>Did you know that interchange on most debit cards is just 0.05% + $0.22?[1] That's massive margin.
Except on certain transactions where it's a money loser. Square was charging Starbucks 2.75% and Starbucks' average $5 debit transaction was killing them. They lost millions.
Square’s cost to process a regulated debit card works out to 0.16% of the total sale price (the 0.05% regulated and the assessments from the card brands) plus a transaction fee of $0.2355. (Again, the regulated transaction fee plus assessments.)
So, Square’s cost to process a $5 transaction is $0.2435 (5 x 0.0016 + 0.2355). However, 2.75% of $5 is only $0.1375, which means Square losses $0.106 (0.2435 – 0.1375). It only charged its customer $0.1375 for a transaction that it paid $0.2435 to the bank and the card brand to process.
That's a somewhat separate issue. That's because Square doesn't charge an absolute component ("+ $0.xx"), not because their percent component markup wasn't huge. In any case, Stripe suffers no such problem.
Visa even owns a low volume processor called authorized.net that charges same fees as stripe. They also own cybersource which specializes in high volume processing which operates on an interchange plus model.
Are there published details on this? What is their markup?
Generally, Interchange plus fees(not stripes) range fixed of 0.05 with 10bips settlement fee all the way down to fractions of a penny if you're doing millions of transactions per month. Authorized.net used to do 0.10 and 25bips settlement but I think they only do blended rates now.
Stripe only partners with a merchant acquirer bank. To replace Visa/MC they'd also have to get into the card issuing side of things: get a bank or banks to issue "Stripe cards" and get merchants to start accepting them.
Yeah, that's not how it works. Banks that issue cards contract with intermediary card networks like Visa/MC, not POS system vendors.
> integrating bitcoin lightning network soon
Been hearing that for years. Basic problem is while merchants would love to have lower fees, consumers don't have a powerful incentive to switch off using cards. The usual argument is they would save ~2% on prices but there is actually evidence that this would't necessarily happen. When Australia regulated down processing fees, the savings were not passed onto consumers.
Certain retail industries are willing to pay a premium for simplicity and better UX. Merchant account processing is a cottage industry and it's easier to pass on hidden charges through a merchant than a what-you-see-is-what-you-pay flat rate. Especially one with Stripe-caliber UX.
From their perspective, the fact that companies like Stripe and Square have been able to obtain unicorn valuations for card processing services means that there's money left on the table. Card processing was a basic commodity business before these guys. Somehow, Stripe et al have been able to convince a large swath of customers to accept 2.9% + $0.30.
Did you know that interchange on most debit cards is just 0.05% + $0.22?[1] That's massive margin.
Visa/MC is like, sorry Stripe, don't try to play our game on our platform. We invented it. (Somewhat cynically you could argue this is why Stripe spends a lot of time/resources on "big thinking" and kind of puffing themselves up into more than a "card processor". It's part of the sell.)
[1] https://www.burlingtonbankcard.com/interchange-plus-pricing/...