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Comment by posguy | Hacker News Reader

Processing a credit card costs $0.02 per card, plus interchange of up to 3%. Debit processing is $0.22 cents plus 0.05%. Both of these are the baseline cost, your merchant processor often won't be able to even get these rates for their own wholesale rates.

Now try and build a micropayments ecosystem ontop of this infrastructure that is very expensive to interact with (in the context of $0.01 charges). Amazon can do it for AWS as they aggregate many small charges into one bill, resulting in the service cost not being dwarfed by the payment processing cost.

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The answer to this, which I am a little surprised no one has tried to implement (maybe someone has tried?), is to charge the end customer in some larger amount - say $5 or $10, and then draw down the micro transaction amount as you go. So if you could pay $5 a month (or at a time) but gain access to every article, site, video, piece of content etc, and it auto deducts from your balance then you don't have the transaction cost to manage with the CC, and you don't have the friction of purchasing. The challenge here is like any two sided marketplace - you need consumers to pay, and then you need content providers to sign on to get enough on offer for it to be worth it for both sides.

Isn't that basically how Flattr works?

Kind of? Doesn't Flattr have you choose up front how you want to distribute your subscription? I was imagining a system where you don't have an upfront choice to make, but that as you consume content the subscription is drawn down.

That is how most toll systems work. You load up a balance on the card $10/$20 and it deducts every time you cross a checkpoint.

The difference between this and a micropayment platform would be the fees. In the toll system, the fees are paid once. With a micropayment platform, the fees would be per transaction.

There can be a "self hosted" version of such a platform that say each content-provider can host but I am not sure it will work out against the cost of maintaining it includes much more than just hosting (securty, auditing, refunds, taxes etc).

There have been several projects that did exactly that. They just haven't really taken off. Like Blendle. https://en.wikipedia.org/wiki/Blendle

I see they're moving to a subscription model now too in an attempt to make it more attractive.

I have Blendle along with subscribing to a number of independent outlets, and really appreciate it. I don't want to buy a sub for all the newspapers I might read and it saves a hell of lot of time worrying about whether I've already read too many articles for the month. It's a few cents per read, and as I don't have all day to browse the papers anyway it is very good value. I hope they, or someone like them, really succeed in the long-term. It feels good to be giving money to journalists.

This is really just circumventing the problem. As an end user, I don't want my money to be split up in to all of these random pools that private companies have control over.

>charge the end customer in some larger amount - say $5 or $10, and then draw down the micro transaction amount as you go.

Wow, I just realized why Steam does this for in-game purchases.

That's also so they can deny refunds for cash balances — once you pay money to their company, you may never receive it back under any circumstances. That way they can 'refund' you games at any time, but not ever have to record a cash transaction to do so. This is, not coincidentally, universal among online video game and microtransaction stores, with the singular exception of Apple who does not compel all purchases through an intermediate currency balance.

Steam only requires the Steam Wallet for microtransactions. Games and DLC are usually bought "directly". Refunds go to the original payment method, unless you explicitly request that it should go to the wallet.

> with the singular exception of Apple who does not compel all purchases through an intermediate currency balance.

Google Play doesn't have one either, FWIW.

Oh! That's news. Thanks for the heads up, I didn't know that about Steam.

Pretty sure that's been the case since they started doing refunds.

My personal experience may have given me an incorrect view on it due to unusual reasons. I appreciate the correction all the same.

I must be misremembering, but isn’t that what paypal did long ago?

Bitpass was an early micropayment startup that was around for a few years. Beanz and Flooz were late dotcom era "micropayment" startups (they were more like gift certificates really) that were very well funded and failed terribly. More recently Kim Dotcom tried it with Bitcache. There are significant problems with the model.

From what I can tell as a lay observer, such schemes are likely illegal in the US. Excepting certain entities with specific legal carveouts or very careful navigation of the legal system such as Paypal and Venmo, every scheme that I am aware of in the US is just maintaining an account with a single provider that you charge and draw down for services from that single provider (e.g. Walmart could allow you to make a Walmart account that you can use to pay for goods from Walmart). Circumstantial evidence leads me to believe that the two key aspects that are illegal are: withdrawal (recovering your balance into a fungible form) and 3rd party payment (account is managed by a different legal entity than the entity being paid) with the latter being the more impactful of the two. The reason the lack of 3rd party payment is deeply problematic is that without 3rd party payment the account must be associated with the ultimate provider of the goods/services, so the consumer can not consolidate or rebalance their funds. Therefore, it is highly undesirable for a consumer to maintain a rolling balance which is the only reason for such a scheme in the first place.

As secondary evidence for it being illegal in the US, the scheme you are proposing is pretty much exactly what WeChat and Alipay do in China. It is also exactly the problem that Paypal and Venmo were made to solve, but for some reason they chose much more convoluted and restricted solutions even though from a technical standpoint it is harder to do what they actually did rather than the absolutely trivial technical problem of the fully featured solution which just manages account balances and transfers between them, a literal CS 101 type of technical problem.

Forgive me if this is a naive question, but how is this different from Patreon, but dolled out in smaller ad hoc amounts? Is the legal distinction because with Patreon each user chooses the distribution ahead of time? Couldn't this be worked around by creating a white list of publishers you are willing to support that approves some set limit or transaction amount ahead of time? So as an example I whitelist a newspaper, and agree to pay $.005 per article view?

This is the answer I envision exactly. The NMA simply needs to offer an annual solution. I think $50 to $100. I have always wondered why it hasn't been done before now also. They complain constantly about people reading their work for free, yet provide no honest mechanism for payments...and expect people to sign up for monthly charges to read one article. Why would anyone pay 5x, 10x to read on article in a paper they know they will not need to read again if they are just researching a particular topic and it comes up in their search results? The rest of the paper is probably dross and yet you are expected to pay for the entire thing and pay for ads etc that have no relevance to you. The quality of the paper would be forced to improve under such a system and they could no longer hide behind forced sub revenues.

I doubt that any transaction costs some percentage of the transaction's value. The true cost shouldn't differ whether I charge $1 or $10 (maybe large transactions incur extra costs for security measures). It's just a convenient way of pricing for the credit card company.

That's pricing in the risk of taking the charge. The $10 transaction is 10x as risky to a credit network's bottom line as the $1 transaction. That's also why the debit percentage is lower.

Many of the entities that process transactions do fraud monitoring. Oftentimes, the fraud monitoring has different levels of time spent depending on amount: under $10 and the system just ignores it, under $1000 and a computer uses some heuristics, and above that, it might be flagged for human review. These aren't exactly 5% of the cost of the transaction, but they do show that the cost to process the transaction does increase as the amount increases, and fraud prevention, detection, and responsibility is how companies justify charging a percentage on a transaction.

I don't think this is inherently the issue. News sites could aggregate charges and bill you at the end of the month.

I think the bigger issues is that if I see an article presented to me as shared on social media or in search results I assume it is free access. I click in, and if they ask for payment, it's a turnoff since I thought it was going to be free. Also, I don't like how credit card information can be continuously used by the organization.

I want to be able to hand an authorization for a single one-time payment to any organization and not an authorization to charge however much they want, whenever they want.

That goes for hotels too. I want to be able to say "Here's my credit card" [but I don't authorize more than $130/day].

Doesn't directly solve the root problem, but I use https://privacy.com for all of my online purchases. It lets you create multiple virtual card numbers, so every site I pay, I give a different card number. If any single site gets hacked, I can disable just that card. And each card can have a spending limit per transaction/day/month/year. Or, you can make the card a "burner" card that automatically deactivates after the first transaction.

Edit: I suppose that doesn't work as well for hotels specifically, at least in terms of giving a card for incidentals. Since it isn't a physical card, not sure if the receptionist would be keen on entering a digital card like that? But I've definitely used it to pay for rooms online.

I suspect there are some regulatory hurdles if the held money can be spent with companies other than the one that takes the deposit. You bleed into banking rules.

Other companies also do aggregate payments (I assume for the same reason). If you buy several things from Apple (apps, subscriptions, or other things) you'll get a single charge 1 or 2 weeks later with all of your purchases.

Does it have to be a credit card? Could it not be crypto or some other option? And in doing so, would the fees be less?

How do they do it so easily in other countries?

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