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Comment by matdehaast | Hacker News Reader

Stripe don’t get even close to the full fee of card transactions. Most goes to the issuing bank. They would be lucky to clear 0.8% of a card transaction and it’s likely much lower

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When Square published its card processing margins in quarterly reports, they kept about 1% - roughly a 33% margin. They have since stopped publishing this metric.

For instance here, page 7 [1] in Q4 2016, Square reported a 1.04% transaction margin against 2.94% transaction revenue.

[1] https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ...

Thanks that’s handy to know! At their volume they can obviously get better rates from the bank. I do wonder knowing that what the actual revenue is and perceived IPO valuation. I can’t see it being $100B unless they doing crazy numbers on their other products

In EU (which I assume is a significant market) the max banks can charge is 0.2/0.3%. Their standard fee is 1.4% + €0.25, so yeah, they should probably end up with ~1% or so.

I'd assume their margins in other less regulated markets should be similar

Why can't this law be introduced everywhere else.

It makes no sense to pay so much for simple payments.

Most of interchange goes to the issuing banks to pay for loan origination, defaults, chargebacks and most significantly reward programs. The EU doesn't really have comparable credit card based reward programs since they can't fund them with the smaller interchange. It's kind of six of one, half a dozen of the other.

In countries without these regulations Visa and Master argued most of these processing fees goes back to customer as cash back or gift or other forms of benefits. In the AUS and EU ruling the court simply decided that is not a business model being accepted in the market. And tell them to put out a fair price of payment processing.

And most of the payment in EU are still done via Debit Card or something similar so they have less leverage.

Along with high level of fraud in US credit card compared to EU.

You are forgetting the $0.30 per transaction. That is pure profit for them too.

Card fees have both a variable (X percent) and fixed (Y cents) portion. For example, a transaction using a Visa credit card might cost 2.7% plus $0.10.

Not forgetting it but it doesn’t move the needle much. If you assume an average card transaction size of $10, which is likely higher. That is only 0.3% of processing which may increase revenue by 30% at best.

You're off by an order of magnitude - $0.30 of $10 is 3%, which overshadows the 0.8% by quite a bit. Although I agree that $10 is most likely a low estimate, I'd expect $0.30 per charge to have a very non-trivial impact.

Well spotted. My quick math was very incorrect. Thanks for the correction

Right but they’re talking revenue, which isn’t net of expenses.

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