Re:Visa, Mastercard mull increasing fees for processing tran...
by abalone on Friday February 15, 2019 @06:49PM
(#19175883)
> Square was charging Starbucks 2.75% and Starbucks' average $5 debit transaction was killing them.
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.
Re:Visa, Mastercard mull increasing fees for processing tran...
by CardFellow on Friday February 15, 2019 @11:48PM
(#19177126)
Indeed, and it's part of why Square was a (ha) square peg in a round hole. Incidentally, it's also why they have other pricing now that does have a per-transaction fee.
>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.