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.
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).
There's an interchange surcharge for rewards cards. Stripe bundles this all together to make the pricing simpler.. but most merchants use traditional merchant accounts, and they are charged based on the type of card used.
Edit: For example, here's visa's interchange fees: https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
As long as you're not a well off person with an AMEX card that regularly makes purchases outside of your AMEX card currency.
AMEX is nuts in that all non-home currency transactions go via USD.
So, for example, if you have a EUR AMEX and you make a GBP purchase, your conversion will go GBP -> USD -> EUR with AMEX taking a cut at each step along the way.
Interestingly my US 1.5%-3% (regular, also 5% special) cashback cards keep paying out on transactions here in the EU. I've always wondered who is losing out in that equation.
this seems like a false statement.
here is an article from 2021 that highlights some of the numerous cashback offers:
https://medium.com/@danminea/best-cashback-cards-with-reward...
and Amex usually has cashback cards as well.
disclaimer: i have used some of these cashback cards both in the EU and outside of it.
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".
Charging me as the end user more money because I have a "Premium" card would be a very fast way for me to not shop with you.
So it’s more a question of finding the optimal equilibrium rather than viewing fees as “deadweight”.
[1] if you are interested. Particularly the section on the dead weight loss of taxes - in this case, transaction fees operate the same as taxes.
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.
In Portugal, the mail company is private and 90% of the highways are operated by private companies. And this is a country where the Socialist party has been in power for 20 of the last 30 years.
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.
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.
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.
> 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.
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").
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.
Which leads to funny questions at development time like "how many characters do we reserve in the customer record for the third child of the second wife of customer X, when they're remarried, this third child is not a child of the customer but there does exist an alimentation 'agreement' between the customer and their third wife". You must make this decision knowing that whatever your answer ... it can never be changed again.
>500kb per record. And, of course, mostly it just has first and last name, address, birthdate and balance, nothing else.
Makes the web look efficient.
on edit: actually serious question, have been away from this area for a while but thinking about making a personal project soon.
edit: my experience only applies to UK (which were better and cheaper way before EU) and EU banks, the US is a minefield that actually is better avoided by just paying higher fees to a popular processor rather than deal with banks who think its the 1800s)
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.
And inflation has given them incentive to start actually doing it - at least two restaurants here have a cash discount now.
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 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.
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.
And I don't know the rates big players negotiate with Adyen but it's probably similar.
I barely ever heard of Stripe as a European, and now that I live in China, it's almost mandatory to have alipay.
As long as they do not lose customers / don‘t miss out on new customers, it was the right decision.
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)
Yes but payment processors generally take fees as a share of transactions. That naturally shields them for inflation.
Raising their percentage fees is just a naked cash grab.
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...
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.
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.
To quote Hanlon’s razor “never attribute to malice that which is adequately explained by stupidity."
Having been involved in these conversations, I can tell you with some confidence, that banks are far more worried about being unable to deliver the technical work on time, than they’re worrying about interchange.
There will be fees to pay for OpenBanking Variable Recurring Payments, it’s not going to be free for merchants to use. Which makes sense, contrary to popular opinion, running a bank account, and transacting, costs quite a bit of money. Every Faster Payment you send costs your bank a couple of pennies, not much on an individual level, but it sure adds up.
Revolut Metal (personal) is not one of these cards.
Commercial cards (business banking, business credit etc) are what these cards are and they have less regulation in the EU.
For instance no cap on interchange fees and they can show prices excluding the card fee and add that on at checkout for business card users.
Corporate cards, or cards with more "features" (lounge access, insurance etc.) tend to have yearly fees associated with them, at least in Australia. I was under the impression the customer covers the cost of these extras, not merchants.
Right but that’s not a premium card and neither is Amex, so this doesn’t follow
The company (or cardholder) pays for this - corporate cards and the like aren't free, they come with an annual fee. So it's not all on the merchant.
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.)
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
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...
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.
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.
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?
Yes.
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
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.
We're outside the EEA cap on interchange fees, that's not surprising.
Everything's outrageously expensive in Switzerland, so why shouldn't Stripe be too !
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.
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.
That’s very interesting. Stripe is so greedy and dishonest.
GDPR requires that user data is guarded in certain ways, and European courts have ruled that no data can be sufficiently safeguarded if it is under control of a US company.
Google "analytics gdpr safeguards" or see here for example:
https://piwik.pro/blog/is-google-analytics-gdpr-compliant/
Especially the section "Does collecting visitors’ consent solve compliance issues with Google Analytics?".
Fun fact, this very website is not GDPR compliant. I've never ever seen a cookie notice on HN, which is legally required.
Of course, none of this is relevant, because AFAIK HN has no physical presence in the EU, but still, this site is not GDPR compliant, which just outlines how stupid GDPR actually is.
