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Comment by dangwu | Hacker News Reader

It shouldn’t be surprising. That’s how you steal customers.

I’m not in the payment space, but it seems like it’s rapidly commodifying. The hardware to support mag stripe, contactless, and EMV isn’t terribly expensive per unit, and as long as there’s some bare minimum functionality, the competitive edge is the processing cost.

This seems less about stealing customers and more about keeping Stripe attractive to existing customers who might be continually evaluating other payment providers and their hardware offerings.

Long term, we likely end up like China with WeChat and Alipay, using apps and QR codes primarily for payments eventually. Venmo and PayPal support C2C and C2B payments with QR codes, Zelle is beta testing them currently.

https://www.paymentsjournal.com/how-wechat-alipay-networks-m...

Gravity Payments, First Data Merchant Services (the direct sales side of First Data), Vantiv/Mercury and numerous other platforms and platform resellers (Square & Stripe resell others processing platforms) have spent the last decade driving down prices.

Some wholesale contracts for certain ISO resellers are as low as 1 basis point (.01% of a transaction) and $0.01 for bank underwriting (where the bank holds the chargeback risk if the underwritten business goes bankrupt), with platform fees being as low as 3 basis points and $0.02 cents.

Stripe is probably doing the underwriting in house, hence why sometimes deposits of recent transactions to your bank account are delayed for a few days to a week.

Square & Stripe don't seem to be reselling other processing platforms.

> We work directly with multiple networks

https://squareup.com/us/en/payments/payment-platform

> Stripe’s platform connects directly to Visa, Mastercard, American Express, Discover, JCB, and China Union Pay across global markets

https://stripe.com/newsroom/news/direct-platform

In the merchant processing industry, there are frontends (where your transaction initially is routed for approval by Visa/MasterCard/American Express/Discover or by one of the Debit Networks) and backends (where the amounts of these transactions are debited between banks).

Square and Stripe are both Independent Sales Organizations riding atop Chase Paymentech and First Data respectively: https://www.quora.com/What-payment-processor-do-Braintree-St...

Stripe does use Wells Fargo for the backend settlement, they are one of the most popular acquiring banks on First Data (though many other banks can be used for underwriting risk and settlement of payments on First Data).

Don't you need to be a bank to settle funds from issuing banks? That's not what I interpreted you meaning when you said "platform reseller" for processing.

I believe Square is a bank now, so maybe they'll stop using Chase.

The frontend (what authorizes the transaction with the card network, like Visa, Pulse, Star, Mastercard, etc) and backend (settlement bank that ACHes the cash around and usually takes the underwriting risk (unless the independent sales organization, eg: Stripe or Gravity decides to do this themselves)) are generally called a payment platform in the industry.

This platform can get wrapped with many different payment terminals (Verifone, Pax, Dejavoo, Ingenico, etc) or processing interfaces (Authorize.net, PayPal, Stripe, Square, et all).

Square does look to be a bank now, but it appears the only products they are underwriting risk on are loans to businesses, which they immediately try to sell off to third party investors: https://www.cnn.com/2021/03/02/tech/square-bank-business-len...

Kinda surprising, I would expect them to have underwritten their own payment processing, but it might be the case that they don't want to have the outsized liability of chargebacks on their books if a client business goes bankrupt, all to save 2 cents on a $100 transaction.

Perhaps once the US economy slows its rapid economic shift they will consider handling their own underwriting and batch settlement.

This is tangential but you seems really knowledgeable about the payments industry. Can you perhaps recommend some sources to understand how the payments infrastructure works (POS but also web/online/mobile)? I only seem to have a broad idea and would love to understand the nitty-gritty of it all!

This is a good overview of the landscape in the UK, though it's a little out of date.

https://storekit.com/advice/uk-payments-industry/

Interestingly Square basically created this category (the merchant aggregator) by somewhat secretly running all their early clients' payments through a single merchant account.

There's certainly a lot going on now.

Having previously implemented a variety of other payment providers, I am now looking at a Gravity Payment integration.

Not done yet, but so far pleasantly surprised by how they communicate with integrators.

Beware, Gravity screwed over numerous businesses I work with. They purposefully misclassified businesses SICs (a code that defines what very specific category your business is, eg: a bar or a restaurant) to reduce credit card processing fees (interchange fees) for their customers, but were caught doing this for a massive number of businesses.

The card networks and issuing banks that had this money stolen from them went after the businesses that dodged these fees illicitly, with bills of tens of thousands or hundreds of thousands of dollars for fees that should have been paid.

huh, that's unexpected.

Thanks for the warning, I'll pass it along.

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