CardFellow

We don't know which rates Visa/MC are actually raising yet, but probably not. It has a lot to do with how/what processors charge.

Along with lowering costs, Optblue let processors add a markup to Amex transactions. (Previously they couldn't. That meant no incentive for processors to suggest or push Amex acceptance, as they didn't make money on Amex transactions.)

Now they can, and those markups tend to be higher than for Visa/MC. In egregious cases, the processor simply continues charging the business the old Amex rate (~3.5%) and pockets the entire difference between 3.5% and the new lower rates.

Yeah, credit assessment is .14, debit is .13.

>But why would you want to do the credit card company's work for them?

I'm not sure I'm following. The reason you'd do it is because you want to pay for a small purchase with your debit card. Like if you run into a gas station and buy a soda and a bag of chips but don't have cash on you.

>That regulation is in place purely because of political bribery by the credit card industry.

It's in place because it was determined that people shouldn't be subjected to a minimum purchase amount for paying with their own money through their debit card. (As opposed to paying with borrowed money through a credit card.)

>The consumer-friendly thing to do is to charge proper rates for things with higher processing fees, like credit cards, and not subsidize them by punishing everyone else.

Again, I'm not following. We're talking about minimum purchase amounts. What's punishing someone else?

The problem isn't that there aren't strong anti-fraud tools available, it's that businesses by and large don't use them. Merchants struggle as a whole to get to even 50% of card-accepting businesses actually being PCI compliant (the security regulations for accepting cards) and the ones that become compliant often fall out of compliance again within a year.

>Being able to use a RFID/NFC reader in close proximity to someones wallet (like in their back pocket, standing ahead of you in line) and being able to charge their card without even touching it is not a very good thing lol.

It's not, but it's also extremely uncommon. The cards people have aren't typically RFID, and NFC has a much narrower range.

The problem is that as far as pricing is concerned, regulating at the interchange level isn't going to have the effect people want. That's what happened with the Durbin Amendment.. it capped regulated debit at 0.05% and 22 cents at the interchange level... but processors can still add whatever fees they want on top of that.

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.

They actually only do get a tiny slice.

Interchange fees to the issuing banks start around 1.5% while Visa's volume assessment is only 0.13%.

But they get a tiny slice on an ungodly amount of transactions, so it adds up.

Nah, they've been fine with cash discounts for a long time. They only became okay with surcharging / adding a fee for cards as a result of a lawsuit in 2013. They'd still prefer businesses offer a cash discount, though. They know customers generally don't take them up on it, but also don't feel punished like they do with a surcharge.

Businesses actually aren't allowed to impose minimums on debit cards. Some still try it, but technically you can report them.

Definitely the case for some, I know a lot of developers love Stripe's documentation. But some others just plain equate simplicity and low cost. They have no idea how to read their complex merchant processing statement, there are all these rates and fees.. Square or Stripe comes along, bundles everything into a simple-to-understand rate, and they think it must be cheaper.

I'll agree that processing is surprisingly lightly-regulated.

It's true that they don't change prices daily, but it's also not particularly uncommon for them to do so. Visa raised an assessment I think last January? And interchange fees have changed several times over the years as well.

Visa / MC rates aren't 2.5%.

There are multiple components to the final rate that a business pays, with the bulk of it being interchange, which goes to the banks that issue cards. Visa/MC only get assessments and dues, which are significantly smaller. (Visa's volume assessment is 0.13%, for example.)

We need to know which fees they're raising, and by how much, to know what sort of impact this will have.

True, although Visa card circulation far eclipses MC, so you could take the gamble that they'll have a Visa. Last I checked, Visa actually had more cards in circulation than all three of the other major brands combined.

Slightly old info, but:

SEC filings for end of 2016 had Visa circulation at 335 million, MC at 200 million, Discover at 51.4 and Amex at 47.5.

https://wallethub.com/edu/market-share-by-credit-card-networ...

Nilson report 2016 card usage by volume has Visa at $1.549 trillion, with Amex at $0.695 trillion, Mastercard at $0.693 trillion.

https://www.valuepenguin.com/largest-credit-card-issuers

Forbes has some charts with market share info.

https://www.forbes.com/sites/greatspeculations/2017/09/07/vi...

Cash discounts are legal in all states and permissible by merchant agreements.

Amex lowered their fees in 2015 through their Optblue program. They're still a little bit higher than Visa/MC, but much closer than they were. If you're still getting high Amex (3.5% or more) your processor is pocketing the difference between that and the lower costs.

I agree that there isn't much of a way to get lower interchange fees, but many, many businesses overpay at the processor level, where there IS a way to get lower total costs.

>contract terms in many places preventing merchants from passing on fees a

This is not a thing anymore, the card brands allow surcharging. It's prohibited by state law in something like 7 states, but those are rapidly losing court battles about it.

Visa/MC don't care what Stripe (or any other) processor charges, they get their money FROM Stripe/the other processors, by way of assessments.

>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.

Amex actually lowered their fees to be more in line with Visa/MC through its Optblue program back in 2015. The fact that many businesses don't know that is just a testament to the complexity and confusion in the industry.

Source: am in the industry.

Merchants actually can charge more for credit card usage now. It's been permissible since a 2013 lawsuit, except in 9 states where it's prohibited by state law.

Visa and MasterCard have permitted surcharging for credit card use since 2013, as the result of a class action lawsuit.

That's not necessarily true. The debit network fees have gone up a lot. In some cases, they get pretty close to credit card transaction costs.

Unfortunately with the way things are set up right now, a percentage fee is actually the only way it makes sense for processors, who are somewhat at the mercy of banks, who charge a percentage-based fee. So if they charge a flat fee, they run the risk of either losing money if the percentage fee is above their cost, or the business will overpay if the flat fee is a lot more than the percentage fee.

(Note, that applies even to flat percentage fee. That's what happens with companies like Square. They lost their shirt in their flat rate deal with Starbucks, because it cost them more to process the transactions than they made via the flat fee.)

Banks get money either way. They get most of the money from a credit card transaction.

Curious, if you're willing to share, what was the good deal?

Couple things - Chase Paymentech and First Data are processors, not banks. I'd be careful going to banks for processing, because it tends to be among the most expensive and opaque you can get. (Bank of America and Wells Fargo both have merchant processing divisions, and are among the worst solutions most businesses can choose.)

Interchange plus is definitely the pricing model that most businesses want to be on (and it's actually not limited to high volume businesses - plenty of small merchants can get it, too) but be aware that by itself, interchange plus isn't a silver bullet. It really needs to be a true pass-through model, where you pay the true costs of interchange and assessments. Otherwise, you could still get overcharged. Mercury Payments, for example, charges with "interchange plus" but has now been sued twice for overcharging on assessments. Basically they padded the costs of assessments while trying to make it look like those were the costs charged by the card brands.