Home Depot Files Antitrust Lawsuit Against Visa, MasterCard
wsj.com
wsj.com
For reasons I don't understand, the credit card makers have spent many years bringing the new chip cards to market, they include much higher technology than ever offered before, yet the payment process takes much longer. Of course these few seconds don't matter that much per transaction, but think it might be enough to actually make a meaningful difference in staffing levels and line lengths at big stores in December.
I do understand the fees though. The credit card brands and banks have worked themselves, through years of diligent effort, into a business where they can impose a kind of "tax" of 3% on most of the retail economy across the entire US. This is obviously of immense economic value to them, and they will work very hard at every level to maintain it for as long as possible. On the other hand, paying these companies a 3% tax on every retail transaction is... rather surprising in the grand scheme of things, and seems unlikely to persist for that much longer.
Apple takes a cut for "tap to pay". No one wants to pay extra middlemen.
> For reasons I don't understand, the credit card makers have spent many years bringing the new chip cards to market, they include much higher technology than ever offered before, yet the payment process takes much longer.
It took years to roll out chip and pin because no one wanted to pay for the new terminals (another expensive cost pushed on to someone). It takes longer to approve a transaction because of the challenge response implemented to reduce fraud.
> I do understand the fees though. The credit card brands and banks have worked themselves, through years of diligent effort, into a business where they can impose a kind of "tax" of 3% on most of the retail economy across the entire US.
This is being driven down by legislation.
Everything has a cost, and someone has to pay it.
In Europe, the interchange fee (what the retailer's bank pays to the card company) is limited to 0.3% for credit cards and 0.2% for debit cards. This came into effect sometime last year.
Reward programs always have been a bit less pronounced here in Europe and mostly have been reduced after the regulation of interchange fees.
Naw, never mind this is the USA. Free market is all that matters.
MasterCard and Visa do pay Apple a minuscule fee (15¢ per $100.00, and less in Europe), however, it is smaller than the amount they expect to save due to reduced fraud from folks using ApplePay (and Apple apparently has also agreed to split some fraction of any fraud losses with them).
With regards to merchant fees, I have actually had some merchants say they would be glad to take a check
As for Apple Pay, it becomes A LOT more compelling if you have an Apple Watch. All of a sudden instead of having to pull your phone out of your pocket you Press the button on the watch, move your wrist in front of the reader, and it's done.
To be fair since I've gotten my watch Apple Pay is in WAY more places so I can use it on a regular basis.
I think Apple Pay would still win over the card for privacy (I'm REALLY tired of getting cards stolen) and speed over the current chip system.
Some places require inserting. Some places still use swiping. There's a swipe area and an insert slot. The cashier looks at you like you're new to using credit cards when you don't guess the right method, even though it's different everywhere you go. It's a mess and apparently the chip isn't even a requirement. Screw the chip.
I'm unhappy that stores have been pushing more and more cashier work onto the customer without adopting an industry standard UI for their payment systems.
The chip also enables contactless transactions which is even faster.
Weird. In Germany, it's usually very, very fast (recently, using my Number26 CC, payment in three seconds including PIN entry, and ten seconds later I got the push notification on my phone).
But that may also very well be because it's rare here to see outdated terminals. Most retail chains change their card terminals every two or three years, because they listen to their customers who actively demand speedy transactions. Oh, and because stores usually don't own the terminals but rent them (cheapest solutions are at < 20€/month and terminal). Downside: CC fees for merchants can range up to 4%, most of it goes to the CC providers.
It mostly seems smaller merchants simply don't switch their acquirer to get cheaper rates and complain about "high costs". FWIW, credit cards are capped at 0.3% interchange (which is what the bank gets), debit cards at 0.2% since last year. Scheme fees for MasterCard/Visa are peanuts and even AmEx doesn't cost 4%.
For example see https://www.cashforless.de.
Visa/MasterCard credit and debit 0.98% German debit (girocard) 0.25%
The only terminals in the US that take the chipped cards are brand new (because the cards themselves are new and the deadline to accept them isn't quite here yet). I don't know why they are so slow, but they are all brand new machines.
I feel awkward and foolish with it, since it's ostensibly so simple, but so inconsistent. Add in a watching-water-boil time delay, and it's just a great recipe for social anxiety. One wrong move can jam the works. (Like, I once pulled the card out too early when I heard it beep at a Target and the register had to cancel the order and restart.)
For example, the Wawa chain of convenience stores on the East coast are very good at moving people through the registers. Around 10-15s per transaction sustained throughput is common: one or two items, beep beep good day. If someone pays by check or chip, the whole thing grinds to a halt and everyone taps their foot.
This was well before chip-and-pin, they probably did because of the slowness of writing checks.
Though maybe this is all moot with self-checkout since the store doesn't really care that much if it takes you a bit longer to check out. Especially if they can show you ads while you wait.
The card swipe doesn't use the same reader hardware as the chip reading (well, it is in the device) and there is more processing going on with more round trips to the bank if using the chip. Likely different parts of the software are used both at the reader and the bank as well.
They do have the nifty portable readers, though.
But I can tell you that my German card is quite slow in Germany (not as slow as US transaction though) but blazingly fast in Sweden, Denmark, or France.
Canada has them, too, and they're great at restaurants. Great for tipping since they just hand you the device at that point with common percentage options on screen (or the option to customize it).
The American experience of server collects your card, comes back with two receipts, mental arithmetic to figure out the tip, write it down on the receipt, hand the receipt back, and server types in the tip amount just seems clunky in comparison.
In general, though, I carry cash for tips since I know those probably won't be taxed.
Always amusing to see confused Americans in Canadian restaurants, though.
There were a couple of times when Samsung Pay blocked all payments until an update was applied and the change log had nothing to do with payment functionality but with other useless & unrelated stuff like "better notifications" "better deals". NOTHING, absolutely NOTHING about a security issue, a flaw or a hole that was being used to steal money.
I havent had too many issues with Android Pay but still its the same issue ... instead of a simple swipe and go, and my ability to use my money in anyway I want and I am not at the mercy of an app developer who is acting as a gatekeeper to access my money so he/she/it can control what I need on my phone / my device to use my money whenever I want so they can push their agenda that has nothing to do with me using my money. no thanks.
thats not even including the additional cut the app provider takes and increases my price effectively. I'd rather pay one middleman.
Credit Cards dont need to be "fixed" or "solved". As a customer, its easy to use, widely accepted and my risks are covered 100% by the issuer. I cant say the same for phone payment methods.
https://usa.visa.com/dam/VCOM/download/merchants/surcharge-c...
http://www.howtogeek.com/241012/safetynet-explained-why-andr... has an explainer, and a link to more technical information.
I've had cards compromised probably a dozen times (most in the forms of "mass compromise," where the bank shuts down my account and sends me a new card even though there were no fraudulent charges on my specific account). I'm glad I didn't have to pay any cash, but it has cost me a lot nonetheless.
If the underlying credit card number is compromised, just change that and leave the virtual in place.
My daily card has been compromised a few times—Chase just overnighted me a replacement and that was it.
As a customer, you are paying more for products because credit cards are broken: retailers are passing on fraud-related expenses to you. You are paying for the inefficiencies in the system, even if the costs seem hidden.
Chip & PIN is quite prevalent up here in west coast Canada. Just wondering how our experience differs from yours.
Compared to something like ApplePay where you tap and it's processed in a few seconds or old swipe where it's even faster.
And that's assuming Apple Pay is recognizing your fingerprint or is coming up at all. Don't get me started if you have multiple cards linked to Apple Pay...
For extra oddness, Apple Pay is extremely fast everywhere I've used it except my grocery store. There it takes about 30 seconds. I have no idea why. The device tells me I'm done, but for whatever reason the software on the point-of-sale system doesn't decide that the transaction has been paid for for a surprisingly long amount of time.
This is not possible via the chip which requires synchronous communication with the terminal.
The example it brought up was that because the chip's identity could be verified through local communication with the chip, purchases could be logged at the terminal and synchronized at any point with the payment processor.
Is there something about the US payment processing market that makes that feature unattractive? Are businesses subsidizing more fraud protection than in other countries by making transactions synchronous and hiring more staff?
In Europe, even when being abroad (if that makes a difference), I have never had any issues with delays or payments, it only takes 1-2 seconds.
[0] http://www.npr.org/sections/money/2016/04/13/474135422/episo...
My anecdotal experience has shown this to be an extreme pain in some cases for both consumers and retailers. Any sort of business with frequent CC payments and high volume sees their POS wait time explode.
Two personal examples:
Attended a cinema, where they had to delay the movie time due to long CC processing times. Bought food at a takeout place, with clear signs instructions (to avoid) and apologies for the delays caused by chip readers.
This is a sign of their incompetence. Period
The whole rest of the world uses this without a problem.
Not really true. The rest of the world has had it and moved on, and this is a main reason why.
In my country at least, we're now on to tap-to-pay credit and debit cards in recent years, which is faster than the old school swipe and sign and much faster than the chip.
1. cashier done scanning items 2. person swipes card since reader has a slot to do that on the right side and that's what they usually do 3. machine beeps or displays an error or does nothing 4. cashier has to explain to insert the card 5. person fumbles with card, eventually getting it into slot 6. sometimes people just push it in and pull it out or otherwise don't leave it in long enough since every single POS has a different workflow and dialogue for this, and this error condition requires re-starting the process (GOTO 3) 7. Waiting 3-10+ seconds 8. Sign 9. Hit yes or accept or I agree 10. Wait another few seconds 11. Remove or forget card. Sometimes the machine beeps, sometimes not 12. Done!
Despite all this hassle, we still didn't get chip and pin that I had been complaining about for years, so if someone steals your physical card, they can still use it until you realize. I'm not really sure how this whole process improves security (does the actual CC number no longer enter the POS at any point?) but consumers here are definitely having some growing pains with the new system and the current state of supporting both old and new systems.
Per parent, this could also be an internet issue. If the POS is processing with a delay, the employee has little control and blaming "incompetence" is ludicrous.
Having first hand experience with dealing with impatient customers because the POS is running slow creates a feeling of entitlement (on the person pointing out how incompetent someone is) and resentment (on the side of the affected employee who is helpless in the situation).
A one-off internet issue is fine. But in this case it seems that there is something systematically broken.
After readying your comment, I went through at least 5 different emotions.
I work in the QSR space and deal with the IT side. The idea that IT department can control the speed of the computer/internet/etc. is shared by both, staff and guests. Regardless if that's the case, your comment, in addition to the parent comment are fascinating.
It seems that regardless of the situation, someone has to take the fault and customers will just blame someone regardless. That's totally appropriate (even if its not, doesn't really matter as this is a perception > reality).
Just for that insight, I would up vote your comment twice, if I could.
http://www.npr.org/sections/money/2016/04/13/474135422/episo...
Whose incompetence? The cinema? They bought a turn-key, off-the-shelf POS package from a vendor. How much control do you think they have over that system? Card processing starts taking a dump, and you would suggest that the minimum-wage cinema worker running the cards do...?
Though your post makes me wonder: do payment providers have SLAs, or do they just say, "you're locked in with our network and hardware, suck it up"?
However, customers hated it because it felt like it took longer. They would be done with their transaction, done paying, then have to way 10-20 seconds for their receipt to finish printing. So they'd be standing there just waiting to leave with nothing to do. The company had us change it back to printing each line as it was entered into the computer.
But the modern thermal receipt printers are pretty fast (the old dot-matrix ones weren't). Epson has one that does 350 mm/sec (13.75 inches per second). So as long as you aren't shopping at CVS with their infamously long receipts, it's not too long of a wait.
Chip and pin definitely would definitely be too slow for this. The barriers have to be fast enough to process huge numbers of people at peak times.
Contactless has eliminated all the usual queuing for tickets and/or prepay card topups - except for tourists.
In the UK nearly all cards can be used for contactless payments below a fixed amount (£ 30 at the moment).
Additional security (inconvenience) only kicks in on higher price purchases.
Additionally, there is no time delay for contactless, and chip and pin is extremely fast too.
Contactless is far faster than even unlocking your phone (even if you use a fingerprint unlock), and can usually be done concurrent to the cashier putting your item in a bag or reaching to pass it to you... it is essentially frictionless.
This all works so well I find myself doing something I never though I would... I've abandoned cash. Contactless payments are that good, and fast, and work at the end of the day when my phone is out of battery, and works for every one of my daily casual purchases (travel, food, a book, some toiletries, some groceries, etc).
Many airlines transmit level 3 purchase data as part of the credit card transaction, which will contain your complete itinerary -- which can be fed into the bank's risk system.
Just swiping the card, however, also works just fine and I now use it everywhere again because I can't be bothered to remember and type in yet another passcode. Just more friction in the process.
That is for debit, which is an entirely different thing than credit.
There are no US banks that implement Chip & PIN. Heck, it's nearly impossible to get a Chip & PIN capable card for travel if you have a US issuing bank.
Swipe support will in theory eventually be disabled (e.g. authorizations declined by your issuing bank) at some point in the future when Chip & Signature is being rolled out.
If you're typing your PIN code into a terminal in the US, you are using debit though.
Frankly, I'm baffles by these claims that US cards don't work with chip and pin because so far, if I use the chip, I have been required to use the pin.
I also have a corporate amex with a pin set up, but I've never used it.
Not entirely, but your last sentence is true. Some issuers do PIN credit cards. I have one from First Tech Federal Credit Union that uses PIN and touts it as a benefit. When I used it in Europe, it worked exactly as expected and prompted for my PIN just like in the States. There are a handful of smaller issuers that also do PIN primary (mostly credit unions but at least one Florida bank with a card catering to Cuban trade does) and a few more that have PINs but the PIN is secondary so it isn't asked for unless the terminal's configuration insists on it.
Not true - BarclayCard Arrival/Arrival+ do. However, they prioritize signature first. They can be used at automated kiosks that require PINs, though.
So yes, the chip rollout here in the states is a giant clusterfuck for the time being. It will get better soon, once the hodgepodge of banks and hardware vendors get everything straightened out.
[1] http://www.emv-connection.com/downloads/2015/05/EMF-Liabilit...
For a grocery store <1% per transaction and 3% per transaction is a pretty huge difference, one of my local stores that only takes debit cards still doesn't support chip cards because of the madness with the US Common Debit AID preventing them from enabling the EMV support on their terminals.
During a recent trip to the US, they had to swipe my card and make me sign a piece of paper (which I gleefully sign with an "X" as if I were illiterate). It felt so backwards.
In pretty much every other country I've visited, you have to do the whole process serially after the total is done, which is quite slow.
This sounds really interesting.
I've had chip cards in the U.S. for a couple years, but I've never seen someone use a contactless payment card here. Even tap to pay with phone is very uncommon.
By comparison banks in the US use the debit card & ACH system which has many issues compared to credit cards and European payment systems.
They've been quite good at this — Norway has had chip and pin since the early 2000s, and contactless payments (using NFC in ordinary cards, not phones) have existed for a few years now. Money transfers are also completely effortless; all you need is the other person's bank account number.
For consumers, the main hurdle remaining is the speed of transfers between banks. They only perform transfers in bulk twice a day (and for years they only did it once a day).
Cards are waterproof, and don't require being charged.
If your phone is almost out of juice, you can order an Uber. But if your battery is flat, you can always ask the cabby if they take cards (or just withdraw cash using your card if you're in a city where most of the cabs don't).
Fight the power! Stick it to the man!
The taxi driver is just trying to reduce his costs; he could allow riders to negotiate cheaper prices, benefiting everyone.
Given credit card companies have legal means to pay less percentage tax on much more income than the cab driver and suck money out of taxpayers' pockets in many other ways, I'd offer that screwing over the credit card company might benefit the rest of taxpayers more than the cabbie paying tax does.
If one believes that a proposed-but-currently-illegal behavior is beneficial to society, the technically correct way to go about rectifying the situation is to discuss with your local democratic representatives, who can take the issue back to the legislative chamber and work to correct the law. Admittedly, that's pretty impractical at this point.
Man, I love Uber. Or at least the idea.
I really like cash.
It can be stolen easily. You have to go somewhere to get more of it. You have to make change. It doesn't allow you to automatically track your purchases. You can't get it back from a seller if you are sold fraudulent goods.
If you lose your phone you just fall back to the physical card that you presumably have in your wallet somewhere.
Edit: Thought about getting the $50 version, but I'm not quite that frugal.
Second Edit: You probably need NFC for this huh? Drat.
BLU is a usually-cheap phone brand, with handsets starting around 60USD.
Wow. Not a comment about you in particular, but about the industry in general. I did a quick search and found this: http://bluproducts.com/android-phones
Really? 66 different phones? Is this entire industry, except for Apple, run by imbeciles? Not that I'm in the target demographic, but I only have a relatively few years left on this earth. I don't want to spend half of them just figuring out the differences between Android phones!
Hasn't the rest of the world learned anything from St. Steven?
Out of curiosity, I went to find out how many variants Apple is currently selling[1] (model, color, storage). I counted 42 distinct combinations you could possibly choose! I guess not even Apple learned from 'St. Steven', or he was wrong.
Removing the color axis whittles down the model/memory combination to a more manageable 12 options - but the point remains.
The magnet isn't damaging the phone — at least not at field strengths likely to be encountered in everyday life. Removing the magnetic field should immediately turn the screen back on.
Obviously 90% of the time a phone could be used (though I don't agree it's faster than credit card tap, roughly the same speed) and a card can be used as backup, but it makes ditching a credit card completely not really an option.
I thought "maybe the mayor is speaking to the media" and walked over. Turns out the crowd was people charging their phone from the truck. CNN generously left the truck running there for a couple of days.
If your social circle is anything like mine, it's not some person, it's always one, as in a single person who disproportionately is incapable of maintaining their phone. For the majority of people they're very reliable devices, so this is less "everyone will be inconvenienced sometimes" and more "a few people will be inconvenienced a lot". I recognize that it's still an issue, but those people can keep using cards while the rest of us benefit from tap-to-pay being the preferable option a majority of the time.
Also, not to be discounted is that it's far from free to handle cash. The delay in settling credit card payments + apparently pretty heavy-handed practises around charge backs is probably a bigger problem than ~2% transaction fees are.
[1] https://gendal.me/2014/08/09/a-simple-explanation-of-fees-in...
The funny part is that this all works quite well in Canada. The chip and pin systems there are quick and completely painless. Send like the card companies in the US drug their feet for years, and then picked up some substandard contractors for implementations...
Until the device that authorizes the payment is owned by me, there's always a great deal of opportunity for chicanery.
I doubt the security is greater:
* Phones have a far larger attack surface and are regularly exploited.
* Confidentiality is part of security, and I don't want my purchases tied to the rest of my phone data and identity.
Motorolla has the horribly overpriced AME 2000 (ick), and Samsung has the knox platform built standard into most of their stuff (which is very good), but they lack a true HSM. If you're an android user and want a HSM for sensitive data, get one of the Microcrypt SD devices. It is as good as you'll get (and still not as good as an iPhone).
Unique card # per transaction is the holy grail of security.
Your claims of somehow compromising confidentiality are also provably false.
There is a reliance on the security of the local device that isn't an issue with cards. Primarily this is more of a social engineering concern anyway, rendering most technical solutions useless.
What's the point of saying something is provably false and then completely leaving out any reference to that proof?
Agree. However, this does illustrate a point that safety concerns are valid.
Myself, I'm a proponent of mobile payment but I understand the inherited hesitation from some folk about security.
It's enough faster than chip+pin to make a difference. But the weird thing about chip+pin is that it's much slower in NYC than it is in Toronto or elsewhere in Canada. I can see why these mobile-pay systems are gaining ground in the U.S. where chip+pin is poorly supported in the rare places that it's actually supported at all. And I don't see anyone tap-pay'ing with their cards here.
The infrastructure behind the tech makes a big difference for whether there's any room for mobile-pay to actually improve on credit-cards.
The whole Android Pay/Apple Pay thing has been nice from a "more people have the terminal now" thing. But the card's tap function works so well, I can't imagine using my phone.
That seems to be true, what I can't figure out is why.
Yeah they do. To the point that both Visa and MasterCard opposed even introducing chips for years. For that sole reason.
It's one of the main causes of the incredibly long delay the US has seen to their card security.
Are generally wildly insecure.
-Instead of getting quicker, payments just got slower
-Apple and Google have the credit card companies on to their payment platforms now
-Minimum wage moving toward $15+ an hour means cashiers need to double speed/efficiency
-Interest rates are extremely low, which means cash flowing transactions is cheaper for any party
The payment terminal is already being leapfrogged at Starbucks with mobile ordering. Retail stores could require identification and payment method in order to enter the store, and then bill you as you walk out using mobile sensors. This wouldn't be any more unusual than needing a membership to get in to Costco. The membership contract could over ride traditional payment transaction rules.
There are tipping points in terms of costs vs lost revenue but I suspect things are going to move away from cash and physical cards really quickly. Like Uber, rather than being a negative, this will be seen as a huge positive by the majority of users.
So simply preload the transaction as you're walking to the barrier, then touch your phone on the reader. Usually it is fractionally faster than contactless cards.
There is no reason to think that the 2-3% tax is going away anytime soon once you understand the network dynamics. The key element that almost everyone overlooks, even people on HN building alternative payment systems, is that that tax mostly gets refunded to consumers via reward programs. It does not just go into Visa or the banks' coffers. They certainly take a healthy slice of it at scale but they key point is, they have aligned themselves with consumer interests. Reward programs keep consumers loyal to the "high tax" system, because the tax mainly goes to them.
This can be demonstrated very simply by comparing credit and debit usage rates. There is already a "low tax" payment method that has near 100% adoption in every consumer pocket and merchant register. It's called debit cards. They work exactly the same as credit cards at the register -- you can even sign for them (and it's no more expensive than PIN thanks to the Durbin amendment). Yet consumers still widely use credit cards. Why? Because no rewards. It's mostly merchants who would benefit from lower interchange fees, at least in the short run.
So this is why Apple Pay et al did not try to build a lower-fee system. It would have misaligned them with consumers. This might shed some light on why Bitcoin never had much of a chance as an alternative consumer payment method.
I'm curious as to the experience of people taking EMV cards from the US to Europe, is it any faster than in the states on the same terminal hardware?
But to your point I found chip terminal manufactuer that claims to have optimized the communications between the chip and the terminal [2].
[1] http://investor.visa.com/news/news-details/2016/Visa-Speeds-...
[2] https://cayan.com/insights/emv-doesn-t-have-to-slow-down-the...
NNNNnno. 1) the price on everything is inflated 3% for what amounts to an archaic and insecure way to process transactions 2) It's not opt-in: that is, with few rare cases, I gain nothing, and in fact, must spend more money to not participate and 3) Even if I do participate, all I can hope for is, at best, 1.5% or so cash back. You might say, "Oh, well that's a fee for convenience and security. OK, then what the hell is that fee I pay for the card every year?
It's bullshit. Get rid of it. Make consumer credit illegal. People are too stupid, greedy and short sighted to consume it well.
As for the theory that prices are inflated by interchange, there are two problems with it. One, reward card users don't experience inflation because most of the interchange is refunded to them. Two, when Australia regulated down interchange, it didn't actually result in lower prices.
> what the hell is that fee I pay for the card every year?
Most cards in the U.S. don't have annual fees. The ones that do usually offer enhanced benefits like richer reward programs.
The chip and whatever cards despite taking 10 or more seconds are still just transferring the secret to the merchant. So once criminals figure out how to make copies they will be no more secure.
The problem is not that a phone is fundamentally better for this stuff, the problem is that you're yet to be provided a card-based alternative that works well.
For transactions under $100, card payments in Australia don't require authorisation (I'm unsure if this is a legal requirement, or if it's just a de-facto standard that most of our banks have adopted). You just wave the card and you're good to go - the payment processes using the same mechanism as tapping a phone so it's just as fast.
It's actually more convenient in most cases as many places don't have their credit card terminals right in front of where you're served, so the cashier has to walk over to a terminal. With a card, I hand it to them and say "just tap" - they handle the rest while I wait and talk with whoever I'm with (or check my phone if I'm on my own). With a phone, I'd have to walk over to the terminal, wait for the cashier to key in the pricing and then hope that Touch ID won't stuff up while I hold it near the contactless reader. I also can't check my phone while I'm doing that, because I need to use it to make the payment.
Tapping cards works so well and is so widely supported that I was able to live just fine with a near-destroyed debit MasterCard (and zero cash) for nearly six months a few years ago. The plastic was coming off and prevented it from being inserted into a terminal, but by 2012/2013 our retail sector had such widespread support for contactless payments that it didn't matter. For the purchases over $100 I made, I tapped and then entered my PIN.
Despite Australia being the highest users of contactless payments in the world (per capita, of course), Apple Pay has had a very slow launch here. It only works for Amex (which no one uses as no one accepts it due to high fees), and MasterCard/VISA cards for one of our big four banks. The banks aren't interested in dealing with Apple due to extra fees that Apple wants to impose, and consumers aren't pressuring the banks or Apple to make a compromise because the current experience is already good enough.
Maybe there's something "magical" that I'm missing out on, but I really don't get why phone-based payments are being so widely hyped. It's already a solved problem.
Sometimes I need to read comments like this to remind me that Hacker News is full of people who live inside the SF tech bubble where this sentence is considered a reasonable idea, and I shouldn't take HN too seriously.
I don't even know how to swipe my phone.
I believe Europe has had this chip and pin technology for something like 20 years so we just finally upgraded to 20 year old technology.
For some reason the credit card cabal decided that after all this time that instead giving the US "the chip and pin which would be compatible with the EU system they gave us "chip and pin" which incidentally takes much longer to process a card, and I am almost never asked to actually sing my transaction. You have to ask WTF on all this?
The rational I hear about why the US went with "chip and sign" rather than "chip and pin" is that they feared that US card holders if they have to memorize pin numbers they would likely stop using there other credit cards(lots of people in the US have 3 or 4) and just use the single one they decided to memorize. Memorizing pins was at odd with encouraging maximal credit card use.
I don't always carry my phone. A credit card requires no power supply either.
Of course cash is preferable to both.
Another thing to realize, most credit cards have some kind of reward program that amounts to about a 1% payout. That's coming out of the transaction fees, which if you do the math is actually being paid for by the merchant. If the fees were 2% there would no longer be rewards programs. I find that interesting. The retail world is being taxed to pay the credit xard reward programs of their customers. Makes you think a bit doesn't it ;)
In fact, "amphtml" is the first link on the page. Follow this link to see the full article.
However the /amp URL does not retrieve comments like the URL you posted.
Personally, I prefer the amp version on mobile, and this on desktop.
You're allowed to show different content based on referrers, just not if the user-agent is googlebot.
Googlebot's referrer is google.com, so it is able to bypass the paywall, just like anyone else clicking off google.com
https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfml...
Visa and Mastercard and the banks all offer Chip and Pin services here in the UK, and have done for years.
I can understand the delay in adopting chip cards, with the ridiculously large number of terminals and cards that would have to be replaced - but I really don't see why when you're performing the migration to cards with a chip, you wouldn't implement PIN at the same time
Another issue is that PIN adoption often implies a liability shift. Right now I have zero liability for fraudulent uses of my credit card. Some places place liability on the cardholder if the cardholder didn't take sufficient care to protect their PIN and a fraudulent transaction is made with the PIN. If that happened, I would stop using credit cards unless it was absolutely necessary, and the mere possibility is enough to make me extremely skeptical of any move to require PINs.
By the way, there is no requirement for your signature to be readable or reproducible or even anything resembling your name. Just do a quick freehand scribble. There's no reason for it to be harder than entering a PIN.
In the US, our experience with PINs is mostly around debit cards. Those have significantly weaker fraud protections for debit transactions with a stolen PIN, up to $500 if you don't notice the fraud until after two days, and unlimited if you manage to miss it for two months.
Aren't signatures still used as nominal security verification? If not, what is the legal significance of "signing" a document?
Here in Japan traditionally identification for things like contracts and bank transactions is done with a seal (custom-carved rubber stamp). A lot of foreigners who move here think it's absolutely bonkers, since what if someone stole it? Isn't it really easy to clone?
Many banks here let you use a signature instead of a seal though, and some foreigners opt for it. They usually switch to using a seal after they have to re-fill a form 4 times in a row to get their signature to match the one on file, since they actually verify the things here!
I suspect that one is more of a chicken-and-egg problem, with merchants not really caring to adopt it as long as few people have the cards, and card issuers not really caring to issue them as long as few merchants accept them. But I don't really know.
When I travel to the US I'm always surprised by how backwards the approach to credit cards is:
- Waiter grabs my card and walks away with it. (In Canada they'd bring you the machine to your table.)
- In the unlikely scenario that they actually place the card in the chip reader, as opposed to just swiping it, they usually come back to me with a puzzled face. Last time I had the following interaction, "Sir, your card is giving us an error". "What's the error?". "It wants a code". "OK, I'll come and enter it". Then waiter proceeds to ask me for id, inspecting my card, checking the signature on the back carefully, etc. Basically, he thought I was up to no good because my card has a PIN. :)
Is it? From what I understand they basically use their fraud-detection algorithms to determine whether the transaction should go through. That's why, every so often, the tap will fail and you have to do chip & pin.
I once had a chip&pin transaction refuse to go through because I was out of town and used a gas station brand that I almost never use. I called the CC company and they said pretty much that was reason. They monitor all transactions for behaviors out of the norm.
Probably because it is so easy to swipe someone's wallet and then go on a spending spree without having to know a second detail.
This is actually something that has really puzzled me about the American chip rollout. As of October 2015, any merchant without a chip reader bears full liability for fraudulent chargers. I was sure that this would mean everybody would be switched over on time. Forcing merchants to pay for fraud is a pretty big threat! And yet here we are most of a year later, and I still see tons of stores with no chip readers. Even weirder, I see tons of stores with chip readers that don't work because they haven't activated it on the backend. Why....
[1] http://www.creditcards.com/credit-card-news/ownership-statis...
I personally have a single debit card, and a single credit card, as do most people I know - is the culture in the US really so different that people need so many cards?
I've visited the US, but do not live there - I never felt properly safe when I was just swiping my card and signing to pay for things. I don't even know if the fraud protection would apply to my European chip and pin card if I paid for things that way.
I'd imagine it's because the credit card companies have less restrictions on what they can do here compared to Europe, so they can afford more extravagant offerings.
Thats not even getting into the shadier side of card churning for the sign up bonuses or buying gift cards so that you can pay your rent and for other things that have a fee associated with them when you do anything besides a bank transfer.
https://www.nerdwallet.com/ has a good primer on the different cards
Many people I know use special card offers similarly. Want those 50,000 airline miles? Better sign up for Delta's Amex, can always cancel after the first year... etc, etc. There are very strong incentives from the card issuers themselves for Americans to carry multiple credit cards, and if you use the cards responsibly you can rack up some serious benefits for no cost.
My cards which are otherwise great have ridiculously high fees for cash advances (20%+).
That's not a fee, that's the interest rate. You would pay 20% over a year of interest. There are many many cards with promotional rates between 0% and 5% per year.
Source: I used it once to get money out like a debit card... without realizing there would be a fee, and got charged the nasty fee. For the card I tried it on at the time, the fee was somewhere between $10–20 on a $100 withdraw. Never tried it again.
Some ways having multiple cards can benefit your credit score:
- More cards = higher credit limit = lower utilization percentage when you carry a balance. [0]
- If you're young, opening lots of cards early can make sense because in a few years the "average age of accounts" will only take small hits if you add a new card. Also, if you foresee a mortgage in your future, you can cancel your credit cards and they will still continue to "age" on your credit report
- If you've missed a payment in the past, since payments are calculated as "percentage of on time payments," you can increase that percentage faster by opening more cards and making all payments on time.
- At least according to creditkarma, more accounts actually translate directly to a higher score.
[0] edit - see jdmichal's comment below. utilization = current balance / limit.
Just want to mention that, at least some card companies report the current balance and not the carried balance. I have never carried a balance on my card, always pay in full every month, and my report still shows an amount for that card, which is basically whatever random amount I have on the card when they report.
There are advantages to the stores providing the card (data, CC fees, brand loyalty) and very easy for shoppers to apply while in the store.
Additionally, to get a good credit score, you need a high amount of available credit and long lived accounts. There aren't many disadvantages to having multiple accounts assuming you are able to manage your spending.
This is why merchants get hit with anywhere from 2% to 5% fees and have no idea which card cost them so much. And why friends say they're "losing money" if they don't play this game. It's fakaked.
The whole shenanigans is only possible because the issuers have a monopoly where the merchant can't charge the true cost of a transition to each specific consumer. If the consumer was paying for his own kickback, the whole party would end. It works because of obfuscation and free loading off others, especially those who pay by debit card and cash.
'Verkakte'.
As a card issuer, they get a cut of the interchange fees whenever you shop with their card, even if you're shopping at other stores. That provides both a discount on their own payment processing costs (some of the fees they pay their processors come back to them when their own branded card was used), and an additional revenue stream unrelated to their own store sales.
To entice consumers to sign up for retailer-branded cards, they offer significant discounts or rewards on purchases at that retailer.
Banks can offer rewards programs for use of their branded credit cards as well, but their reward programs can never pay out as much as a retailer-branded rewards program, because the retailer can cut into their profit margin to finance it while the bank's program has to be financed entirely through interchange fees.
It's perfectly rational to sign up for an Amazon card that offers 5% off your Amazon purchases if you shop there often. It's similarly rational to sign up for a similar program at each retailer you shop with often. So a rational consumer can end up holding a number of credit cards, some of them issued by their bank, some issued by retailers, simply in order to minimize their bills.
Beyond all that, there's also people that churn through cards in order to earn rewards for opening new accounts, or whom carry large debts and transfer balances to new cards with introductory 0% interest rates periodically to avoid accruing interest on their debt, essentially using new cards as loan extensions.
In order to get customers they have to stand out from their competitors which means marketing, card perks and rewards. With that much activity, it is almost inevitable that people will end up with more cards.
Americans also like their stuff complicated. Look at health care and politics as two examples. What it often manifests itself as is different choices for different circumstances, whereas others would lump it all together. For example you generally don't have a single "bank account", but instead you have a checking account and a savings account, not necessarily at the same bank even! And yes there is federal law around what constitutes a savings account.
When making a purchase, the optimum card to use will vary. For example a store affinity card will likely offer discounts at that store and affiliated ones. Some offer cashback but it varies by category (eg it may be 5% for petrol stations, 2% for restaurants, 1% for supermarkets) with each having its own percentages and other limitations (eg min quantities, max cash back). And if you are saving up airline miles, you may want to use that relevant card instead of the others until hitting your goal.
I try to keep my cards to an absolute minimum but ended up with 4 all from my bank: a debit/atm card, another one tied to my health savings account (which has to be different), a credit card, and a second backup credit card.
1. Chip and pin protects against someone who gets your card number making a fraudulent card with it and using that for card present fraud. It doesn't do very much to protect against someone who gets your card number using it for card not present fraud.
If the chip card also implements tokenization, that protects against losing your card number to attacks on card present payment systems. If it does not implement tokenization, then you can lose your card number if someone hacks into payment terminals or merchant back end systems. Also you can lose your number if an online merchant who keeps your card on file gets hacked.
So, even with chip and pin it can be a good idea to have more than one card, such as one that you only use for card present transactions, and one that you use for online transactions.
2. Cards often offer rewards. At one point I had four cards, because one gave me cash back on gasoline purchases, one gave me cash back on grocery purchases, one had a very low interest rate, and one had a rotating cash back program that changed what category of purchases it rewarded every month.
They all had no annual fees, and I usually paid my bill in full every month, so basically each card was free money to me from the rewards, except for the low interest rate card which I only used if I wanted to make a big purchase that I would take a couple of months or so to pay off.
For example, Costco's Visa card gives me 4% cash back on all gas purchases. Costco's Visa also gives me 3% back on all travel related purchases like hotels, airlines, and restaurants. Citi Double Cash Mastercard gives me 2% back on all other purchases. Discover card runs 5% cash back each quarter on up to $1500 of one category, like online shopping, or home improvement retailers.
It's a bit of a chore to determine which card to use for every transaction, however, if you don't have credit cards, or just use debit cards, you're effectively leaving money on the table.
1) Your credit score is negatively impacted if you close a credit card account.
2) Specific cards have specific benefits. For example my insurance company issues a credit card and if I use that card when I rent a car, I not only get automatic collision damage insurance (pretty standard on many cards) but also coverage against "loss of use" charges and other risks with rental cars that many other credit cards don't offer.
3) Some places don't take all cards. My AMEX card gives me hotel points that I use a lot but AMEX isn't accepted everywhere.
4) Many benefit programs have debit cards that are to be used for specific purposes. My HSA has a debit card, but I can only use it for medical expenses and prescription drugs.
Because the need for a particular card can be somewhat unpredictable, (and just to avoid losing them) I end up carrying about six cards in my wallet at all times.
What happens if you raise the credit limit on your remaining cards to eat the loss of total credit?
If you have $50 available on one card and $50 on another card, you have $100 of available credit. If you close one of the cards, you now only have $50 of available credit. If one card is maxed out and the other is empty (because you're about to close it), before you close it you are only using 50% of your available credit. Once you close it, you're now using 100% of your available credit, which looks bad.
Edit: another alternative is to manually pay your bill every other week to keep the utilization ratio down.
Varied rewards across cards is a big reason. One card offers 5% cash back on gas and 1% otherwise (so you only use it on gas). Another offers 2% back generally, so you use it for most things.
Also stores convince a lot of Americans to make expensive purchases by starting a store credit card that has no interest for 12+ months.
For debit cards I keep two, but only because my main bank does not offer chipped debit cards yet and I need one that does for travel abroad.
Incidentally, the large schemes usually set Europe-wide rules anyway.
That the US card industry is trying to move away from requiring a pin is somewhat strange, but I think can be explained by different people weighing in at different stages. Engineers nixed the EU type system as not secure enough, and then different company decision makers start pushing for no pin, to make sure they don't see a dip in usage. What you end up with is this.
The banks collect higher merchant fees for signature-based credit-card transactions than PIN-based ones.
“While chip-and-PIN authentication is proven to be more secure, it is less profitable for Visa, MasterCard, and their member banks and it provides a greater threat to their market dominance,” the lawsuit claimed.
This is the main reason retailers want to use Chip and PIN all the time and drop signature. It would mean they could simply run debit transactions over debit rails all the time which would cost them less. Obviously the issuers want the opposite since processing over debit rails is less profitable for them.
I've heard from some Canadians running a payment processing company that it was the U.S. credit card companies lobbying for decades against it for precisely this expense. Right nextdoor in Canada they've had chipped cards for over a decade.
I don't know if it was a matter of profit so much as fear of customer alienation. First they get customers used to using the chips. Then they can make them use pins later.
The biggest hurdle will be past once all the chip terminals actually work. It's crazy how many vendors were forced to install these things before the processors were even able to process chip transactions. Most small vendors in this area of the country still are not able to accept chip cards despite having the newer hardware. Thus they are now liable for fraudulent transactions on swiped cards because their processors cannot get their sh*t together.
But once that debacle is resolved, chip and pin should follow as a matter of course.
Frankly, I too wish they had just ripped the bandaid off. After having spent a couple weeks in europe, it is idiotic how many restaurants in non-tourist towns have to scramble to find the one terminal that can print a signature slip for their American guests.
1) I go to a store and pick up what I need 2) I walk out of the store with everything and take it home 3) Store knows what I took (RFID tags) 4) Store knows who I am (Cameras, gait analysis, face, whatever, fingerprint at the door, phone swipe, credit card swipe, be creative) 5) I receive an e-bill when the vendor identifies me 6) I set up an auto-pay on my e-bill
Honestly, tap-to-pay doesn't seem like any difference at all vs cash or credit to me. Show me something where I don't even need to interact on exiting the store!
Those are all guesses but they all seem likely to me.
Nah, you can always crank up the power in line with the inverse square law. Your other reasons are plausible. RFID tags are fairly cheap, but they can't compete with printing a barcode on a label.
RFID is primarily used in application where the tag can be reused. I haven't seen many disposable RFID tags.
You walk in, pick something up, fiddle with your phone, and walk out.
The fact that the Apple people know that I bought something and smile or are nice to me on the way out just makes me feel more like they're watching me thinking I stole something.
But how do they know? Someone must know. Is it broadcast to their headsets?
http://gizmodo.com/theres-smartphone-powered-store-in-sweden...
1) Swipe card (out of habit)
2) Machine says use chip card reader.
3) Insert card in reader.
4) Machine freezes.
5) Get support - reset machine quickly.
6) Plan to swipe but luckily remembered. Inserts in slot.
7) Wait for what feels like hours to get it going.
8) Enter code
9) Approved! Takes card out.
Blah. I am sure in few years things will get better though. Or maybe just go with Apple Pay (or that type).
The German systems are a bit slower than others (and also everyone there, young and old, uses cash more than cards, which is odd), but they essentially work the same way.
America's credit and banking systems are over two decades behind the rest of the planet (including parts of India).
In NZ, Australia, Germany and Indian, people can make person-to-person transfers to anyone, on any bank, within 24-hours, for free, using just their account number and full name (and in Germany a one time use TAN number, which other countries are trying to implement). This is all taken care of at the government banking level. No Square. No PayPal. No Facebook. Just state mandated person-to-person transfers.
I need a third-party app to transfer money to my friend (Venmo). Why don't the banks allow easy inter-bank transfer here?
And with signing with my credit-card, I feel like I'm back in 2010 in Australia when some retails still hadn't adopted chip technology.
Dear US, you're a great country, but please catch up.
Us consumers are stuck.
1) Insert card 2) Wait 2 seconds 3) Enter code 4) Wait one second 5) done
Overall max 20sec, all combined, and it’s also amazingly secure.
1) double tap home before I even get the phone out of my pocket
2) instant beep when it touches the terminal
3) grab receipt
I've had people comment that it takes longer because it feels like it does, since grabbing your phone is quicker than grabbing your wallet and removing your card, then putting the card back in the wallet and putting your wallet back in your pocket. It takes about the same amount of time, but there's more time spent doing nothing since the time in motion is less.
I honestly think this is something that needs to be done as a public works project, or a non-profit.
Chargebacks are frequently last resorts for dealing with unscrupulous businesses or places that just don't give a shit once they've sold you what they want to sell you.
That said, chargebacks can also be used vindictively and/or fraudulently. And Visa/MC/etc could do a better job in dispute handling.
One major root of the problem is the liability shift from police to the cards and banks. If you're a buyer, you're suppose to file a chargeback, not call the police. If you're the merchant, you're suppose to contest the chargeback, not call the police. In a real sense, it's legalized theft enabled by a card ecosystem sustained by companies with a monopoly that make too much. To think the law favors these companies more than the people is outright disgusting.
If you as a merchant get an invalid chargeback, you can report the buyer to the police.
And for most people it's not worth trying to lift a pack of donuts off a store shelf, but if they do they get arrested and can end up with life in prison where there are three strikes laws. That's what keep the police busy and the prisons full. Credit card fraud is far more common, and usually the perpetrators are not desperate, are mentally well, intelligent and intentional -- far more deserving of punishment if that's what we're after.
The challenge is making it worth carrying "your" card
They settled in 2007 : http://www.nytimes.com/2008/06/26/business/26credit.html
Mastercard paid $1.8 billion, Visa paid $2.1 billion
MA and V have way outperformed AXP since.
And why are chip transactions so much slower than either swipe or contactless transactions? It really is something of a regression.
Phones authorize the transaction differently and are this still safe to use for tap & pay.
It also takes some time to get that money out of the merchant account. I've yet to hear someone actually doing that in practice because it only sounds if you don't think too long about it.
Furthermore, nobody is going to pay out on these fraudulent transactions once they're discovered. It's not as if the money is instantly transferred.
Not saying that current digital currencies (bitcoin, etc) will replace Visa. Just that they show that this problem doesn't cost 3% of the transaction to solve.
Yeah PayPal is pretty nice
Meanwhile parasites like Visa skim an insane 3% off of the whole US retail economy. How this isn't banned by the government is beyond me... I'm sure it rivals the sales tax in some jurisdictions.
It seems likely that the fees they earn from "signature transactions" must be significant enough that they don't want anyone using it as a chip card.
An alternative answer is that the cost of the cards themselves is so much that they don't want to do it. When I lost my wallet, a different credit union charged me $10 for a replacement card. And neither had a chip. The other banks did it for free.
It is quite weird that you don't have a chip card, since it is mandated to only provide chip enabled cards as of October 2016. I would ask your credit union for the reasoning behind not issuing you one.
Best of all I spend far less - I am more parsimonious if I pay with cash.
As someone with one foot in retail, I can honestly say these cards are not doing anyone any favors. Fraud is rampant and there are shoppers that travel the world [0.5] with stolen cards just to spend stolen cards and gift cards [1].
During the transition to chip, Square had liability shift for non-chip cards [2], but we failed to meet the requirements for a few transactions because we insisted on entering the ZIP for security, which requires key entry even at an additional fee. There was no feature to enable ZIP code entry for swipes. In these cases, trying to heighten security with additional measures was the wrong move for us. We should have just let them swipe and Square eat the cost.
Apple has been burying a scandal of its own with Apple Pay fraud. Once after a shopper left, we immediately received negative feedback through Square from someone claiming they didn't just buy anything from our store. Well, when someone has a phone, there is nothing to check. Though Apple Stores seem to have been hit hard, which seems appropriate [3].
The main problems are, 1) as retailers we cannot treat every customer as a crook nor can we profile them [4], 2) if they jump through all the hurdles, we can't then not sell them something even if something seems odd, and 3) in the case of Apple Pay, gift cards, and some swipe transactions, retailers are actually covered so even if buyers appear suspect, there is zero incentive to call them out, 4) the police don't treat it as shoplifting, and 5) some of the worst offenders are not suspicious at all, and can even be contesting their own purchases on purpose.
This is just a fact, but most of the scammers that came through our store were from NY and were black (again, just a fact, not saying anything about race or NY, though something does seem to be going on there [4][5]).
--
[0] http://www.wsj.com/articles/wal-mart-sues-visa-over-chip-ena...
[0.5] http://arstechnica.com/tech-policy/2014/11/authorities-arres...
[1] http://www.tripwire.com/state-of-security/risk-based-securit...
[2] https://squareup.com/news/why-square-sellers-can-rest-easy-a...
[3] http://www.nytimes.com/2015/03/17/business/banks-find-fraud-...
[4] http://www.ag.ny.gov/press-release/ag-schneiderman-announces...
[5] http://nypost.com/2016/04/26/rappers-used-stolen-credit-card...
TL;DR: chipped cards are not as secure as swiped cards. Also, CC processing is expensive.
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correction: "If you're looking for quick numbers, here you go: the average credit card processing cost for a retail business where cards are swiped is roughly 1.95% - 2%" source: https://www.cardfellow.com/average-fees-for-credit-card-proc...
why would a trust have rates that low? It seems competitive to me...
To clarify, supposed we lived in bizarroland where the transation fee was 7%. bizarrologicallee could post this very same comment, but as "if they had a trust, credit card processing fees would be 15%, not 7%"
(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.)
Western Union, which cut its teeth on being a "an industrialized monopoly dominating the telegraph industry in the late 19th century" and in some areas I feel succeeded in establishing a money transfer monopoly, has rates close to 15% in some cases. Here is an economist talking about its remittance monopoly: http://therealnews.com/t2/index.php?option=com_content&task=...
So in areas where western union might have a literal monopoly, or a duopoly[2], they might set their price at around 12%. This is ridiculously high, and shows a monopoly level of pricing.
1.95% is a level that reflects a fair amount of competition, not at all a trust versus cash. You can argue till the cows come home, but you can see the actual monopoly or duopoly rates on this type of thing for yourself and compare.
[2] http://www.theguardian.com/global-development/2014/apr/16/uk...