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Comment by edwinwee | Hacker News Reader

Some more context: this has been around for a couple years (for only new Stripe users). Payments are costing more to process. Card network fees have been gradually increasing over the years.

Stripe has kept this at bay for its longtime users for as long as we could, even as it's been getting more expensive. But with the water rising across the whole pond, we sadly have to start charging for some of these things.

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Are processing fees really going up? As a longtime brick-and-mortar retailer, I am used to fees going up and then changing to a new processor to get competitive rates again. You just go back and forth between the different providers every few years. They give you a lower rate and then slowly raise the rates because they know it's a pita to switch.

As a SaaS founders, I use Stripe because it was easy to get reliable subscriptions up and running. I have no returns, so this particular policy doesn't impact me. However I know that I am still overpaying for convenience and it will likely be time to make a change this year or next.

Maybe when Stripe will drop rates once they start experiencing the same churn other processors deal with.

Hmm, so when refunds are processed, Stripe still always has to pay the interchange fees?

As far as I know, this is true.

I work on this type of stuff thing at a major payments company and I can say this is _not_ true. For refunds, almost all of the interchange fee is returned. Sometimes even more than the original interchange fee is returned (don't ask why).

Caveat here is that the card networks' rules are ridiculously byzantine and making blanket statements is usually a bad idea.

> Sometimes even more than the original interchange fee is returned (don't ask why).

If that behavior is at all deterministic that sounds like it would be incredibly prone to abuse.

Think about things that have increase in values during during a clearing period. Stock dividends is one.

What portion of the transaction cost goes to stripe and what portion goes to Visa/Mastercard or the card-holder's bank? Which part is the cost that is increasing?

Stripe is Visa.

Visa is one of Stripe's largest shareholders.

https://fortune.com/2015/07/28/stripe-visa/

I don't know what Stripe's cost to merchants is.

As far as Visa/MC and the banks? The banks get something like 9/10 of that portion off the top; Visa/MC get about 1/10th.

Can this be further clarified? Are they keeping the 2.9 percent of the transaction and the transaction fee? If so, run away as fast as possible. If not, the transaction fee is still too high. Plenty of banks will will negotiate a much better fee with specific commitments, but it’s not too bad if you find value in the other features.

Yes they are keeping the 2.9 percent plus the +0.30 transaction fee. In my case since we are in Canada they are keeping 3.5%

Could you partially return the fee, such that the transaction is done "at cost" for Stripe?

Don't those fees get refunded to Stripe in case of a refund, though?

If so, I'd imagine it's more fair to refund them completely, and instead increase the base fee for payments.

Why? Some businesses and types of businesses have higher returns.

From what I understood:

The interchange fees aren't going up because of higher rates of returns. They're going up to pay for credit card rewards.

Stripe is keeping these fees when a purchase is returned simply to increase their overall profit.

Why punish businesses that have higher rates of returns if that is not the cause of the higher fees?

Just as an example, any business that deals with sex - porn sites, strip clubs, etc. have higher returns.

Why should your mom and pop diner with low fees pay more? When you are in certain types of business, you can take that as a cost of doing business.

But no matter what the reason is, if Stripe doesn’t get the money back why should they eat the cost? We should want companies that we use to pass the cost of doing business + profit to make enough to be sustainable.

I don't think you understood my point in the first post. The point is that we don't know if Stripe still has to pay interchange fees in case of refunds. It is assumed they don't, and they're just pocketing it.

Ahhh understood.

I’m seeing various things, but the consensus seems to be that the payment processor does get refunded the interchange fee.

https://www.quora.com/How-are-credit-card-processing-fees-ha...

So it would be fair if Stripe charged a small transaction fee for a refund but returned the bulk of the interchange fees.

Do the banks and network still charge the full fee if a transaction is refunded?

Maybe now you can start charging us properly for debit card transactions, instead of pocketing the difference.

My company is now evaluating options to move off Stripe because of this fiasco and how it was communicated to customers, along with the complete lack of explanation of whether this impacted the % fee or just the flat $ fee.

Is that even possible? I though debit cards entered using purely digits (vs pin) have to be run through the credit card network.

Is there a provider who provides debit card online processing?

In the U.S., fees on debit cards are limited based on the Durbin Amendment.

There is a different fee between PIN and signature debit, but not so much that signature debit matches credit cards.

https://www.valuepenguin.com/credit-card-processing/intercha...

I know the fees are lower. I’m asking if it’s possible to submit a transaction via an online API as a debit rather than credit.

> submit a transaction via an online API as a debit rather than credit

Yes, via ACH/SEPA Direct Debit but I don't believe it's common outside of Europe.

Processors, like First Data, will know at the point of transaction if it's a credit card, debit card, or even a prepaid card. Though it's been a few years, I remember the Adyen API returning all of this in the pre-auth response (had a business that didn't accept payments from prepaid cards, fraud was too high).

It's also possible this is encoded in the BIN/IIN (1st 6 digits), but my memory is fuzzy on the specifics.

It seems to be attached to the BIN. Our processor has a bin endpoint where I feed it the first 6 and it returns a bunch of info about the card, including credit/debit.

BIN will tell you if its prepaid/card type. There's some weird rules around prepaid, like your can't set the recurring flag on prepaid on non-reloadable cards.

Adyen says they can route cards on different networks though i never used them personally.

Why are payments costing more? Isn't technology lowering costs more and more for these companies? Is this just execs needing another summer home so they raise the prices to whatever they like?

Rewards cards that offer all sorts of perks. Cash back, travel bonuses, $500-$1k signup bonuses, etc.

I'm wondering if it has something to do with the increasing prevalence of rewards, which is driven by competition between issuers?

I mean, I get somewhere between 2% and 5% back on virtually everything I buy. On top of signup bonuses.

Whereas when I think back to 10 or 15 years ago, it seems like I usually got 1% back, and I still had cards that didn't offer any rewards back at all -- which is unthinkable to me today.

Just my anecdote, and I don't know if it's the main driver, but it certianly seems like rewards have become a much bigger thing.

" I get somewhere between 2% and 5% back on virtually everything I buy."

This is more a function of the extreme power that VISA etc. have over the transactions. They are locked into their fees and make it impossible to do things like 'pay this other way and save 2% etc.' i.e. trying to do anything to obfuscate to the consumer that they are in fact responsible for 3% of every purchase you make.

So various entities find ways around those controls by giving you money back in another direction.

Basically, there's immense 'market pressure' on those 3% fees, but the oligarchy has control over it, so those fees will nature be eaten away by any and all other angles.

If there was no oligarchy, those '2% back' programs would be less likely to happen and what we would see is material margin erosion for such fees.

Actually - it's mostly because of cost / benefit shifting.

A card can attract USERS by increasing the rewards it offers -> and charging MERCHANTS for the reward.

So visa infinite cards might charge a much higher swipe fee to a merchant, and then make available cash back + first party car insurance + lots of bennies to the holders of these "elite" cards.

They justify this to merchants by claiming that these "elite" users spend big bucks.

The reality - if users of cards were charged the actual swipe fee their card incurred -> they would push for SUPER low fees or switch to debit cards.

Many lucrative business depend on the person picking the service not being the one paying for it or the kickback going to someone other than one paying.

Many lucrative business depend on the person picking the service not being the one paying for it

So in this case it’s better for the user but worse for the person paying.

Just the opposite of enterprise software sells.

Merchants also bear all the costs for fraudulent purchases. Even if they followed as much procedure as the CC company provides.

Pretty evil! I imagine the card companies have an explicit rule that, in order to accept their cards, a merchant can't charge their users any extra fee? I wonder if some regulation were created that bans rules like that from existence whether this would change tomorrow.

Kroger stopped supporting Visa cards for a minute and I realized that's literally all I carry.

The opposite law already exists in the EU - merchants aren't allowed to charge users extra for card purchases

the intent was to dissalow discrimination cash vs card. i know eu likes that electric payments, it a lot easier to track.

but what with the fees from card a vs card b.

The EU sets limits on card interchange fees.

Suddenly all "reward cards" lost most of their rewards...

Good. They’re a regressive wealth transfer from the poor to the well off.

> I imagine the card companies have an explicit rule that, in order to accept their cards, a merchant can't charge their users any extra fee?

In the US, this was the subject of a recent class-action suit! https://www.paymentcardsettlement.com/en

Meanwhile it's become the new hot thing locally (Southern USA) to charge credit and debit card users a "convenience fee" sometimes as high as 35 cents a transaction. Everyone went from offering discounts to cash users to simply charging card users more.

Interestingly, in 2013 both credit card minimums (up to a maximum of $10) and surcharges (up to a maximum of 4%) became legally federally, although there are 10 states that still prohibit surcharges (including New York, California, and Texas).

So seems like $0.35 is allowable on any transaction of $8.75 or more.

[1] https://www.thebalance.com/credit-card-surcharges-315423

I think it's also worth noting that many of those states allow cash discounts.

https://www.ncsl.org/research/financial-services-and-commerc...

I've started seeing this trend in a lot of small shops here in NYC as well. There used to be a ton of "cash only" places, but now I'm seeing more places that I would expect to be cash only accepting credit cards with a "convenience fee."

I thought it was illegal but I may have been wrong.

What is the difference between a "discount for cash payers" and "convenience fee for card users", when the only two options are cash and card? In both scenarios, price for purchasing with cash is less than price for purchasing with card. Seems like semantics to me.

AFAIK payments are only really costing more in the US. Europe, Australia, Canada have all regulated or negotiated lower interchange rates in the past years.

Costs might be lowering but not necessarily the fees charged: https://www.pymnts.com/visa/2020/report-visa-eyes-biggest-in...

Yeah, the headline was weird to me because it's been this way for a long time.

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