Hacker News Reader

Comment by jaywalk | Hacker News Reader

>Almost every commercial transaction at the retail level allows you to use a method of payment that does not guarantee that the seller will actually receive that money (credit cards).

That's not how credit cards work. At all.

>You order food for pickup, and the great majority of restaurants will let you walk in and pick a bag off an unattended table without any attempt to verify that you did in fact order what you're taking

I have literally never seen this once in my life. Where do you live where the "great majority" of restaurants operate this way?

View on HN

>>Almost every commercial transaction at the retail level allows you to use a method of payment that does not guarantee that the seller will actually receive that money (credit cards).

>That's not how credit cards work. At all.

Not the OP, but that's exactly how cards work. When a card is swiped the seller doesn't receive the funds until possibly days later. There is absolutely no guarantee that the seller will actually receive that money, since it can be disputed or charged-back.

In retail, the actual risk of not receiving money for a credit card transaction is pretty low. In the case of a stolen credit card, the retailer is not responsible for the fraud and will be paid. Outside of some sort of mistake (or outright fraud) on the part of the retailer that they refuse to correct, the fact that the credit card was physically present resolves pretty much everything else.

The actual risk of a merchant not receiving money for a credit card transaction is quite high. Chargebacks are enough of a business problem that many large retailers have whole teams only devoted to processing and disputing them. There are entire companies that create products and services to help merchants reduce just "friendly fraud" chargebacks—that is, chargebacks where the cardholder says the purchase wasn't authorized but they are just lying or it was a family member who made the purchase. That there are entire industries devoted to helping reduce it shows that the risk of chargebacks is definitely something that merchants take into account in how they run their businesses.

In case of a stolen credit card, it's 100% the merchant who pays (that's why they're called charge-"backs"). The only exceptions are if the transactions are indemnified by a third party partner.

All the card brands have multiple chargeback codes for fraudulent transactions, even card-present ones, so the fact that the credit card was physically present is not some kind of guarantee that the merchant would win a chargeback representment.

In the US maybe. I have never in our business seen anything like a chargeback or heard of anyone ever doing something like it. It is a very American problem. Even if people did do so they would be punished quickly. It is only a problem in a society with a high level of crime and little or no consequences. The law allows a chargeback for 12 months here. Not a problem, not even in our webshop.

> It is a very American problem

This is laughable, as North America has the lowest chargeback rate of all the global regions. This is just biased and ignorant anecdata.

> It is only a problem in a society with a high level of crime and little or no consequences.

If you're going to make nasty anti-American claims, you should at least back it up with real data. The facts are that chargebacks are a bigger source of fraud loss outside of North America than inside it.

> Even if people did do so they would be punished quickly.

This is not how credit card fraud works.

Yes. I didn't say that the risk is incredibly high. If it were, cards would not be used. The point was that payment is not guaranteed, since chargebacks are allowed.

The risk is 0.001%, and it brings in 30% (or whatever) more business. This has nothing to do with trust, it's a simple equation.

You're comparing apples and oranges. This is not a risk, revenue, or trust discussion. The discussion was that credit card payments are not guaranteed due to chargebacks. This is a truism and has nothing to do with the percentatge of chargebacks that occur.

This is exactly correct, and the parent's suggestion that the risk of chargebacks is something like 0.001% is WAAAAY off. Like, by orders of magnitude off. Any business that processes credit card transactions at scale, card present or card not present, is going to have a whole department of people who all they do all day long is deal with chargebacks.

It does seem like there are some people here who think they know how credit cards work but actually have no idea.

Not all businesses that use credit cards are in the broken US system. It's not a widespread problem everywhere.

According to Merchant Risk Council survey data[1], in 2021, friendly fraud in Europe was 1.3% (of transactions), 1.6% in Latin America, and 1.5% in APAC. In North America it was only 1.0%. So, it's actually a smaller problem in the US than in Europe and other global markets.

Further, "Annual Ecommerce Revenue Spent to Manage Payment Fraud" was 9% in Europe, 12% in Latin America, and 15% in APAC. It was only 5% in North America.

[1]: https://merchantriskcouncil.org/resource-center/surveys/2021...

Chipotle and Starbucks do it with online orders. However, they do that because they are big enough corporations to replace anything wrongly taken for free.

This really varies a lot with where you live. I'm almost an hour out of philly, very solidly middle-class office-y medical/pharma area and yeah, the sushi place I go to (not a chain, local place) just lays out the stuff on the counter for pickup, and you just look at the attached receipt since you actually what _you_ ordered. This would of course be ludicrous to do in some parts of the city itself.

Reply on news.ycombinator.com