But, I believe, there is a way: they can introduce wallets for $1-2 patrons: put $10 in a single transaction, then charge the wallet once it is a time to pay to creator. This should aggregate small transactions into larger ones and significantly cut the costs.
They did aggregate up until this point, at least for most patrons and creators. If you did a regular pledge with a monthly charge, you only made one transaction a month. Similarly, each creator got paid once a month with one transaction. The exception was per-post patronages, which do indeed have more fees and are less suited to the micro-payment model. That is NOT what this was about, though.
The real motivation was to support gated content.
They want to bring creators into their subscription system, where you pay a fee to access content. They had a problem, though, in that people could pledge, access content, and then simply cancel their pledge before getting charged. To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion about when people get charged (do you pro-rate the first charge, with or without the next month, etc.) because people would pledge a certain amount and see a different amount charged. The alternative is to have people on their own billing cycles, which is much less confusing for customers, but eliminates the possibility of aggregation.
Basically, they want to abandon the goodwill/patronage model and become a subscription service, likely because the latter model is far more lucrative.
Still an issue if most people support 1-2 creators with $1-2 pledges.
For comparison, both Square (which is not known to provide the best rates) and Stripe advertise better than 2.9% + 35¢, and that’s the rate you’d get without any negotiation at all.
What am I missing?
I wonder if they have problems with anti money laundering regulations? Financial transactions are supposed to clearly indicate the beneficiary. If you're paying into a wallet that gets divvied up later, that's not possible so showing the paper trail of who benefits gets difficult.
Now, since it's basically acting as an escrow payment, Patreon might have some laws restricting what it can do with that money while it's holding it. For instance, they likely cannot legally earn interest on that money. Similar to how the security deposit held for a rental cannot yield interest unless that interest is paid to the renter.
That's sort of the same thing here, right? Prefill a wallet and you don't have to pay extra for processing fees (equating to convenience going back to tollways).
But if you actually ask people whether they want the first couple charges to have weird timing, or whether they want to pay significantly more in credit card fees that don't go to the creator...
I mean, it seems like a dream business model, you basically channel donations to content creators taking a cut, collecting goodwill along the way.
Their service cannot be more than a (refined and well designed as you want) CRUD app with payment processing, it's hard to imagine having such high costs that is not profitable.
Then they should have never strayed from the original model, where they charge you once per month for all your pledges, causing only one fee paid to the payment processor.
(If they needed to accommodate people pledging small amounts to very few creators, they could have introduced some sort of quarterly, biannual, or even annual payment option instead of just monthly. I'm curious if they evaluated this option and what they concluded.)
And you’re right, in that perhaps they should send $3 every three months or. $6 every six if you’re only giving to one person.
Payment cards are not a legal tender, so you can do whatever you want, provided you didn't sign a contract not to do.
You can impose a minimum purchase amount for accepting it though.
Certain professions (i.e., taxis) are even forced to accept credit cards.
Are you sure, that it is by law, though? In most countries, it is a contractual obligation: when you make a contract with your bank or payment processor, one of those terms & conditions is not to discriminate against the card payers. The purpose is to force the processing fees on the merchant, otherwise the cards would be at a disadvantage and would not get popular. For a case study, see Southeast Asia (1. cash rules there; 2. you can pay with a card, but you will have to cover the fees too; 3. as a consequence, everyone uses cash, see also point 1).
In the case of taxis, I would understand if they voluntarily had terminals for their own protection (so they would not get mugged for few banknotes), but forcing them... that sounds wrong.
> Are you sure, that it is by law?
It is: Article L112-12 from the Code monétaire et financier. "Le bénéficiaire ne peut appliquer de frais pour l'utilisation d'un instrument de paiement donné." (The seller shouldn't charge any fee for the use of a given payment instrument).
https://www.legifrance.gouv.fr/affichCodeArticle.do;jsession...
More generally, the law requires that the total to pay is to be presented to the client before he choses how to pay.
"Semantics" is about the meaning you're trying to express.
"Syntax" is the way you've chosen to express that meaning in this particular case.
e.g.:
def blah
"a"
end
function blah() {
return 'a';
}
The difference between "card surcharge" and "cash discount" is treated as 'semantic' in the merchant contract context, but is it a distinction without a difference from the customer's perspective?
It happens that, with programming, explaining precisely how each part of a program corresponds to "meaning" (and there are different levels and dimensions of precision, e.g. "xs.append(x) means it'll add object x onto the list xs" vs "xs.append(x) means it'll look up the value of the symbol 'xs' in the lexical environment and then the global if necessary, and do the same for x, and then look for xs's attribute hash table for a key named 'append'..." vs "xs.append(x) means it'll check if the array backing the list has room for one more element, and, if not, look for a free block of the right size in its freelist, and, if not, use 'mmap' to grab more memory from the OS, and barf if that fails, and then copy the array data into a new array of twice the size, and free the old array...") also gives a precise description of the behavior of the program (assuming hardware perfectly obeys the abstractions it's meant to obey), which is all the programmer is interested in.
This is a field where machines reliably turn symbols into actions; hence, the meanings of symbols are the central object of study. Semantics are extremely important and are almost all we need to think about. This is not the case in most fields. (I guess one other profession that comes to mind where semantics is important is law.)
To bring it back to your original question... yes, semantics is important to us. If we want to call something unimportant in that way... "It's a matter of definition" or "We're arguing over definitions" strikes me as the best fit.
(One other distinction: Programming language terms have semantics for machines. They also have semantics for humans. Whether the computer recognizes something as a closure, or complains about a syntax error or executes something completely different, is very important. Whether human programmers call it a "closure", a "function", a "procedure", or some other term, is generally unimportant. Thus, the maximally correct dismissive comment might be something like, "It's human semantics".)
Q. Why are there different prices for paying with cash vs. with my Visa card?
A. A merchant is permitted to offer discounts for paying in cash, however, the discount must be given as a reduction from the standard price.
Which was recently thrown out on appeal, so that’s fun for any place that was relying on it.
Places can simply work out a monthly total the cost of CC fees and increase their prices overall (or on specific products) to recover that cost.
(and no, bitcoin doesn't fix that at all)
I think if we were in an alternate universe where the government managed a free utility for digital payments no one would find it strange for a second.
Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc.
Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc...
Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc...
It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.
At least they used to be. Chips ruined that. Now I have to stand there staring at the screen for half a minute waiting to respond to prompts and to pull the card out at the end. For most transactions, cash is probably faster than using a chip.
Everyone hates the chip.
At least in Spain
In the US it's chip and signature, and you can't sign until after the chip verification (either signing a paper receipt, or with a stylus on the terminal screen).
In addition chips are new and some terminals are painfully slow (30 seconds) to verify. I'm not sure I've ever seen one finish in under 5 seconds, though a few merchants have terminals that come close to that.
We now have contactless payments for under £30 in the UK, similar to Apple pay but you just place your card on the reader.
When you use a PIN you get a nice two factor signature from the card chip: it signs the current timestamp and the PIN you knew, and can do both as quickly as chip's processing capability and the bandwidth between the chip and terminal allows.
US banks came up with a dumb compromise just like most of their websites use Wish-It-Were-Two-Factor auth and secondary "Security Question" passwords, the chip cards in the US are doing their own Wish-It-Were-Two-Factor: sign a timestamp, wait some amount of wall clock time, sign a different timestamp.
Most of the wait in a chip purchase in the US is artificial just to make sure that two timestamps are "sufficiently" different. US banks should just give people PINs and stop this silliness.
Is this conjecture, or do you have actual citations to back this up? Those same banks have been issuing debit cards with PINs for a couple decades.
Every chip card I've received to date from several different major US banks has included some variation of "Great news! You don't need to learn or use a PIN to use this card."
My personal reaction every time has been, "But what if I want to use a PIN?" and this far I've never seen a satisfactory answer in those same letters or on those banks' own websites.
Admittedly that is purely anecdotal, as far as citations go, but in my mind it seems pretty clear what these banks think about PINs for credit cards.
Though I’m in the US. I hear chip transactions are way faster in other countries where they’ve been using that system for a while.
When I was visiting Sweden the terminals did not support NFC or I was just doing something wrong.
I had high hopes for bitcoin like currency having a flat fee in cents and an optional percentage few for insurance if you do want a charge back and other nice credit card like features.
But bitcoin is riddled with its own charge mania nowadays.
You may not care about security, but all I said was it's worse, and not good enough for me which you have not denied.
In that case cash can save ~5 minutes.
Near field is also limited by transaction size so it's far from sipe for anything.
Waiters used to take cars and swipe them ASAP presumably to get better tips by being prompt. Now, put this off until they finish a full round and/or put cards in and start doing something else because it's going to take a while.
Granted, this is far from a complete switch, but it was still noticeable.
Major US banks made $171B _profit_ last year. Lets not pretend that they're already bending over backwards to lower costs on transaction processing.
It's a free market and you as a merchant are free to pick your vendor. In addition, you don't even have to accept credit cards if you want--you can just take cash or check, or even just cash. Of course people entering your store might not buy anything from you because who the hell carries around cash or checks anymore, but no jackbooted thugs will force you at gunpoint to accept credit cards.
The credit card industry is a huge, highly competitive industry with little barriers to entry. Massive market forces are at work squeezing the margins for transaction processing fees to as little as possible.
My bet is that transaction fees are priced at what they are because:
- its cheaper than handling cash or checks
- it results in more revenue, even with the "cash back" discount given to CC users.
- it is more traceable and easier for your bookkeepers to manage
And to be honest, I believe many small business who take cash only do so because they aren't reporting all their income. When it is off the books cash-only, you can pocket the sales tax, underreport income tax, pay your vendors cash under the table, etc. I also believe that if their margins are so thin they can't afford a 2% transaction fee they probably have no business staying in business anyway. Whatever they are doing is more likely than not a value-destroying NPV-negative project to begin with. (see also: just about every business shown on those "save my bar / save my restaurant / save my hotel" TV shows)
Holy God. I might as well say it's all equally free, since when the heat death of the universe is done with, there will be no difference between something having existed or taken place or not.
What makes you think we could do it digitally?
I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it
Though, the Federal Reserve is quasi-public/quasi-private. But for any systemically important transactional system you can be sure that the government is plugged in one way or another. The Clearing House company is the main alternative to the Federal Reserve electronic systems for interbank transfers (they're the "private" ACH operator), and they're heavily regulated, with the Federal Reserve given substantial oversight authorities.
Just because the current system sucks and needs to be replace, does not mean that replacement should be another Government Run System.
As I stated in my original comment the government is too closly integrated to today's electronic systems as it is
I want the government out, not more ingrained
Note that nearly all fees are flat fees.
Even they have a $15 fee and sometimes a $15 receiving fee as well.
Ideally you'd have zero fees for transactions under $5. $5-$X0000 would have a percentage based fee and thereafter a flat fee for large transactions.
In general, real time payments for large amounts can be made for <1$ (both fedwire system for its participants and various EUR systems do that), and consumer payments that can be (a) batched and sent in bulk and (b) get delivered e.g. at the end of day, not in real time, those have a cost of ~$0.01 (perhaps 0.02 in case of small volumes) to the bank.
So, in EU, everyone has access to something that's pretty much equivalent to USA "wire transfer", and it might cost e.g. some 40 cents or can be offered to consumers either "for free" as part of a common services bundle/maintenance fee.
I have really hopes for the Euro
If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits.
[1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-...
[2] https://www.reuters.com/article/us-mastercard-results/master...
[3] https://www.reuters.com/article/us-paypal-hldg-results/paypa...
Anecdotally, I worked at a company store years ago where we would charge customers paying with cards a 2.75% fee, which is what we were paying. And that store was operated by a Fortune 500 company.
Also, virtually every small private business I go to in Los Angeles charges some fee, or has stipulations, for credit card transactions.
The big change came in January 2013 after a big court judgment. Adding fees, though, is still illegal in some states: https://www.creditcards.com/credit-card-news/business-surcha...
Made me wonder about the stores/restaurants I frequent here that do charge, apparently they're still ok to do so after 2015(link from the comments in your linked post): https://oag.ca.gov/consumers/general/credit-card-surcharges
There are more stores not accepting credit cards than charging extra.
Credit card "processing fees" however are high because of the stupid rewards programs that Americans are so addicted to because it makes them feel like they are "sticking it to the man" and getting money back, to the point of having dozens of plastic cards in their wallet. Of course with processing fees at >1% of gross value no cashback or airline miles program is ever going to make you come out ahead.
In the EU there are no silly rewards games and fixed processing fees of at most 0.3%.
And then VC dogs biting them to make fatter profits so they find ticket master like shoddy processing fee scams.
Even for very large businesses, actually processing cards directly is pretty difficult and generally not worth doing. Instead you can just get a processor like Stripe or Adyen to give you good rates on an interchange-plus model.
The problem was that was per pledge. So if, like me, you support a couple dozen creators at $1-$3 each, you would expect to pay 24 x $.35. But all those payments are charged in one transaction. So they are only paying $.30. It isn't 5c per transaction they were planning to skim, but $8.
Which honestly makes it even more baffling an idea.
It's like designing a fancy new electric car but leaving off the wheels.
However, they talk about that problem in the article. What if a Patreon supporter pledges/makes a subscription on Day 1, then another on Day 2, and a third on Day 3, and so on?
In their original blog post [1], they spoke about how, ideally, they'd issue each of those charges to the supporter immediately; and then begin recurring billing 30 days later after that date. However, if those charges are made on different days, and the anniversaries occur on different days going forward, then they don't have the opportunity to condense them into a single transaction.
Patreon are looking for a solution where someone can create a subscription, be billed for it immediately (i.e. not wait for beginning of next month), and then continue from there with recurring monthly payments. With a naive system each subscription would have its own cadence, preventing transaction consolidation. They also talk about how, if they have a standard monthly billing period, then there are issues with waiting until the next period to make the first charge.
Perhaps they didn't explain this as well as they could have, but it made sense to me. It seems like a "Patreon Wallet" could indeed be a solution to a lot of these problems. Refill your wallet with a single large transaction, then draw funds from it when pledging to support creators.
[1] https://blog.patreon.com/updating-patreons-fee-structure/
They could delay payments to creators by a month to combat this but then they're holding the funds for a month, which brings you back to the original problem of seeming like a bank.
This seems like something Stripe could address, maybe.
EDIT: Just saw the other reply that explained this is how it currently works. I'll leave my original comment up though
They already group the transaction on the 1st of the month for me. I use PayPal, is it different for other payment types?
WRT Patreon, I'm 99% sure that this is the reason they didn't propose something like a "balance card" where patrons just give them $X and both pledges and fees get deducted from that -- since that money's being held and then paid to someone else, it could end up being too close to a "money transmission service." (I'd thought there was a non-zero chance that this was a motivating factor in this change to start with, actually; coming so soon after a huge investment round sure makes it seem like there was a condition to that investment that spurred this change. Christie Koehler wrote a good post about that on her blog, although I don't have the link handy.)
How is that different from putting money into a Patreon account, which can later be allocated to content creators, at which point the funds are disbursed, minus Patreon's rake?
Patreon could certainly do that, but either they haven't considered it or--probably more likely--they don't like the idea. There could be practical reasons for not wanting to do that; a lot of people have talked about Patreon's problems with chargebacks, for instance, when people want to cancel pledges but they're bundled together with pledges they want to keep going all in one credit card transaction. In this balance card scenario, it'd be easy to have someone say, "Hey, I wanna cancel the monthly pledges I'm giving and get my balance back," and they could lose a lot of goodwill if they say, "Yeah, you can't do that." (While many of us would rather receive cash than gift cards, we generally understand that an iTunes gift card is something we can only use by spending at iTunes.)
(Edited to add: of course, this means that Patreon could have done a balance card thing if they were willing to say "but you can't get your balance back if you cancel," but I doubt that would have won much more love than the per-transaction fee idea did...)
At least in Europe that's not true. If I buy milk (6% VAT) and beer (19% VAT) in the supermarket here (The Netherlands), I don't have to split that in two transactions.