VISA offers restaurants $10,000 to stop accepting cash | Hacker News Reader

VISA offers restaurants $10,000 to stop accepting cash

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For those who are interested in these kind of things, you should check out UPI API built by the government of India. With a singular goal - to kill Visa and MasterCard and make digital payments free in India.

The ultimate goal is to tax on consumption - tax payer base in the world's fastest growing economy is abysmally small. So the economists kind of gave up there and leapfrogged into building a digital economy : make all transactions free and charge GST on consumption.

The API is brilliant - recurring charges, refunds, text message payments, etc - basically all the venture funded startups in the US are all free in India.

That looks really interesting. But, the government will hold a lot of information about their citizen, how they will use that? I do not know if something like this could be replicated in every country.

The government already holds a lot of information about their citizen. I think this worry is particularly American and not shared by most people.

You ask, how they will use that? They don't much use what they already have, so the best guess is that there will be no use. Which is pity, since it can be used for a lot of good. But I guess you would say it is lucky, since it can be used for a lot of bad.

> But I guess you would say it is lucky, since it can be used for a lot of bad.

"whatever can be used for bad will be used for bad" - murphy's law

the government will hold a lot of information about their citizen, how they will use that?

Exactly the way they've already announced that they'll use it: To collect tax.

Isn't that better than a couple of private companies, Visa and Madtercard, holding the information (and taxing you meanwhile)?

Definitely not. The corporations can't put me in prison or kill me, can't force me to use their services, can't use the data together with other data sources available to governments, don't have incentive to limit my spending and can't flat out take my money, and so on.

Governments can ask companies to comply to get information.

But the companies can then come forward to the public and/or not provide requested data, like it already happened many times.

To clarify, this was not built by the Government of India. This is a common misconception because the entity responsible - the National Payments Corporation of India, sounds like an arm of the government. However, it's actually a private corporation whose shareholders are the main banks. [1] Some of those banks happen to be state owned, however.

Also, the government has not and will never give up on Income Tax. Although only an estimated 1.5% of the population pays Income Tax [2], that's still the lion's share of govt revenue. By encouraging digital payments, the govt thinks it will be able to track money better and make people less likely to dodge any tax, whether consumption or income tax.

Next, transactions on UPI are free for the time being, as mandated by the govt. But if it becomes successful, the plan is to introduce small fees ($0.01-0.06). It's likely that the customer will pay that fee, rather than the merchant, which is the opposite of what we're used to with card networks. It's possible that this will hurt UPIs popularity for small transactions. But the banks that funded the development and upkeep of this API need to see a return on investment, so they're unlikely to keep it free in perpetuity. One compromise is that the fee will only apply to P2P transactions, rather than point-of-sale transactions [3].

Why did the banks fund this then? Don't banks everywhere jealously guard their APIs and minimise interoperability? It's different in India for a couple of reasons. Firstly, India is heavily regulated. The govt issues many declarations, especially in the banking industry, that are meekly listened to. The govt encouraged the creation of a common API, and it was built. Secondly, the banks themselves want to do it. In India, payment apps are very popular because of the great UX. Most restaurants and many small vendors accept mobile payments through "wallet" apps like PayTM (partly owned by Alibaba). These apps increasingly account for most digital transactions. They're nimble because it's easy to sign up with them - unlike banks they don't need to perform KYC until the user has $200 in his wallet. The banks can see the writing on the wall - either they provide a compelling payment experience or they will be replaced. The next generation of customers might end up opening bank accounts with PayTM instead.

Here's the really interesting nugget in all of this though. We have a payment API exposed by all major banks. We're not stuck with only the substandard apps developed by banks, anyone can build one, pending approval by the banking authority (RBI). It's reported in the press that Facebook and Google have both applied for this approval [4], so we could see it integrated with WhatsApp, Messenger and Android in the near (3-9 months) future. If you can pay through WhatsApp, why take out your credit card?

[1] - http://www.thehindubusinessline.com/money-and-banking/npci-b...

[2] - http://economictimes.indiatimes.com/news/economy/policy/why-...

[3] - http://gadgets.ndtv.com/internet/news/upi-payments-tax-charg...

[4] - http://timesofindia.indiatimes.com/business/india-business/w...

actually its not completely true. The banks were MADE to do it by Raghuram Rajan (the ex-director of the Reserve Bank of India) The day of UPI launch was the last day Raghuram Rajan was in office. Even today, you see news of banks trying to sidestep the UPI. For example HDFC tried to start charging UPI transactions, but was soon made to shut it down.

GST tax is also a private agency - the GSTN Pvt Ltd. - but that is the structure the govt created for autonomy.

The RBI in India is heavily progressive - for example the business models of Yodlee is at risk for bank data scraping, because the RBI is creating a new kind of a regulatory structure (called "Aggregator NBFC") whose only job is to hold personal financial information.

The plan to start charging for UPI has been a debate inside the RBI that I have been privy to - everyone has bets on different sides of the table. My personal bet is that the govt is going to keep digital payments free for the next decade atleast. The revenue share is too less - the long term strategic gains are too high to not do otherwise. Plus, the govt is promoting digital payments in villages which were predominantly cash - this cannot happen unless digital and cash are made equally free.

Anyone can integrate with UPI - you can too. Its not very hard. Facebook, Google have had licenses for a long time. Its the demand side that they are figuring out.

> The banks were MADE to do it

That's what I said too, read my comment once more. I only pointed out that the banks didn't resist it, because they could see that a compelling payment experience could help them fight PayTM.

> Anyone can integrate with UPI - you can too

That's what makes me sceptical of your expertise. My experience working in a payments startup tells me that the only way to integrate with UPI is to partner up with an existing bank. For example, Flipkart's PhonePe couldn't simply start calling UPI APIs. They use software provided by Yes Bank Limited and all payment requests were routed through Yes Bank. This is why all PhonePe users have @ybl addresses, not @phonepe.

> Its the demand side that they are figuring out.

I don't see what "demand-side" needs to be figured out. Everyone agrees that giving the 200M users of Android/Whatsapp the power to make payments would be desirable. What Google and Facebook must actually figure out is how to integrate with YBL or whichever bank they're partnering with and to make sure their UX is good.

UPI addresses are linked to banks. When a merchant integrates with UPI, they are using it to transfer money and accept payments. For example if you use UPI via Razorpay - it does not ask you to create a new UPI id. What Flipkart/Phonepe did was a play to own the customer - and bring more people to their fold. So that was a strategic partnership between YBL and Phonepe via which users could implicitly get a bank account as well! However you can link your existing UPI id with it as well.

YBL does not provide software - they have certain API that you can use. You can integrate with other banks as well...Or use Razorpay. The difference between both is that it's harder to talk to banks.

The banks are still resisting it. The banks are not hugely threatened by Paytm in general but UPI is causing a drop in revenue. Check out HDFC trying to introduce UPI charges and the hullabaloo. It would have done it, if it hadn't gotten a rap from the regulators.

Payments is a two sided game - I think that Google and Facebook are figuring out how to create walled gardens around payments in India, when UPI basically makes it easy to switch apps. This is purely my conjecture at this point.

So yes, my expertise is definitely doubtful ;)

While you're right in pointing out that UPI was built against VISA and MasterCard and it is an innovative solution, I would not brand it as a brilliant API.

Recurring charges are currently not supported, we've seen frauds to the tune of 40cr happen already, "text message payments" is not part of the specification. It is a bank transfer method, that happens to run on mobile phones. It uses AES-256 with a static IV, and then calls it a hmac (common library spec).

Also, this is not the Government, but NPCI (which is a private entity held by all major banks in India).

Disclaimer: I work for a payments company in India.

For those interested from an executive chef. 10k? That's a shitty deal for the restaurant.

You have two things off the top of my head that are working against that: a) cash sales are easy. Really, if it's a small purchase they will prefer to buy I cash.

B)if it's a large purchase that the customer wants to pay in cash, (and assuming the restaurant does a lot of large tables/bookings), they can delete it from the system and avoid tax.

B) sounds shit I know, but it happens. I have seen it on multiple continents, over my professional life (17 years atm).

So what is 10k with a. 2-5% charge? A drop in the water.

Restaurants run on(best case) 25% costing. To put this into context the way we are taught is:

33% cost worst case. 33 food, 33 labour and overhead, 33 profit. Never works out like that (in a bad way), but that's your base.

Execitutuce chef's aim doe 25% to cover the losses in the other sectors(overstaff etc).

So a standard non-chain restaurant that charges $15 for a meal is looking at $5 "profit" worst case per meal.

If they are running at peak at all times with no downtime or overbook or refund due to screw up.

Which is great. Would be lovely. Never happens that way though. Not every day is busy, and people don't book(allowing restaurants to staff up).

Skipping all the intermediate parts, what little profit they make a cc takes a percentile off the top.

Doesn't seem like much to most people but for an indiatey that knife edge, those cc charges can add up.

> Big interchange fees enable credit card companies to offer sweet rewards to big-spending consumers and get paid by the banks that issue the cards—at the expense of small businesses and customers.

> Swipe fees at a cafe become part of the price of a cup of coffee, principally to the detriment of cash customers and “vanilla” cardholders who aren’t earning airline miles when they get their caffeine fix.

And that's why I avoid card transactions at "Mom & Pop" stores

Yes, It's good to remember those "cashbacks" and miles are not free, they came from somewhere

I'm assuming that all the stores for which accepting card payment makes a difference already adjusted their prices (in one way or another) to cover it. By using cash you're just paying more to offset the card fees. A lot of small places I know tell you to pay the card fee extra instead - and that's a pretty cool solution.

The card fees are not the main source of income as far as I understand: it's the interest and other fees that really bring in the big money.

$10,000 is only about one year of credit card transaction fees at $500,000 in revenue per year.

There is a cash only brewpub chain in Colorado (Mountain Sun) that easily pulls in millions per year. Everyone complains about it being cash only, but the places are so packed that it is a no brainer for the owner. 2% is big bite, especially in the restaurant business.

$10,000 / 30 cent transaction fee comes out to a net positive for the credit card companies after 33,334 transactions (not included the average 3% additional fee).

If we assume a modest 100 credit card transactions per day for high transaction industries like restaurants and food trucks, the 30 cent fee will return the $10,000 of revenue in 333 days not including the percentage fee.

There is a reason restaurants/food trucks/gas stations... charge an extra fee for using credit cards on transactions below a certain price. It's cause credit card companies charge an arm and a leg for each transaction.

But isn't cash legal tender in the US? If you have just eaten at restaurant, you have a debt to it. I thought they had to accept cash then?

Swipe before you buy or they refuse service.

A cashless society in the United States would be quite a surprise. With the pain that prepaid cards are to use and reload for those that aren't well heeled, combined with the pure, unbridled hatred that businesses have for the merchant services industry in general, it will be a long time before cash is not encouraged as a form of payment at most businesses.

Meanwhile in the UK card transactions overtook cash transactions not just in volume (this has been true for a long time) but in actual transaction counts last month.

I'm not sure which way you mean this, but I'd be surprised if less than 80% of transactions in the US were on a credit or debit card (though I'd love to see real numbers, my anecdotal observation is surely biased).

I would wager you are an outlier at 80%, although I can't find published US statistics of these numbers. Small transactions such as buying a stick of gum or a newspaper inflate the transaction counts at the low end.

Meanwhile in Germany I feel we are a decade behind the US when it comes to accepting electronic payments. In Berlin there are so many Bars/restaurants that are "cash only" when the next ATM (that is a partner of your bank, otherwise you pay a 5 EUR fee to withdraw) is blocks away... It's beyond annoying

Cash in most cases is better for the business, hence why its so popular.

Cash is the only unrestricted currency in Germany. Law demands that they have to accept it.

No, law does not demand that. You have to accept it to settle existing debt but that's it. For new customers you can demand any payment method you want. If they don't like it they are free to not form a contract. A cashless restaurant would be legal. They are just rare because of customer preference. But just look at online shops: they generally don't allow you to pay cash.

https://www.gesetze-im-internet.de/bbankg/__14.html

"Auf Euro lautende Banknoten sind das einzige unbeschränkte gesetzliche Zahlungsmittel."

Online shops allow you to pay cash through payment on delivery (Nachnahme).

As I said, this law does not mean that you have to accept cash for every transaction. It is often repeated but that does not make it true. Requiring a specific form of payment is well within the freedom of contract.

And Nachname is not offered by every shop, probably not even the majority. If it's offered the usually for a steep surcharge. And while we are at it: Try paying your car tax in cash to the government and you will find it to be absolutely impossible.

And I think that is a good thing.

i have no problem with accepting cash, just when its cash only. Or at least don't scam people when they want to withdraw 20 EUR from a bank that is not their with 5 EUR fee.

Sometimes i just don't have cash on me and when i learn i can't pay for the 40 EUR dinner i just had by card and have to go look for an ATM, it's just annoying.

And from my experience New Zealand was a decade ahead of the US for a long time. Growing up everywhere accepted card payments. I had a bank card when I was about 10 and that's how I spent my pocket money. Over here in Germany some places that do accept card only accept EC cards, which my N26 MasterCard isn't. Not having the right payment method to pay the people who installed the kitchen in the apartment I was renting was a very foreign situation.

meanwhile, AU:

http://www.abc.net.au/news/2017-03-27/is-australia-on-the-br...

Cash is (still) king.

Man, when I read about how the swipe fees for credit cards remain so high (3%!!), even decades after the infrastructure's been built out and can chug along in maintenance mode, I just think.. where's the market solution to this? Where's the upstart processor that charges 1%, still make bank because it's just 1s and 0s now, and exert real competitive pressure on Visa and MC?

Charging 1% for existing payment network card transactions would put them out of business real fast when the wholesale cost to processors is more than 1%.

Do you have a source for this?

https://usa.visa.com/content/dam/VCOM/download/merchants/vis...

Those costs are only so high because of reward systems that pay credit card users for purchases.

Get rid of all of the rewards and 1% is easily enough to cover transaction costs.

Then how do they operate in the EU, where the fees are capped at 0.3%?

Those who pay the fees (merchants) aren't the ones who chose which cards their customers have. High fees also seem to allow high rewards to draw more consumers. I think it would be difficult to challenge Visa and MC just by undercutting them. It seems that regulatory action is the most likely thing to break Visa and MC's dominance.

The legal way might put pressure on Visa and MC, their attempt at a settlement failed last year [1]. I don't know what happened next.

> The settlement may now need to be renegotiated, or the case could go to trial.

> "Swipe fees are an improper and unnecessary hidden tax on consumers," said Jeffrey Shinder, a Constantine Cannon partner representing Amazon.com Inc (AMZN.O), Costco Wholesale Corp (COST.O), Wal-Mart Stores Inc (WMT.N) and other opponents of the accord. "The structure of swipe fees is back on the table."

Anyone knows if the case went to trial after that court of appeals decision?

To compare, in the E.U. [2], "the Regulation caps interchange fees for consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction.". In the U.S. the fees today seem to be 10x higher[3].

[1] http://www.reuters.com/article/us-visa-mastercard-settlement...

[2] http://europa.eu/rapid/press-release_MEMO-16-2162_en.htm

[3] https://www.richmondfed.org/~/media/richmondfedorg/publicati...

Who knows, maybe cryptocurrency will be the answer for this, by accepting Bitcoins/Litecoins at the cashier.

At 5 dollar transaction fees [1], credit cards are much cheaper for most cases (they also give rewards for purchases).

[1]: https://www.reddit.com/r/btc/comments/6gek0z/average_bitcoin...

That's what off chain payments is for.

businesses do not generally* offer discounts to customers that pay in cash so consumers use the high return cards that also cost businesses the most in fees. Aka, it's the current inefficient market standard.

*business that have lots of small transactions often charge extra for credit card purchases below a certain amount and big purchases will also charge extra since the marginal/absolute cost is a lot.

This. Note. Is. Legal. Tender. For. All. Debts. Public. And. Private. Which of these words does Visa not understand?

That's not legally binding.

There are many flaws with your absolutism here, starting with our government system not being one of absolutes.

In this instance, no debt is created before a transaction. As long as the merchant states up front, "no cash," you are free to walk away if all you have is cash.

On the contrary, the government happens to be full of Sith.

As someone else in this thread noted, they can just not give you stuff until you've paid by card. Then you do not have a debt, so legal tender doesn't apply.

That phrase doesn't mean what you think it means. Allowed to use it =/= must be accepted.

Edit: here are the Feds words. https://www.federalreserve.gov/faqs/currency_12772.htm

It's actually you who doesn't understand.

There's already thousands of businesses where your dollar bills are unwelcome (try sending an envelope full of $100s to Amazon for your next order if you don't believe me).

https://www.treasury.gov/resource-center/faqs/Currency/Pages...

>The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."

>This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Is this even legal? Cash is legal tender for all debts, public and private.

Whenever I order food and services at a real restaurant (not a fast-food joint where I must pay up front), I incur a debt with the expectation that I will settle it as I leave. Can the restaurant legally refuse to accept cash as settlement for my debt, as long as I'm not using cash in a blatantly unreasonable way such as paying $250 in dollar bills?

If they tell you up front, "no cash," before you order, you are free to walk away and the merchant is under no obligation to enter into the transaction with you.

It seems that it would not be legal, unless announced upfront : http://www.news-leader.com/story/news/watchdog/2014/12/24/as...

I live in Sweden, and this is very common. Handling cash is inefficient for everyone involved.

The big downside is that people that didn't adapted , usually older citizens, find themselves in a worse situation. This is still more obvious in situations like the buses where you can't even buy a ticket as you need to buy it in advance. If you don't have one, you need to buy the ticket on your mobile device, and this is not easy for everyone in society.

So it is mostly a good thing, with more efficient transactions, but it is not heaven.

This will slow things down at some places such as 7-11 and Starbucks. It bugs me when I'm in line behind someone using a credit card and an affinity card. There's all this waiting, and pointing and clicking, and signing. Plus the additional delays caused by cloud-hosted point of sale systems. A cash sale takes about ten seconds.

These days in the UK you simply touch your card to the reader, no PIN, no signature. It is definitely quicker than cash. Only works for under £30, above that value you have to put your PIN in.

Same in other parts of Europe, Australia, and New Zealand

> Only works for under £30

This is set by the bank. In most cases you can adjust the limit. I remember Lloyds allowed you to do that.

I'll be the non-US person to point it out this time: This is a US problem, not a credit card problem. In Oz, I've got both the store card and the credit card on my phone. The first gets scanned while the items are being processed. The second gets touched at the end and takes max 5 seconds till "approved". In the UK it's even faster.

Even that would be faster if the shop moved to the "insert cash or card, or select cashback amount" method popular in the UK rather than having to tap "card", "no cashback", "full amount" first (Oz / coles)

Actually, for the fastest system I know, see London Underground. For a while now you can tap your credit card instead of the usual Oyster and you'll get close to immediate access.

There's all this waiting, and pointing and clicking, and signing.

Ok, I agree that it's a bit annoying when I have to wait a few seconds before the terminal will allow me to tap, but it's wait, what, signing?

In all seriousness, the problem you're describing is archaic terminals. Here in Canada I can't remember the last time I signed for a credit card transaction; I very rarely even have to enter my PIN. And it's much faster than paying cash.

I have to sign at the supermarket, at the bookstore, at the hardware store, and at the pharmacy.

Huh. Paying with card is way faster than counting cash unless you happen to have few items and even change easily available. Just 1. insert card, 2.enter pin, 3. ok amount.

In most places you would have done 1 and 2 while they are still scanning your items.

Then of course there are the old, slow machines that take half a minute to connect over some shitty gprs connection but those are only used by individual cloathing and jewelery merchants, not 7-11.

That used to be true, but in the USA the new card systems are way slower. You have to insert the card, it's not clear when it needs inserted, it asks all the time. Then you have to leave it there for a good while, then it asks to sign.

Cash, or android pay is way quicker. Or if you can find one a chipless credit card.

Yes, that's "point of sale in the cloud". If they lose their network connection, they can't even accept cash.

I would prefer it if restaurants started accepting cryptocurrencies. I don't really enjoy the fact that paying with a credit card lets both visa and my bank to know where I eat.

Not to mention that credit cards are a giant pain in general, "this transaction was declined".

> I would prefer it if restaurants started accepting cryptocurrencies.

That's a completely different problem with completely different implications. Doesn't matter if you pay with cash or credit card, dollars are still dollars and are regulated by the Federal Reserve.

To change to cryoptocurrencies is to leave the dollar. So it is not about how you transfer money, but about which currency you work with.

Similar discussion/topic: https://news.ycombinator.com/item?id=14755034

This is bribe, and should be treated like this.

Anti-monopoly and human rights guys should perhaps take a look into this.

Reply on news.ycombinator.com