Square to no longer return processing fees when buyers are issued a refund

[cwkoss]

Sounds like the real villains are the credit card companies who have the market power to enforce fees on cancelled payments. They are so entrenched no one is even questioning their position anymore.

Visa and Mastercard are massive drains on our economy - it's ridiculous how unquestioningly their 3% tax on commerce is accepted.

[pcarolan]

In Australia, this is regulated and they can charge no more than 1.5%. https://www.accc.gov.au/consumers/pricing/card-surcharges

This could be changed overnight with 1 piece of legislation.

[paulmd]

Visa and Mastercard typically only keep the fixed fees on refunded charges, the $0.30 part of the typical "$0.30 + 3%" fee structure.

Square is saying they'll keep the whole 3%. That's obviously different and not Visa/Mastercard's fault - Visa is refunding it to Square, Square is keeping it. Stripe is now doing the same thing too.

The fixed cost is the processing fee and that cost includes processing refunds. The percentage is the "interchange fee" and is supposed to represent the agreed take of the processing network for that settled transaction.

https://www.businessnewsdaily.com/16583-credit-card-processi...

[SoftTalker]

I don’t know if it’s worth 3% but the convenience of not having to have and handle cash is worth something, for both buyers and merchants.

[themaninthedark]

Cash still works and if you can get enough people to go back to using it then credit cards will have to change or be more ripe for disruption.

[randomdata]

Seems to me that the real villain is the network interchange companies. The credit companies which use said networks are numerous and are in reasonable competition with each other, continually eroding their share of the transaction fee to provide more and more compelling 'rewards' to their customers.

Once upon a time people dreamed that blockchain would provide the network, operating in a distributed fashion that isn't dependent on one or two companies, and bet big on it becoming that, but obviously that didn't pan out.

[rileymat2]

I don't know enough about the topic to analyze whether 3% is high or low, but I don't think it makes sense for them to refund the fee in the case of refunds. They have provided the same service, same costs. So I would hardly call them villains for that aspect.

[georgeplusplus]

They provide a service and they charge for that service. What part about this is so villainous?

I agree that is not a consumer friendly situation but on the grounds that it because its effectively a duopoly and not because they charge for a service they provide.

These monopolies never benefit the consumer. The best ways to approach this are 1. the government to break up the duopoly, 2. a competitor to come along to introduce more competition, or 3. the consumer can get fed up and go back to using cash or carry a laptop around to transfer bitcoin until said companies are forced to break up and consolidate to a better product. These solutions are tried and true.

I am tired of hearing people complain about a service and still continue to use the service.

[patmcc]

From a user perspective, I get a lot of benefit from credit cards. I get cash back, an interest-free advance, the ability to do chargebacks, very low liability for lost/stolen cards, etc.

If I got 1% or 2% lower prices, would I give all that up? I doubt it.

[remram]

France has its own payment network, CB (previously Carte Bleu). Payment cards emitted by French banks are usually both CB and Visa, which allows French banks to route payments through CB rather than Visa. This could probably be done by other groups, national or otherwise, with little effect on users.

https://fr.m.wikipedia.org/wiki/Groupement_des_cartes_bancai...

[theFletch]

A lot of local shops near me pass the processing fees to their customers. Usually with a small sign at the register that says 3% added for credit card payments.

[dangerboysteve]

In my wife's small biz, she was paying between 1.8 to 2.2% for Visa and MC and 2.8% for Amex for in person. The 2.2% dealt with rewards cards.

[awill]

and yet Apple/Google/Valve can take 30% :)

[latchkey]

This will affect businesses that do 3rd party merchant services, like events. If the event is cancelled, refunds are issued. Who pays that fee? It would be up to the business to try to claw back funds from the promoter of the event... who is now bankrupt from not being able to do their event. It gets ugly fast.

[samwillis]

I think that's why (well one of the reasons along with generally poor behaviour) most ticketing sites tag on so many extra "service" charges. Some charge to even receive a digital copy of your ticket! I believe they don't have to refund these charges when the event is cancelled.

[Jeremy1026]

I'd think they'd just amend insurance policies to include the potential 3% revenue loss.

[devrand]

Isn't this why non-refundable deposits are common? The fee would be paid out of that.

That all being said, for sales that big I'm guessing ACH/wires are a lot more common anyway.

[foobar1962]

> If the event is cancelled, refunds are issued. Who pays that fee?

Insurance. The promotor would have insurance to cover this. If the event was cancelled due to a performer cancelling, the performer's insurance will pay.

All this puts up the price of insurance, which puts up the price of event tickets.

[gowld]

Those businesses don't get a refund on their electricity costs from cancelled sales.

[jarym]

I guess the days when refunds were frictionless so that consumers could purchase with confidence are gone? Refunds have always been a cost of doing business - it just seems the processors / card companies want to change the rules and have their cake and eat it now that cash is mostly dead.

[gowld]

Refunds are still frictionless for consumers. It's vendors who have to maintain product quality and prevent fraud to avoid returns. It's not Square's job to make sure that a vendor's product is high-quality or that customers really want to keep the products they buy.

Credit cards mostly work the same way.

https://www.cardfellow.com/blog/credit-card-refund-fees

[bombcar]

Does anyone know if the "real big" merchants like Walmart have to pay the fee? I assume they're so large they can sit on the processors and squeeze them (I know Costco does, they pay 0% fees in-store because Visa is so hungry to be their processor).

[jedberg]

Based on this article it sounds like they pay enough to want a law to make it less:

https://www.cnn.com/2022/09/20/business/credit-card-fees-vis...

Costco gets away with 0% because they offer exclusivity and because they cover some of the cost of the rewards programs. I guess Walmart et al did the math and figured they would lose too much business.

The average Costco shopper makes over $100K a year, so getting another card just to shop there isn't a problem for most. Can't say the same for Walmart.

[gtk40]

I work for a very well known retail brand and we've negotiated our average interchange fee to under 2%. I believe it is around 1.7% currently but it's been lower in the past.

[halestock]

In general, the more volume a merchant has, the larger their discount. But it's usually negotiated with the processors/issuers.

[bastardoperator]

I thought Walmart bought their own merchant bank/processor to avoid fees which sound like something walmart would do but I can't confirm, I know they're looking to expand on fintech services to consumers/business and that's difficult to do without some level of processing control.

[adrr]

Interchange is refunded but settlement fees aren’t. Settlement is 25Bps or lower.

[sparrish]

This is now pretty standard across the industry. PayPal made the same change last year.

[brianwawok]

Sadly users still expect refunds for any reason. Charging a 3% fee on a refund is a cause for a shtfit.

[gowld]

> last year.

I see we're still not counting the pandemic in this timeline.

It was October 2019.

[caleblloyd]

I learned the hard way in March 2020 that PayPal doesn't do this anymore either. I was helping an organization raise money for a Charitable 5k when COVID shut everything down.

This was when everyone thought the world was ending still so we didn't think to change it to a virtual 5K. Refunded all payments on a couple thousand dollars and was out around 4% in processing fees.

[ashwagary]

It seems any victim of a decent sized "card testing" attack will pay a heavy price. They just removed their last incentive to protect against this kind of fraud by forwarding all the costs to their clients.

[charles_f]

I guess this will get back to the consumer, either by having to shell out these fees, or by merchants refusing to refund altogether.

The one thing I am wondering is whether PayPal and stripe will follow

[napsternxg]

Why cant US have something like UPI [1], which significantly reduced reliance of credit card companies and extra payment traaction fees in India. Is there some regulation holding this back or no state or federal government has tried it yet.

[1] https://en.wikipedia.org/wiki/Unified_Payments_Interface

[Dayshine]

How is this going to work for businesses in the EU where customers are allowed to refund for no reason when buying things at a distance?

[crote]

Raised prices. The company I work for alrady has to pay a 3% charge on payment returns. Take 3% of the product price, multiply by the expected rate of return, and add that as a hidden fee to the new product price.

[kasey_junk]

Businesses will increase costs to cover it, just like they do now.

[yashg]

Paypal and Stripe have been doing this for a while.

[nikolay]

Well, they launched as a PayPal alternative, but now they are copying all the negative features. Anyway, we've stopped using Square long ago given their obscene policies. One such policy is charging $70 per month for "team access"! That's absolutely crazy to put a basic feature under a greedy paywall! So, basically, they force people to share logins! Add the rate hikes, now this! Sorry, but there are alternatives such as SumUp, Stripe Terminal, Clover, QuickBooks, etc. In fact, if you want the lowest swipe rates, go with QuickBooks!

[vinarun]

it was only a matter of time given that Stripe has a penalty too

[CryptoBanker]

I fail to see why there’s a penalty for a refund. A chargeback would be one thing, but a refund is a totally normal business process

[aveline]

Stripe doesn't refund the processing fee too.

> Depending on your fee schedule, you may incur fees to refund a charge. Additionally, Stripe's processing fees from the original transaction will not be returned in case of a refund.

https://support.stripe.com/questions/understanding-fees-for-...

[RC_ITR]

Which is a great reminder for all the purchasers of SaaS or other business services on here:

If the terms of one provider are noticeably different than the rest (and those terms have a directly measurable economic impact on the provider), it's marketing. It will likely get pulled as soon as the provider is at a large enough scale that they no longer need that marketing.

[computing]

Uh, if only there existed a neutral, owned-by-no-one, decentralized monetary network with instant low-cost transfers and finality.

Too bad this sort of stuff is out of science fiction.

EDIT: aaaand I'm being downvoted :) At least leave a comment.

[LatteLazy]

Devils advocate: this penalises businesses with a LOT of refunds. Which is probably a good thing. Because they generate a lot of work for square and are doing something wrong commercially (misadvertising?). And SHOULD be discouraged...

[gowld]

What work do they generate for Square?

It's not really "Devil's" advocate to advicate for the current standard practice across the industry.