Yeah, you can. I'd expect PSD2 legislation will all-but destroy CC companies across the EU within 3 years (just for online use initially).

Strong Customer Authentication (SCA) requirements coming into force in Sept 2019 are making card payments increasingly unattractive.

Payment Initiation (via PISPs, which Stripe undoubtedly will become) will offer free, instant, seamless push-based payments where fraud is essentially impossible (and the merchant isn't liable anyway).

Imagine having Cuvva's payment button pop you out to the Monzo app, hit accept, then immediately pop back and have paid. No card networks or fees involved. Just a simple Faster Payment directly from the customer's bank account to ours.

For in-person payments, I'd imagine a similar arrangement could be facilitated via Apple Pay.

May take non-EU countries a while to follow, but they surely will eventually. The days of CC companies are numbered.

Your example of the payment button is exactly how Dutch-only iDeal works and has adapted well to mobile. The pop-out however is to your own bank's app/website, which works cause there are just 10 banks. Transaction fees? < 0.50 € per transaction

I see all of your points, and agree things are going that way.

But, for me, I will be staying with the cards until the chargeback/dispute schemes match up on bank transfers. I don't want to have to go to the small claims court if I have a problem.

> I'd expect PSD2 legislation will all-but destroy CC companies across the EU within 3 years

I wish. PSD2 will do nothing for consumers and won't hurt CC companies in the slightest. The requirements to actually be able to use the PSD2 APIs are insane. The only companies who will be able to use them are big players like banks, CC companies, large payment processors and large IT companies like Google/MS/IBM/Apple.

People have been saying that for decades and the CC companies are as strong as ever. It's proven to be a great solution and remains the best user experience.

Right but this is actually being caused by very recent legislative changes. Things have started changing very quickly - particularly in the UK.

Credit cards will never disappear as long as they offer the ability to chargeback if the goods are unsatisfactory, and competing systems do not offer that.

In the UK, debit cards can chargeback. While this is currently implemented over MasterCard/Visa network, it's the bank that performs it and there's no reason to expect that would change if something replaced the plastic.

Something similar (but not quite identical) exists for direct debits called the direct debit guarantee.

They already are disappearing in the UK. None of the new banks are offering credit cards.

> The days of CC companies are numbered.

Some sibling comments echo that this is underway in Europe. In America, the credit part of "credit card" is relevant. Many purchases on CC's here are intended as short-term (or longer) loans. (Something like 40% of American credit card holders carry a balance.) Direct debit from a bank account does not (and cannot) fulfill this use case.

Not to mention the fact that people like me who get 2% cash back or points worth as much as 5-10% are going to want to keep using their same cards.

This went away in the EU already. Interchange is capped at 0.3% (0.2% for debit), so there’s no way to provide rewards for cardholders.

Sure it’s sad that we no longer get air miles etc. But the reality is that we never should have in the first place - was a symptom of a nonsensical system.

I think the interesting idea is what happens when you use a Stripe issued card[0] on a Stripe API powered terminal. The system, somewhere, will know it is a Stripe card based off the number, but I'm willing to bet the CC networks are protected from being cut out. At least for now.

Great job team! Looking forward to more of this in the future \o/

[0] https://stripe.com/issuing

There's a whole infrastructure of liability for payer and merchant that exists below the surface of every transaction.

This is why, unfortunately, credit card companies can charge the fees that they do. For example, the issuing banks take on liability if payers don't pay, for example. I don't think Stripe is willing to get in the business of this unless they want to turn into a bank.

I think you might be surprised how much risk Stripe is willing to take on when they can gain hundreds of basis points on cutting out the networks. Only time will tell though :)

Not if it means having to turn into a bank. The repercussions on their business will be draconian. Although I would be surprised if they haven't already explored or fully gone through a money transmitter license for a subsidiary.

Can't they just buy a Bank?

Almost certainly they would, and there might be some small banks out there they could buy or merge with. That would get them out of a lot of legal issues, and also buy them some relevant legal expertise.

However, I seem to recall WalMart investigating this option a while back, and it never happened. It may be that the more you look at the option of becoming a bank, the more it looks like it would take over your life/business. Also, there are doubtless many lobbyists who the existing banks employ who would try to stop it.

I think the issue is being a bank vs owning a bank.

What's the risk if payments were to be debited from the customer's bank directly?

Related side note: I've always wondered, if people don't ever need the "credit" in the credit card transaction, could they get a discount of 2 odd % on each transaction that the CC companies charge, say if they connect their bank accounts directly to they payment methods? This would effectively a debit card but not using the VISA/MC networks. What's stopping Apple/Google pay from processing payments directly from my bank?

Almost none. PIN/passwords render fraud to negligible amounts. That's why debit card transaction have fees for ~$0.10 under Durbin. Companies like Stripe make a killing whenever their customers use debit cards instead of credit cards because they're charging 2.9 +0.30 with a cost of 0.10.

But if you had to rely on debit cards only, then commerce at least in the US would grind to a halt. I believe the average American CC debt is ~$8000.

nordstrom used to do this, back when it was also a bank and issued their own line of credit cards. they also negotiated more favorable terms with visa because of it. they marketed the crap out of their own cards so they could keep more of the fees.

but the regulatory environment tightened up and being both a bank and a retailer became less appealing, and consumers found store branded credit cards less appealing, so they sold the bank portion.

They're protected from being cut out because they are the networks on which the credit card system runs. If you look at a stripe-issued card, you'll see there's still a visa or mc logo in the corner.

I understand how the system works; the requests hit the API before the credit card network. Hence the ability to cut out the network if Stripe is willing to take the chargeback/fraud risk.

You're saying Stripe would process directly when their own card is used on their own network, and then outside the network they'd process through visa/mc?

Well something like that depending on the Stripe infrastructure.

That currently happens when an issuer card is used in a merchant that is acquired/processed with the same issuing bank. It is called an "on us" transaction and doesn't need to fire through the card scheme rails.

I assume that still incurs a visa fee. Perhaps just bypasses the underwriting. Otherwise, I can't imagine visa would allow this.

I can't see how they could disallow it to be honest. That would be seriously anti-competitive.

No, they would need to become money transmitters according to what you wrote above. AFAIK they aren't money transmitters yet.

They list themselves as having money transmitter licenses across the US.

see e.g. https://stripe.com/us/payments and https://stripe.com/connect (under "Rigorous Compliance" and "Compliance respectively").

You'll also find them on CA's directory of money transmitters. http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra...

It depends on the jurisdiction, but they are in many! It is something they have been working towards for quite some time.