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Comment by themihai | Hacker News Reader

It would be nice to see a Union of merchants. I'm pretty sure Amazon got a sweat deal given its power but the poor small merchant pays the full fee price.

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Isn't it the norm for smaller stores to pass the cost onto the consumer?

That's in effect just as good. Visa doesn't want to be seen as "the card it's expensive to buy stuff with".

All stores pass the cost onto the consumer. It's in the price.

Having to pay the full price limit smaller stores' power to compete on price with the bigger ones.

In many countries it’s illegal for merchants to charge differently based on payment method. So ironically you are better off using Amex or some high fee card with rewards because the merchant has to factor it into the sticker price.

In many countries being the USA, whose Supreme Court deemed it anti-competitive for courts to strike down Visa/Mastercard/AmEx's clause that makes it illegal for merchants to pass along processing costs to consumers.

Also the UK

Fortunately, there are countries where it's not the case. When you think about it for a moment, it's extremely clear how unfair this clause is for everybody except credit card companies.

Honestly, I prefer it as a consumer. In the US, one can relatively easily find a card that gets 2% back on every transaction, if not more, with 3-7% not uncommon for certain spending. Even at 1-2% back, most of the price increase by a merchant is recouped, and some nominal extra amount is perfectly acceptable to me for the convenience. Cash isn't free to accept either for most merchants, given the security risks, so I can't imagine I'd be saving much (if anything) if different prices were allowed for cash transactions.

It is not true in the US either since 2010. See my adjacent comment above.

Contract clauses don't make things illegal. In the countries where it's illegal it's because the government has made it so, presumably because of lobbying by the card companies or large businesses. See the UK for example: https://www.gov.uk/government/news/card-surcharge-ban-means-...

Surcharges are generally considered anti-consumer, because businesses often hide them until the final payment step, disguising the true cost of the product and reducing price transparency.

Same in Sweden, no card charges here. They used to decline card purchases on smaller amounts, but I don't see that anywhere anymore either. Our credit card rewards are absolutely terrible in comparison to the US though.

Interesting. A minimum purchase of $10 or $15 for credit cards is still common at bars and small, independently-owned stores in the US.

I was at the grocery store the other day to pick up a package, bought an energy drink for 8 SEK (<1$). In a convenience store prices are just higher to cover fees. (I guess)

I haven't paid for a beer with cash since I came home from a trip to Indonesia & Australia ~3 years ago. A normal bar-beer would set you back between 30 and 90 SEK (commonly 65) in Sweden, exchange rate is about 1$ to 9 SEK.

This is incorrect. It would not even make sense on its face, as all business costs get passed down to customers. If they did not, then the business is losing money.

As of 2010, Dodd-Frank legislation explicitly made it illegal for payment card networks to prevent merchants from offering discounts for different payment methods:

https://www.ftc.gov/tips-advice/business-center/guidance/new...

> A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card.

In Mar 2017, Supreme Court went further and said state laws banning credit card surcharges were a violation of merchants’ first amendment rights:

https://en.wikipedia.org/wiki/Expressions_Hair_Design_v._Sch...

What you may be thinking about is rules prohibiting charging different payment card network prices for various credit cards (i.e. different price for Visa vs Amex vs Mastercard vs Discover). This was deemed allowable by the Supreme Court in Jun 2018:

https://en.wikipedia.org/wiki/Ohio_v._American_Express_Co.

As an aside, this Ohio v AmEx ruling was of great benefit to tech companies that operated market places, because

> This decision was considered to have created a new type of rule that could make it difficult to seek antitrust litigation; with credit cards being a two-sided market serving two distinct sets of customers, a successful antitrust argument would have to show how both sides of the market were harmed.

In Australia, the merchant surcharges are allowed, but not more than the cost to the business, with the regulator (ACCC) paying a lot of attention to that.

Most small operators will have a 1-2% surcharge for credit cards and Amex sometimes either not accepted or higher.

https://www.accc.gov.au/consumers/prices-surcharges-receipts...

That doesn't mean small merchants are unaffected by the higher prices they have to charge. They still have to charge higher prices, which means less profit.

They also pay a higher rate of tax than Amazon

"Isn't it the norm for smaller stores to pass the cost onto the consumer?" ...and sell for more than the big ones, loosing cutomers? Yes. This is what would be nice to be avoided.

The trouble is that Visa/Mastercard/Amex are all american corporations who have effectively extracted a ~1% tax on a large proportion of every in-person non-cash monetary transaction worldwide. That's a huge amount of power for an unelected, unaccountable organisation to have, and one that returns money to its american shareowners and employees only.

Exactly how the tax is collected is a matter for the businesses to hide. I don't like it one bit, but there's nothing I can do about it.

Maybe you simply intended your comment as hyperbole but if not:

- It's not a 1% tax worldwide. For example most of Europe uses debit cards instead of credit and the fees are regulated to be much lower than 1%. This also demonstrates that Visa's power is not unchecked.

- Visa may be listed on American exchanges but foreign nationals can buy shares no problems.

On the percentage, I was curious and had a look at Visa's financials [0]. On payment volume of $10.4T, they reported revenue of $24.1B, so they get about 0.2% overall.

[0]: https://annualreport.visa.com/financials/default.aspx

I'm curious how the numbers look to get to that result. The lowest rate I've heard of was ~0.7%.

EU maximum for debit cards is 0.2% and for debit cards is 0.3%. Major clients like Amazon, Tesco or Aldi have leverage and probably pay half that...

https://www.linklaters.com/en/insights/blogs/fintechlinks/20...

Isnt the majority of VISA transactions on credit cards, not debit?

Those have rates in the 1-3% range, so even with the lower debit rates everything should average to more than 0.2%.

The end merchant pays 1-3%, then there are a whole bunch of middle-people that take a cut.

The merchant acquirer (eg Stripe), the merchant bank, the issuer bank, the tokenization service (if using Apple/Google/Samsung Pay), there's a long list of people taking part of that fee.

Visa as the network operator takes some of that cut as well, depending on the type of transaction, the type of card (debit vs credit vs "premium" credit).

It's much more complicated than Visa getting all of the merchant fee.

I don't know about Visa specifically but debit cards are about twice as popular than credit in the US [0]. As a non-American, though I don't have a source off the top of my head, I think that outside the US credit cards are even rarer.

[0]: https://www.creditcards.com/credit-card-news/debit-card-stat...

Yeah, visa and it’s partners collect the 1% tax. Don’t forget the cut squiring banks take.

EU law has regulated the maximum fee down to 0.2% for debit and 0.3% for credit cards since 2015, I don't know if it has further progressed since then. But regulation is clearly needed, since these "taxes" on transactions create an inefficient market and they want to encourage, not discourage card transactions.

It should be down to the level already that the big stores think that card handling is cheaper than handling cash.

> and one that returns money to its american shareowners and employees only

This isn’t quite right. Nothing stops British people from becoming shareholders of Visa.

I don’t see how the nationality of the company matters. If a private British company were extracting this tax for the benefit of its shareholders, why would the fact that it’s your own countrymen screwing you make you feel any better?

Your point is correct, but nationality matters (a) because Visa et al. pay taxes in the US and not the UK (b) because most higher-up employees of Visa et al. are based in the US and pay taxes there and not in the UK (c) because the executives are not on-shore, they can sell customer transaction data to US TLAs and anyone else with near-impunity.

Visa as an American corporation is subject to American law. So it's not just a matter of who is making the profit.

It still blows my mind that we have credit card fees structured mostly in percentages of the payment amount instead of what essentially the costs associated with payments are: fixed.

Not all costs are fixed. Dealing with fraud, for example, becomes more costly with higher transaction values.

Can you explain that a bit? Isn't the anti-fraud system in place (software, people) roughly the same, no matter if 2B or 20B are transferred per day?

If a person were to commit fraud they would do it on big, high value transactions. Fraudulently buying a pizza isn't really all that much payoff for our fraudsters after all.

They will buy stuff that's expensive. This means that to credit card companies, the bigger the transaction, the more likely that they will have to spend time and effort on fraud investigations etc.

Man hours are expensive though, and as such it is important someone pays for it. And well, that's where the percentage system comes from.

>Fraudulently buying a pizza isn't really all that much payoff for our fraudsters after all.

Although they will sometimes do that as a test before making a bigger purchase. When my mother's card was cloned, the first fraudulent purchase was a coffee or sandwich at a railway station in a different city (but one close enough that it was believable she might have been there). Her bank only alerted her the next day when it was used to buy jewelry.

But I think the low cost stuff just gets eaten by the parties involved (I once had a stolen card used to make a single $1 payment on iTunes. Refund was as automatic as the new cards and I doubt Apple or the bank cared at all). Not so much when theres $1k at stake and the distinct possibility that the customer, the merchant or both could be lying

The more payments there are, the more reducing fraud is worth it. 1% savings on 20B is worth 10x the effort than 1% savings on 2B.

I guess it's because otherwise the fixed cost would overwhelm small payments.

Are they really though? Chargebacks on higher amounts = more lost money

Just fyi you need to get authorisation from Competition regulator for that. It’s also known as a cartel…(you’re talking about price fixing).

Would this include PayPal? They are the middleman between many, many merchants and acquirers, I assume they have sufficient transaction volume to negotiate prices.

Same with Square (who technically are a single merchant but with lots of payment points)

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