Square to no longer return processing fees when buyers are issued a refund
squareup.com
squareup.com
Visa and Mastercard are massive drains on our economy - it's ridiculous how unquestioningly their 3% tax on commerce is accepted.
This could be changed overnight with 1 piece of legislation.
They charge companies 3% -> companies embed that 3% in their prices -> customers get a 1% refund from CC companies.
- If you do NOT use a CC, you effectively pay _more for CC users_ (3%!).
- CC companies make the customer feel like they have a benefit, while in fact, they are net payers too (2%).
- They have access to all (private) data of the customer, which is extremely powerful in this age and time.
Are the only ones that get it so content with their 1-2% pieces of silver that they're fine in trading the wellbeing of the less fortunate?
Pretty much all of finance, Landlords, IP trolling - the rich will unashamedly collect undeserved rent on anything they can up to and slightly over the line of the law.
And we also taught our children to be ethical and aim to do good, even in school, which helped.
What can we do about it? Is trying to out-lobby i.e. regulate the CC companies the only way? I noticed that other countries don't seem to have this problem.
Is it barrier to entry? Or would such hypothesized credit card company eventually cave to greed once they got big enough and move to 3% fees?
There are no laws against high processing fees; Afterpay takes around 8% for example.
> Specifically, the regulation:
> * caps interchange fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards;
From https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
No cap on corporate cards, though.
[0] https://www.accc.gov.au/media-release/visa-undertakes-to-add...
[1] https://www.accc.gov.au/media-release/mastercard-in-court-fo...
I for one never carry cash, and I will happily pay any extra transaction fees from local businesses for the opportunity to reduce the size of my wallet, the cost/risk of casual theft, and the need to queue at an ATM for cash as part of my daily life.
I use credit because with the rebates it’s rational for me. If retailers offered a sufficient cash discount to wipe out the 1% rebate, I would move most of my volume to debit or even to direct debit.
An example is my cell phone bill. Verizon offers such a huge discount for direct debit that I do it. Otherwise I would certainly use credit.
Rinse, repeat with most vendors.
Ironically, many smaller shops don't support it, even though it would theoretically be cheaper per-transaction, because the up-front costs and hurders are higher than a Square account.
I went to a Chase last week. They didn't have any cash. I filled out a withdrawal slip and finally found a teller. She just told me to use the ATM. I didn't have my card with me. That's why I went in the branch and used the withdrawal slip.
And on top of that there's so many businesses that just refuse to accept cash now.
https://fr.m.wikipedia.org/wiki/Groupement_des_cartes_bancai...
Once upon a time people dreamed that blockchain would provide the network, operating in a distributed fashion that isn't dependent on one or two companies, and bet big on it becoming that, but obviously that didn't pan out.
If I got 1% or 2% lower prices, would I give all that up? I doubt it.
Credit cards only seem like a good deal to consumers because it is hard to reason about n-th order economic effects. The profits these companies make are ultimately coming from all of our wallets.
I'm not against lowering CC fees. But the idea that they're just rent seeking is very silly.
I need to use something for purchases, and each method of payment has pros and cons. Even if using a credit card had a visible 2% additional cost, I'd use it on certain transactions. If I'm dealing with a vendor I might not trust to do a refund, a cc lets me do a chargeback. If I'm concerned about holding large amounts of cash, a cc lets me limit my risk exposure. If I don't have the cash currently, a cc give me an interest-free advance until the statement due date (between 20-40 days in the future).
We can certainly argue about whether those things are worth 1% or 3% or .02%, but they're worth something to consumers.
Square is saying they'll keep the whole 3%. That's obviously different and not Visa/Mastercard's fault - Visa is refunding it to Square, Square is keeping it. Stripe is now doing the same thing too.
The fixed cost is the processing fee and that cost includes processing refunds. The percentage is the "interchange fee" and is supposed to represent the agreed take of the processing network for that settled transaction.
https://www.businessnewsdaily.com/16583-credit-card-processi...
I agree that is not a consumer friendly situation but on the grounds that it because its effectively a duopoly and not because they charge for a service they provide.
These monopolies never benefit the consumer. The best ways to approach this are 1. the government to break up the duopoly, 2. a competitor to come along to introduce more competition, or 3. the consumer can get fed up and go back to using cash or carry a laptop around to transfer bitcoin until said companies are forced to break up and consolidate to a better product. These solutions are tried and true.
I am tired of hearing people complain about a service and still continue to use the service.
Low effort trolling doesn't help anyone.
When I built an event ticket sales site, we tried to get promoters to just raise their ticket prices a bit to include the 'service fees' so that end users got a single price, and they refused.
Promoters just want to advertise $25, not $32.50 (contrived example)... they don't care that the end user has to pay the additional fee. We did all of the math analysis and the end user total cost could have been lower, while the promoter got more money, with our method, but perception is king.
In effect, for better or worse, that is also what Square is doing now too.
Of course, that isn't what the end user wants.
What the end user wants is the promoter of the event to refund them their ticket cost AND the fees. That would be up to the promoter to do that, which they aren't going to do since they are now bankrupt from not hosting the event.
I hate to bring up the whole 'crypto fixes this' thing here, but it does. The transaction fees on L2 chains are so low that the promoter could just afford to give full refunds in whatever stablecoin the end user bought with. There would be no square, credit card company or anyone else in the mix trying to dip their fingers into the pie. The whole problem revolves around the issue of too many cooks in the kitchen and some of those cooks are really corrupt.
This also isn't just events, that is only one example. Any 3rd party merchant service provider is going to be affected.
Back when I had my events company, we went with WePay because they were the only service at the time that offered 'free' refunds. Eventually, it became the norm. Now it seems like this policy is getting reverted and that's going to have a large impact on merchant service providers.
Usually this is a service charge.
That all being said, for sales that big I'm guessing ACH/wires are a lot more common anyway.
Insurance. The promotor would have insurance to cover this. If the event was cancelled due to a performer cancelling, the performer's insurance will pay.
All this puts up the price of insurance, which puts up the price of event tickets.
Again, events was just an example. This applies to all services like this.
Credit cards mostly work the same way.
However, the web shop I work at pays a 3% processing fee on returned payments initiated by us. It just makes no sense.
Square approached us a few years back and could not comprehend why we weren't jumping at their offered 2.6% + $0.35... "but the AI!?!?" is all their sales people could come up with.
We're well below 2% + $0.20 per transaction for all cards (including AMEX, believe it or not). Square/Stripe and the rest are great for being Turn-Key for new businesses. But for anyone with real volume, they are a joke.
"Item Defective" - Unopened factory sealed, tamper-proof blister pack.
"Not Received In Time" - Delivered 3 days ahead of schedule.
"Too Small" - Item clearly says in multiple places, and even demonstrates in images, the item is 2mm in diameter.
The result? Everyone pays more for the products so we can support a few bad apples serially returning stuff.
This new policy from Square is going to stick merchants with an empty bag for all returns. Which ultimately will make merchants more careful, to avoid getting hosed, ie. raise prices for everyone to support a loss on a returned or cancelled transaction.
If a transaction is cancelled, or reversed/refunded - nobody should be making a profit. That includes Square, Visa, etc. This is just an absurd anti-consumer policy that small businesses (the only ones using Square) will get blamed for being greedy over.
And... if you price shop the shoes, Zappos is rarely-if-ever the cheapest. You pay for that "service"...
Is that actually a thing for clothes sized in inches? Or are you referring to the unitless sizing of women's clothes?
I do get that unitless sizing is annoying to deal with. But it's apparently popular enough to exist as a thing.
For Men's clothes that aren't measured in inches and are instead s/m/l/..., I find those measurement to be shockingly stable across the industry. Although, to be fair, men's clothes are generally meant to fit more loosely than many articles of women's clothes.
https://www.cnn.com/2022/09/20/business/credit-card-fees-vis...
Costco gets away with 0% because they offer exclusivity and because they cover some of the cost of the rewards programs. I guess Walmart et al did the math and figured they would lose too much business.
The average Costco shopper makes over $100K a year, so getting another card just to shop there isn't a problem for most. Can't say the same for Walmart.
While technically true, that statistic is misleading as it requires further qualification, namely that $100k figure only applies to shoppers in Costco's PNW area - not nationwide, and certainly not internationally.
More recent attempts at analysis put the number closer to $125K these days for all their customers worldwide.
Which makes sense, given inflation and the fact that they only build Costcos in more affluent areas and target business owners.
“I didn’t want to use that credit card. Refund and recharge this other card”
Or 500 other silly things
I believe the law was originally created due to massive over-promising of results by tele-marketers.
(I live in the Netherlands, but similar laws are common in Europe I believe)
I see we're still not counting the pandemic in this timeline.
It was October 2019.
This was when everyone thought the world was ending still so we didn't think to change it to a virtual 5K. Refunded all payments on a couple thousand dollars and was out around 4% in processing fees.
The one thing I am wondering is whether PayPal and stripe will follow
[1] https://en.wikipedia.org/wiki/Unified_Payments_Interface
If you use the credit card network not just once but twice -- once to process a purchase and then yet again to refund it -- you're using that infrastructure.
It makes sense you'd pay for its usage. If you drive to work on a toll road and then drive back home along the same toll road, you still have to pay the tolls even though you wound up in the same place at the end.
Funny you should use that example. On toll roads you get charged in both directions, but I've never seen a toll bridge that had tolls in both directions. Usually the argument is that you really can't go any other way so the toll in one direction covers the cost of both trips.
But I actually think you're right here -- most people won't make the "return trip" so it makes sense to only charge people twice that do.
Huh, I think I've only seen this once (the Tacoma Narrows Bridge). Other toll bridges I've driven have all had tolls in each direction, e.g., Ambassador and Blue Water Bridges to Canada, Lake Washington floating bridge. Maybe I need to start taking more bridges to nowhere!
That’s part of what I waa getting at with “infrastructure cost”, yes.
Here in the Bay Area all of our bridges only have tolls in one direction.
(late edit)
This is largely driven by the question "is a vehicle heading in one direction likely to return in the other?"
For trips from Oakland to SF, yes - it is very likely that the vehicle will go back across the bay bridge back to Oakland (rather than heading down to San Jose and then back up the other side).
On the other hand, a vehicle driving on the tollway through Chicago may be heading up to Minneapolis or to Detroit and then to other directions. Trips on the Illinois tollways are less likely to have a return trip and so both directions need to be tolled to capture the vehicles. It costs twice as much to do this (twice as many toll booths and staff) and so given the choice (trips to an island or other geographically isolated area) they only pay tolls in one direction.
It seems kind of a waste from my perspective to have to do the traffic bottleneck in two directions.
How else do you think credit cards are able to do things like pay 2% rewards?
So the argument still holds. Banks hold more risk on larger transactions.
Sweet. How do I negotiate with Amazon again?
In reality, negotiation is a relic of a long gone era and flea markets. Buyer agency in general has mostly disappeared in modern transactions.
So how did you determine salary last time you were hired?
(I last negotiated a price in a retail store about 10 years ago - if you call that a long gone era then I feel rather old).
Even vacation has been non-negotiable. It's disheartening, but typical for tech (and ironically largely enabled by tech).
As a seller? You set up your own website and don’t use Amazon. There are literally thousands of mom and pop sellers that use Shopify and advertise on Facebook and Instagram
Source: I was director of digital marketing for a payments company a few years ago.
Or, to put another way, someone selling handmade goods at a fair using Square will never have more negotiation power than "if you don't like it, leave".
> In practice, [switching vendors] is an extremely weak signal, is swamped out by market changes, assumes zero cost of switching, ignores network effects, etc. One of many reasons why I distrust economist’s assertion of fairness.
https://news.ycombinator.com/item?id=34999021
I'd also pedantically point out that this isn't really a negotiation tactic - negotiation generally involves communication.
"to confer with another so as to arrive at the settlement of some matter"
You very likely will find amazon is not willing to engage in much negotiation, unless you happen to have a unique offer. But nothing requires amazon to engage.
There is absolutely logic in pricing in terms of setting a pricing floor, which often comes from a combination of fixed and variable costs.
Of course you are right that there is flexibility above that, but again there's absolutely logic there as well in terms of price discrimination mechanisms.
None of this is just arbitrary. These companies put a lot of thought, and logic, into their pricing mechanisms. Get it exactly right and you make a lot of money, get it a little bit wrong and you go out of business.
> Additionally, we offer a number of resources and tools to assist sellers in accommodating this change. Our Return Policy Guide & Templates provide sellers with guidance on how to create a return policy that best suits their business, while Square’s free eGift Cards can serve as an option for providing store credit to buyers with no additional processing fees.
Meet the new boss, same as the old boss.
When it comes to credit card merchants, a chargeback always dings a transaction fee, and the merchant may additionally tack on a chargeback fee. So a full refund process will incur two transaction fees, plus possibly a chargeback fee.
I've seen more companies offering a reverse debit now (not sure of the actual term). Is this not through a different mechanism? Funds are available instantly same as how they're drawn via debit vs credit.
No, this is not true. The opposite of a charge is a credit.
If the terms of one provider are noticeably different than the rest (and those terms have a directly measurable economic impact on the provider), it's marketing. It will likely get pulled as soon as the provider is at a large enough scale that they no longer need that marketing.
> Depending on your fee schedule, you may incur fees to refund a charge. Additionally, Stripe's processing fees from the original transaction will not be returned in case of a refund.
https://support.stripe.com/questions/understanding-fees-for-...
Too bad this sort of stuff is out of science fiction.
EDIT: aaaand I'm being downvoted :) At least leave a comment.
It's not really "Devil's" advocate to advicate for the current standard practice across the industry.