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Comment by boberoni | Hacker News Reader

> Stripe is enabling standardized access to global banking capabilities via APIs...

The API is Stripe's core competency, and they've been excelling at it for a long time.

I think one thing that Stripe does very well is allow developers to focus on developing. Setting up a business relationship with financial institutions is cumbersome and the legal details can be daunting.

While their engineering reputation is high quality, I'm curious to know how much of Stripe's headcount is in lawyering and policy work.

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I think there’s going to be some reckoning in the payments industry in general, though, in the next 5-10 years.

Covid has forced more businesses to go cashless and pay the 3% payment transaction toll, which is a hidden tax we all pay.

Could easily see post-recovery legislation scrutinizing payment players who’ve all seen their stock skyrocket this year, similar to what happened after the GFC with the Durbin Amendment (however flawed that legislation is).

DOJ blocking Visa’s acquisition of Plaid feels like a hint of things to come.

However impressive Stripe has become the core issue for me is that it’s made it really easy to work with a legacy entrenched card processing system, and it’s incentivized to maintain that system rather than replace it with something better.

Good points. I had to do some research on the Durbin Amendment [1]. It seems to be a legal cap on debit card swipe fees, which saved money for merchants.

I could see a scenario where Stripe is currently capturing market share with a 2.9% + $0.30 fee, and then starts increasing this fee once it has a monopoly.

However, Stripe Payments isn't a loss leader that's focused on growth. I would hypothesize that Stripe Payments is profitable [2] and that the 2.9% + $0.30 fee isn't a huge sacrifice. If this is true, I don't see the incentive for a monopolistic Stripe to raise the fee.

[1]: https://en.wikipedia.org/wiki/Durbin_amendment [2]: https://www.nasdaq.com/articles/stripe%3A-the-internets-most...

Roughly 1.8% of a credit transaction fee goes to the bank that issued the card. About 15-30 bps go to the card networks, much higher for cross-border. Acquirer and PSP fees are minimal in comparison. Legislation would be more effective in lowering overall merchant cost by targeting banks and networks.

It’s probably less now though because we’ve seen a macro shift to debit from credit this year, which are cheaper to process and have much lower interchange fees, so processors that charge a fixed fee are keeping more of every transaction.

>About 15-30 bps go to the card networks

Sorry, I'm not familiar with 'bps' in this context. Techie me read that with no pause as 15-30 bits per second, and then had to slow down as that did not make sense within context.

BPS = basis points

A basis point is a hundredth of one percent:

0.0001

Any idea how much of that 1.8% that issuing banks charge goes back to cardholders in the form of rewards and cash back?

a good portion of it

For countries which have good customer protection (), use of credit cards online can be reduced to just a transfer between 2 bank accounts.
That should be a lot cheaper than current fees, especially for large amounts, as you cut out a lot of expensive middlemen. It will be interesting to see if Stripe or Apple does this first.
It seems like 2 opposing fights are going on:
1) Mastercard and VISA tries to be the only methods of payments by trying to get rid of all national payment cards.
2) EU seems to want to reduce payment fees, but doesn't want customers to know the fee. I don't think they are ready to want the fees to be much lower.
Nice fees also allow for nice lobbying.

() e.g. in Denmark business's are not allowed to draw money from card before the goods are shipped

Good customer (or rather consumer) protection does not necessarily make getting money back straightforward. It just means that if you sue in court you should get a slam dunk ruling against the seller.

A card chargeback may be easier than going down that route, and you know you're going to get paid if they find in your favour, which is not guaranteed if a court finds in your favour...

the Fed Reserve has been working on FedNow real time payments for a few years now.

That could be a great achievement for replacing ACH and debit.

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