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Comment by kt9 | Hacker News Reader

I think the idea here is for amazon to allow customers to add cash balances to their amazon account without amazon incurring the 2.9% credit card transaction fee.

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I think it's more about getting to the segment of customers who do not have credit cards. There's no way amazon is paying the same fee as anyone else in the world for credit card fees, they're the single biggest e-commerce site and have almost certainly negotiated some substantial deals.

> There's no way amazon is paying the same fee as anyone else in the world for credit card fees

I'm not so sure. Is there any actual evidence of large retailers negotiating down interchange fees? Even Walmart resorted to legislative pressure to regulate fees.

The power of network effects is strong. Retailers are reluctant to drop support for consumer-preferred payment methods and lose that business. That gives card networks a lot of negotiating power even with large merchants.

Tbh I don't know. But you'd never see that evidence anyway at it'd be behind a very meaty confidentiality contract.

In the late 90s, my rate was 2.75% and the site I was running was very small potatoes. This era of 2.9% being considered standard despite additional competition, greater efficiencies, and higher volume is basically price gouging.

There's basically two reasons for that. One, 2.9% is only standard with premium processors like Stripe and Square. They charge a premium markup over interchange. You can still find "interchange plus" processors which will be much more value priced, although they usually are not as easy to work with.

Two, the underlying interchange rates have risen since the 90s due to reward cards. It's more expensive for merchants, but a lot of that goes into customer pockets via reward programs, so it's somewhat debatable whether it qualifies as price gouging since it's driven by consumer choice.

Very large retailers do negotiate their fees but there's only so low they can go because different parts of the fee go to different entities along the chain (visa/mc, banks, merchant providers, etc.)

For countries that are cash heavy, it's a common way to pay for online services. Some examples:

Brasil Boletos: this is interesting as there are registered and unregistered versions of Boletos. With unregistered customers can pay any amount of money to it.

Taiwan has a similar system. You take vouchers to various stores (like 7-11 or the post office), pay cash, then it'll make its way to the online company.

[0] https://en.wikipedia.org/wiki/Boleto

I was about to make that connection, this is similar to Brazil's boletos. The difference is that in Brazil it is a standardized system that spans all banks: anyone with a bank account that wants to receive money can have their bank issue a "boleto", which is essentially a barcode that routes money to the destination account. A payer can go to any participating place (post office, convenience store, bank tellers, etc) and surrender cash, which then gets routed through the banking system to the right account.

Which brings us to a potential problem: there has been a tremendous amount of fraud in this system (Brazil's Boletos), with all sorts of malware changing the barcode when it is downloaded in an infected computer to issue a boleto with a different destination account.

Back in 2014 this was well documented by Krebs[1], and at amazing detail by @assolini from Kaspersky[2]. I also documented a specific case that happened to a friend[3]. While it should be possible to mount similar attacks on the Amazon system, having people deposit money into others' accounts, it should be straightforward for Amazon to detect this, since it is a single issuer system...

[1] https://krebsonsecurity.com/2014/07/brazilian-boleto-bandits... [2] https://securelist.com/analysis/publications/66591/attacks-a... [3] http://cs.brown.edu/~rfonseca/notes/net-bb-dns-poison.html

I'm pretty sure this is behind the Chick-fil-a app's in-app cash as well.

I find value in it because I use the app a lot (there's one next to my office) and because they give you a free sandwich every 10-12 purchases. I'm guessing that free sandwich budget comes from the savings of transaction fees.

I think it's to serve the very large and very real market of people without credit cards. I guarantee they're not paying 2.9% credit card transactions; At their bulk they've got incredible deals with every card provider. I'm also sure they're giving a percent or more to the store accepting cash for them - Similar to gift card buying models.

7% of the US, a first world nation with amazing credit services, is unbanked[1]. From that same source, nearly 20% is underbanked - As in, they still go to Check-cashing places and get cash directly, rather than getting direct-deposit.

[1]http://fortune.com/2016/09/08/unbanked-americans-fdic/

Credit card networks (Visa/MC/Amex, not Chase/Wells Fargo/etc) rely on their fixed infrastructure to extract profits. If Amazon can disrupt that business it'd be a massive shift.

Why wouldn't the store charge Amazon at least 2.9% as well for handling the transaction. How much do stores typically earn on gift cards?

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