taken by the bank that issues the credit cards (this portion is called interchange). The remaining 15% is split between the card network and the merchant acquirer (in this case Stripe).
Stripe collects some amount of of money from their merchant customers for each transaction. They could set their take rate to be whatever they’d like it to be, this is and unregulated part of the market and is the reason you hear about crazy 10%+ fees for porn, gambling, etc. websites.
Stripe then sends a subset of that fee (interchange plus a network fee) to Visa. Visa has a public ratebook saying exactly how much Stripe needs to send them for a ton of different kinds of transactions.
Visa keeps their fee and passes the interchange to the issuing bank and the transaction is settled.
Issuing banks feel like they “earn” interchange by acquiring customers and taking on their credit risk.
Now it’s important to remember that until very recently, Visa was wholly owned by the banks. This is because Visa is basically a “don’t shoot the messenger” actor who acts on the behalf of banks while taking a relatively small part of the pie for themselves.
Now, on to premium cards. One of the things banks have started to do recently is say “Hey, we acquire really good customers and we give them airline miles so they use their cards way more than they would otherwise. We should be compensated for that!”
The same thing happens for corporate cards, except worse since most regulations on interchange target consumer cards.
What that looks like in practice is new classes of Visa cards (Google: Visa Infinite) that have higher interchange rates (because the banks do all the hard work of having rich customers). Because Visa is a “neutral party,” they can get away with “if you want to accept any Visa cards, you have to accept them all.”
Therefore, cash/debit consumers continue to subsidize lavish vacations and corporate spend for the wealthy, because of course they do.
Because they give more benefits (insurance, lounge access, cashback etc...) and someone has to pay for this (i.e. the merchants).
For example R̶e̶v̶o̶l̶u̶t̶ ̶M̶e̶t̶a̶l̶ premium cards and corporate cards which offers benefits such as lounge access to pay-to-use lounges, travel insurance, cashback etc.. are mostly designed by the schemes in parternship with the issuing banks.
Also note that mostly in the US and Europe AMEX works in another way than Visa and MasterCard. Where V and MC are in a 4 party model (Issuing Bank that gets interchange, Processor (like Stripe) that processes the payment and gets a cut, Merchant that pays the merchant discount rate (or processing fee) and the customer that got their card from their issuing bank getting some benefits) Amex mostly cuts out the issuing bank and issues the cards to the customers directly.
Hence because they don't have to share the interchange with the banks they offer way better benefits on their cards (airmiles, centurion lounges, travel benefits, extensive insurance) but also at a high cost for the merchant because these are really premium cards.
Some consumer banks do issue AMEX cards so they will get their interchange.
In Asia there's also Amex Debit cards, I think definitely less popular in the rest of the world.
Something to note, also a lot of people in Europe think Visa or MasterCard == a Credit Card, this is not true. A credit card is an actual revolving credit instrument issued to the consumer by a credit institution such as a bank that then uses Visa or MasterCard rails.
A card that you get from Lloyds or HSBC when you open an account in the UK might say Visa or MasterCard but it's on a prepaid or debit programme with the scheme but using Visa and MasterCard payment rails. The interchange on these (pre-brexit) and still in Europe is capped by law.
Furthermore a lot of EU, Latam and Asian countries have their local payment rails which run at way lower costs than Visa and MasterCard to the merchants (Wechat, Alipay, Giropay, Payconiq etc.. to name a few).
One last thing, I do think Open Banking in the UK and Europe, especially when Variable Recurring Payments are coming will be a game changer. The banks have been lobbying to delay most of the UX improvements for the users because they just make too much money as an issuer to get interchange.
Commercial interchange isn't regulated in Europe. The card networks have increased their interchange rates for commercial and business cards in many European countries.
> or why a separate category is needed
These fees have been moved into a separate category to contain increases to cards where network costs have increased significantly. (Rather than apply them more broadly.)
Assuming this is related to Stripe trying to decrease the effect of the next funding devaluation. [0]
Hard to imagine they are still in a cashflow burn despite being around for so long and seemingly capturing a large marketshare of payments. Perhaps its primarily for insiders to take money off the table before an IPO lockup, with a not-so-great 6 month post IPO forecast?
the beginning of the end of stripe. Instead of attracting more customers and building the ground for a healthy startup ecosystem, stripe chose the shortsighted 'let's just charge more'. this immediately makes other alternatives like adyen more attractive...bad move and I don't get how patrick collison who roams around here let this happen. the 2.9%+0.25 was already allowing for healthy margins, and was higher than competitors.
Its crazy there isn't more competition. I was hoping that would be one thing cryptos would be good for.
One thing I think regulators could do is force cc fees to be added to the price instead of hidden. Eg a $10 item costs $10, $10.20, $10.40 depending on which payment method you use.
> I was hoping that would be one thing cryptos would be good for.
It already is. While still not many, there are companies that will pass the savings realized from avoiding traditional payment processors fees by giving you discounts if you pay them in crypto (e.g. mullvad).
> One thing I think regulators could do is force cc fees to be added to the price instead of hidden.
I agree. Increasing competition by nullifying this part of merchant pgw agreements (standard in most agreements) would definitely be better than the status quo. Another option is to simply impose limits on cc fees and ban non-compliant processors but I believe your method is better. Give the customer the information and power to choose.
I thought they would be benefitting from everyone else raising their prices. Isn't this double dipping?
Edit: and isn't it quite likely it's easy for companies just to pass this charge straight on to customers, given the climate? Maybe that was Stripe's intention with the timing
I know this is in the EU, but do yourself and the businesses you love a favor. Pay with CA$H. The value you receive from local small businesses is worth the time it takes to avoid the tax on our economy.
I dunno, the 25 cents surcharge payment processors take on my €10+ payment isn't really worth that much of a hassle to me. Ads have encouraged me to pay by card for years.
I don't know why Stripe is taking a percentage on top of the normal processing fee, I'm guessing it's to deal with percentage differences for people paying using credit cards. There are many cheaper alternatives out there if Stripe is getting too expensive.
Interesting, I did not know that internet payments are so expensive. In Poland (UE) max interchange is 0,3%. Blue Media (Polish payment gate) cost 1,19%. 1.9%-3,25% + €0.25 looks expensive.
Well as it so happens I'm only in the first day or so of integrating Stripe in to my subscription-based side project in the EEA. What should I use instead? Molliepay?
Since these charges are from the gross, it all depends on your profit margins. If they're >50%, sure, it's not a big thing. If it's 5%, that means that 0.5% extra on Stripe eats 10% of your profit.
So Stripe still has some edge vs PayPal in all but non-EU cards. Not sure if they offer a microtransaction optimized fee schedule, if not, PP is far better there.
«Dispute fees (also known as chargebacks) will increase from €15 to €20. We’ll also no longer refund this fee if the customer’s bank resolves the dispute in your favor, due to the costs Stripe incurs for managing dispute evidence submissions (regardless of the outcome).»
That’s very interesting. Stripe is so greedy and dishonest.
How can Europeans use Stripe when they can't use Google Fonts and Google Analytics on the grounds that sending even a single IP packet to a server under the control of a US company violates the GDPR?
One aspect of this is that data processing which is necessary to do what the customer explicitly requested is permitted (GDPR article 6.1.b). Making the payment for your purchase is such a thing and this processing is lawful, but doing analytics or tracking who viewed the site through fonts is not, and generally requires explicit opt-in consent.
Is that how it works? I thought as long as the user gives explicit consent to that happening it's fine. Most checkouts I have seen have a checkbox you need to check before being redirected to stripe/paypal and the likes which asks for explicit consent to the privacy policy rules.
bjackman|3 years ago
IIUC governments already introduce price caps for certain elements of this market but I think we could be doing more? Like mandating incumbents to implement open standards and subsidising their competitors?
Dunno though I'm not very informed about the topic, just suddenly discovered recently how much of my income is just funding a fairly small number of payment providers.
avianlyric|3 years ago
That’s almost an order-of-magnitude lower than interchange fees in the US, which are usually around the 1%-2% level.
This is big part of the reason you don’t see high value reward cards or cashback program in the EU. There simply isn’t the interchange revenue to fund them, which is good thing, because high interchange + cashback creates a nasty regressive tax that transfers vast amounts on wealth from those with poor credit ratings (usually the least well off society) to those with high credit ratings (usually the most well off in society).
PeterisP|3 years ago
scrollaway|3 years ago
For Visa/MC, "running the network" at cost is possible on much less money, but the network involves a lot of elements along the chain that can get transactions reverted. The "insurance" (1-3% of tx) pays for the legal-adjacent issues related to handling those transactions being contested.
Go to a restaurant, use a US terminal? Great, the restaurant owner can modify the transactions after it's been authorized and long after you're gone, "because tip". There's zero checks on this, it's a matter of "it works because most people don't do it". So when it happens, sometimes the payer notices and issues a dispute and the dispute management is part of the network. This is where a lot of costs go.
Anyway, the network is ridiculously bad. The fraud/aml checks are not usually shared among payment providers, because they can just milk each other instead by selling their checks. No wonder it's hard to get the transaction fees down.
And yeah, it's a duopoly. The solution by the way isn't to directly try to build a global visa/mc competitor; with the moat, that's impossible. Rather, it's to build on top of what European countries are doing. EU countries have built their local competitors (Bancontact, EPS, BLIK, iDEAL, Sofort, ...). Those have lower costs, and so would any locally-targeted provider because they each have to deal with less risk and complexity. Any aggregator (like Stripe is, by the way) can take payments for all of them and push people away from card payments. The problem with that very last part is a UX issue, people like paying by card.
It's a difficult problem. What makes it especially difficult IMO is that once you're down this path and become successful, it takes some very specific, very early business choices in order to be able to turn down the mountains of cash that show up to your doorstep in the form of "align your fees with the rest of the industry".
Timshel|3 years ago
abm53|3 years ago
So it’s more a question of finding the optimal equilibrium rather than viewing fees as “deadweight”.
flangola7|3 years ago
We don't have private corporations operate highways or the federal mail system. They may operate (heavily regulated) airlines, but not the traffic control that manages their interactions.
Imagine having to pay a "takeoff clearance fee" or a toll station at every highway on-ramp.
rendaw|3 years ago
On a $1 itunes song it would have been an >30% cut, you can forget about selling any small digital thing worth less than that.
psychlops|3 years ago
MrBuddyCasino|3 years ago
This is a very dangerous path to go down. Direct price control by governments usually leads to unforeseen consequences and often to disaster. Mandating open standards is probably a good idea.
burdapoint|3 years ago
My business does most of it's sales in USD and pays out to a US bank account, I don't understand this fee at all. Just because they can I guess? Stripe is really becoming the new PayPal. Will definitely be exploring options to move to Adyen or continue moving more customers over to Paddle as we've found Stripe to be increasingly frustrating to deal with.
Now we're looking at 3.25% + £0.20 for the card payment in the US, 0.5% for Billing to handle subscriptions, 1% to payout, 0.4% if you want invoices, 0.5% if you need to handle sales tax. Already at 5.65% + £0.20 - that's without any of the paid radar tools.
a1371|3 years ago
Laaas|3 years ago
> If you or your users have an account located in an EEA country that has not adopted the Euro, here are the fixed fees of €20 in local currencies: Bulgaria: ЛВ40; Czech Republic: 550Kč; Denmark: 200kr; Hungary: 7,000Ft; Liechtenstein: 20CHF, Poland: 90zł; Romania: 100LEU, Sweden: 200kr.
200 DKK is almost 27 EUR. This seems a bit expensive considering that you don't get refunded if you're in the right anymore.
tyingq|3 years ago
throwaway67743|3 years ago
gnicholas|3 years ago
I find the dispute fees to be high already, since a customer can initiate a dispute with near-zero effort, but then I have to run around and gather evidence showing that their claim (for which they have to provide zero evidence) is not true. If someone has a subscription with me and it's renewed for several years, and then they decide they don't want it anymore (but don't tell us), they can initiate a "fraud" claim with their bank, which means that I have to prove it wasn't someone else who used their card — with their email address — to set up the account years ago.
I have usually been able to email the customer, ask if/when they asked to terminate their account, and submit that as evidence that no request was made prior to the fraud allegation.
But there should be a higher standard for the initial claim (some evidence should be required, which would at least ensure that claims are correctly categorized as "third party fraud" versus "I forgot this was a subscription").
throwaway67743|3 years ago
pancrufty|3 years ago
My European bank (one of the largest in my country) doesn’t accept passwords longer than 8 characters. Imagine how bad the rest of the systems is.
bryanrasmussen|3 years ago
on edit: actually serious question, have been away from this area for a while but thinking about making a personal project soon.
poxrud|3 years ago
segmondy|3 years ago
conductr|3 years ago
PaulDavisThe1st|3 years ago
csomar|3 years ago
My guess is that most commerce will start offloading this cost to customers especially as new payment methods become available (ie: wallets)
Lest government impose cards monopoly and force transactions with them, I think we have reached/are close to the peak of mastercard/visa.
bombcar|3 years ago
And inflation has given them incentive to start actually doing it - at least two restaurants here have a cash discount now.
kylehotchkiss|3 years ago
Is Stripe testing dispute fees for all chargebacks out in EU before rolling out in the US?
1) This is gonna be bad for NGOs
2) So now people can just DDOS an org with chargebacks to put them in the red?
gnicholas|3 years ago
I agree with 2 — this would be really bad if a business were targeted with chargebacks. There would need to be some defensive mechanism that kicks in and retroactively refunds all these fees in such cases.
I also wonder if this is just a way to pump up their margins in advance of an IPO.
zachlatta|3 years ago
prepend|3 years ago
I wonder if everyone will end up with the apple model of only getting 70% and letting some huge conglomerate fight over fees, or just vertically integrate.
I’m not a fan of government regulation but this is an area where it may be worth having some digital cash mediated exchange where the transaction fees are meant to be absurdly low, like 1% or 5 cents whichever is lower. It would provide all the insurances of cash, so none, but would be a strong financial infrastructure that helps consumers and business.
This has been my hope for crypto since 2009, but the fees have always been higher than visa for consumer purchases.
reisse|3 years ago
hocuspocus|3 years ago
And I don't know the rates big players negotiate with Adyen but it's probably similar.
chinathrow|3 years ago
xwolfi|3 years ago
I barely ever heard of Stripe as a European, and now that I live in China, it's almost mandatory to have alipay.
Traubenfuchs|3 years ago
As long as they do not lose customers / don‘t miss out on new customers, it was the right decision.
tbihl|3 years ago
puzzlingcaptcha|3 years ago
switch007|3 years ago
It's crazy and a lot of gouging is happening (not so much these smaller companies. They do have it tough. The owner does drive an expensive BMW though)
petesergeant|3 years ago
Does anyone know more about that? Why are they more expensive? Is there a different underlying cost structure, or simply price discrimination by some intermediary?
There's more information on "premium cards" here[0], but it doesn't explain the price difference or why a separate category is needed.
0: https://support.stripe.com/questions/what-s-the-difference-b...
RC_ITR|3 years ago
About 85% of payment fees are taken by the bank that issues the credit cards (this portion is called interchange). The remaining 15% is split between the card network and the merchant acquirer (in this case Stripe).
Stripe collects some amount of of money from their merchant customers for each transaction. They could set their take rate to be whatever they’d like it to be, this is and unregulated part of the market and is the reason you hear about crazy 10%+ fees for porn, gambling, etc. websites.
Stripe then sends a subset of that fee (interchange plus a network fee) to Visa. Visa has a public ratebook saying exactly how much Stripe needs to send them for a ton of different kinds of transactions.
Visa keeps their fee and passes the interchange to the issuing bank and the transaction is settled.
Issuing banks feel like they “earn” interchange by acquiring customers and taking on their credit risk.
Now it’s important to remember that until very recently, Visa was wholly owned by the banks. This is because Visa is basically a “don’t shoot the messenger” actor who acts on the behalf of banks while taking a relatively small part of the pie for themselves.
Now, on to premium cards. One of the things banks have started to do recently is say “Hey, we acquire really good customers and we give them airline miles so they use their cards way more than they would otherwise. We should be compensated for that!”
The same thing happens for corporate cards, except worse since most regulations on interchange target consumer cards.
What that looks like in practice is new classes of Visa cards (Google: Visa Infinite) that have higher interchange rates (because the banks do all the hard work of having rich customers). Because Visa is a “neutral party,” they can get away with “if you want to accept any Visa cards, you have to accept them all.”
Therefore, cash/debit consumers continue to subsidize lavish vacations and corporate spend for the wealthy, because of course they do.
thiscatis|3 years ago
For example R̶e̶v̶o̶l̶u̶t̶ ̶M̶e̶t̶a̶l̶ premium cards and corporate cards which offers benefits such as lounge access to pay-to-use lounges, travel insurance, cashback etc.. are mostly designed by the schemes in parternship with the issuing banks.
Also note that mostly in the US and Europe AMEX works in another way than Visa and MasterCard. Where V and MC are in a 4 party model (Issuing Bank that gets interchange, Processor (like Stripe) that processes the payment and gets a cut, Merchant that pays the merchant discount rate (or processing fee) and the customer that got their card from their issuing bank getting some benefits) Amex mostly cuts out the issuing bank and issues the cards to the customers directly.
Hence because they don't have to share the interchange with the banks they offer way better benefits on their cards (airmiles, centurion lounges, travel benefits, extensive insurance) but also at a high cost for the merchant because these are really premium cards.
Some consumer banks do issue AMEX cards so they will get their interchange.
In Asia there's also Amex Debit cards, I think definitely less popular in the rest of the world.
Something to note, also a lot of people in Europe think Visa or MasterCard == a Credit Card, this is not true. A credit card is an actual revolving credit instrument issued to the consumer by a credit institution such as a bank that then uses Visa or MasterCard rails.
A card that you get from Lloyds or HSBC when you open an account in the UK might say Visa or MasterCard but it's on a prepaid or debit programme with the scheme but using Visa and MasterCard payment rails. The interchange on these (pre-brexit) and still in Europe is capped by law.
Furthermore a lot of EU, Latam and Asian countries have their local payment rails which run at way lower costs than Visa and MasterCard to the merchants (Wechat, Alipay, Giropay, Payconiq etc.. to name a few).
One last thing, I do think Open Banking in the UK and Europe, especially when Variable Recurring Payments are coming will be a game changer. The banks have been lobbying to delay most of the UX improvements for the users because they just make too much money as an issuer to get interchange.
smca|3 years ago
Commercial interchange isn't regulated in Europe. The card networks have increased their interchange rates for commercial and business cards in many European countries.
> or why a separate category is needed
These fees have been moved into a separate category to contain increases to cards where network costs have increased significantly. (Rather than apply them more broadly.)
Symbiote|3 years ago
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
unknown|3 years ago
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baby-yoda|3 years ago
Hard to imagine they are still in a cashflow burn despite being around for so long and seemingly capturing a large marketshare of payments. Perhaps its primarily for insiders to take money off the table before an IPO lockup, with a not-so-great 6 month post IPO forecast?
[0] https://techcrunch.com/2023/01/27/fintech-stripe-tried-to-ra...
jambojumbo|3 years ago
moneywoes|3 years ago
mtmail|3 years ago
rr888|3 years ago
One thing I think regulators could do is force cc fees to be added to the price instead of hidden. Eg a $10 item costs $10, $10.20, $10.40 depending on which payment method you use.
Zuiii|3 years ago
It already is. While still not many, there are companies that will pass the savings realized from avoiding traditional payment processors fees by giving you discounts if you pay them in crypto (e.g. mullvad).
> One thing I think regulators could do is force cc fees to be added to the price instead of hidden.
I agree. Increasing competition by nullifying this part of merchant pgw agreements (standard in most agreements) would definitely be better than the status quo. Another option is to simply impose limits on cc fees and ban non-compliant processors but I believe your method is better. Give the customer the information and power to choose.
m3nu|3 years ago
sensibar|3 years ago
Does anyone know if one can add a German USD-bank account to Stripe by now? (Was not possible a year ago)
Does the 1% fee also apply if the company is based in Switzerland? (strictly not the EEA)
Does anyone at which MRR scale one can negotiate fees down with Stripe?
chinathrow|3 years ago
Yes.
switch007|3 years ago
Edit: and isn't it quite likely it's easy for companies just to pass this charge straight on to customers, given the climate? Maybe that was Stripe's intention with the timing
sschueller|3 years ago
If you want a local solution that also can do Twint (Swiss p2p payments) without extra contracts then I would recommend you try Payrexx[1].
Per transaction fees are also less than what Stripe is charging although you have a monthly fixed fee.
[1] https://www.payrexx.ch
hocuspocus|3 years ago
We're outside the EEA cap on interchange fees, that's not surprising.
stanislavb|3 years ago
titaniumtown|3 years ago
freedude|3 years ago
jeroenhd|3 years ago
I don't know why Stripe is taking a percentage on top of the normal processing fee, I'm guessing it's to deal with percentage differences for people paying using credit cards. There are many cheaper alternatives out there if Stripe is getting too expensive.
dehrmann|3 years ago
matips|3 years ago
CalRobert|3 years ago
12907835202|3 years ago
unknown|3 years ago
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zhuzhu|3 years ago
unknown|3 years ago
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Anon4Now|3 years ago
mihaic|3 years ago
Semaphor|3 years ago
PayPal normal: 2.99% + 0.39€
PayPal Microtransactions: 4.99% + 0.09€
So Stripe still has some edge vs PayPal in all but non-EU cards. Not sure if they offer a microtransaction optimized fee schedule, if not, PP is far better there.
glintik|3 years ago
That’s very interesting. Stripe is so greedy and dishonest.
metacritic12|3 years ago
zhuzhu|3 years ago
unknown|3 years ago
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TekMol|3 years ago
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Escapado|3 years ago
ptman|3 years ago
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that_guy_iain|3 years ago