The business of wallets | Hacker News Reader

The business of wallets

bitsaboutmoney.com

106 pointstiniuclx63 comments

I liked Google pay, until I found myself randomly in some experiment group and it just didn't work one day. I discovered this in the shop, and of course I wasn't carrying physical cards because I'd been duped into thinking the digital type would never fail.

I started carrying my physical cards after that, and started using them more for quick transactions, as I'd rather risk dropping a piece of plastic rather than my phone.

I've entirely switched back to physical cards now, after exclusively using digital wallets for years.

One thing that helped is learning how much data is stored by the wallet providers. I fear data being used against me, in the future, in ways I cannot imagine today.

So imagine my surprise when a Stripe payment, for an online service to provide hormones for transitioning, which is legal where I live... Triggers Stripe to send an email phrased like it was necessary for order confirmation, and then to create a Link account presumably with the transaction details... Opt-in via dark patterns.

One thing not covered is the safety of wallets and the metadata around transactions, safety for individuals from the politics of the United States.

I doubt there is much difference to this tracking vs credit and debit cards. Really unless you are paying with case I think your transaction history is being sold.

I mean, you can just read up on Gov information on it: https://www.consumerfinance.gov/data-research/research-repor... (similar reports are published by the EU, UK, and other governments)

"Apple is reportedly using consumer data, such as spending history and which devices a user owns"

"Specifically, Google collects an immense amount of consumer data when consumers use the product. Google appears to use this data to develop new services and also in its advertisement business, among other thin"

Payments made by Apple Pay and Google Pay/Wallet both include a lot of data, and the use of that data by Apple, Google, Samsung, et al is "opted-in" when you chose to use the service and were presented with the very long ToS to agree to.

I bet most people didn't realise that Google may share all of that data (you can see your activity here https://payments.google.com/gp/w/home/activity ) with their affiliates and partners, the opt-out is hard to find and most people are unlikely to be aware of it, it's on this page: https://payments.google.com/gp/w/home/settings

Note: Stripe Link also collects a lot of data https://link.com/gb/privacy-center

Contactless card payments are naturally limited in the amount of data collected and very tight regulation about how it's used.

From a privacy standpoint cash wins, but realistically cards will be used offline and online... so cards which are not loyalty / points cards, and not used via Apple Pay, etc, and which you can use in person, or enter each time into a payment provider and not store are the best choice.

The article is about digital wallets, and it spends more than a little time explaining Stripe's product, Link. There's plenty to learn from this article about "electronic" wallets, and their place on your phone. But my eyes glazed over when Patrick kept circling back to Link.

Of course, having just bought a lovely mid-sized leather wallet to replace a slightly finicky minimalist wallet (elastic is annoying), I was kind of hoping for some kind of dorky deep dive into physical wallets (which we used to just call "wallets.")

Well, if you circle back to minimalist wallets, https://www.hawbuck.camp/ makes a wonderful one.

For those looking for more card space:

https://www.exentri.com/

You got me curious so I ordered one. I have a minimal leather wallet but no cash pocket. I don’t really need to use cash but there are two classic old bars/tap houses in town that are still cash only, so carry some for that.

I've always gravitated towards minimalist wallets.

For a time, I just used a rubber band. Although it was stupid looking to other people, the rubber friction did help it stay in my pocket.

I've come to like tyvek wallets. Search "mighty wallet" or "tyvek wallet" on amazon. They are super thin, yet durable and functional. They also can look normal to people (unless you get the peanut butter and jelly sandwich one)

Also big on minimal wallets. I rocked a ridge wallet for a while until the metal corners rubbed holes in my pants. Now I use a trove wallet and it's been perfect

I know they get advertised heavily but my Ridge wallet has served me well for the better part of a decade now. They also sent me a new pack of screws for free after some of the originals fell out, several years after purchase which was cool with how rare good long-term customer support is these days.

Now that I mostly use a phone to pay for (almost) everything, I've resorted to carrying every card I need in a small phone pocket.

It is actually refreshing not to have a wallet.

The small businesses I know have learned from bitter experience never ever to leave money in Paypal because it will seize it when it feels like and give it back whenever if ever. That does not sound like a business that relies on people leaving money in their account earning 0% for the depositor and a few percent / year for PayPal (large retailers run the same scam, where they always pay for goods 89 days after receipt and keep the money earning interest in the meantime).

That's consistent with the article, which says that

(a) a large part of PayPal's margin comes from convincing individual consumers, as opposed to businesses, to keep money at PayPal

and (b) that while it's tempting to assume the benefit from this is to keep the interest rate spread, the bigger deal is getting to keep transaction fees when a user next sends that money via PayPal but one side of the transaction is open to paying credit card interchange fees for it.

As far as I can tell I pay 0% and $0.00 to transfer from Paypal to my bank account (they added an instant transfer with a 1.75% fee as a sucker option). I thought that paragraph was about "aha, if they pay from buyer's paypal wallet A to seller's paypal wallet B, we can deduct our 3% plus 30 cent fee, but just do the transaction as a database update which costs us nothing"?

Yet most people here will will claim there's no usecase for crypto

Losing your cryptos when a trusted intermediary steals them or loses them through incompetence (Quadriga CX) is so common that crypto fans invented their own name for it! (Rug pulling)

I never advocated for custody services. Those completely defeat the purpose. I always recommend people go self custody.

Credit card fees are a weight on the economy, a tax that benefits only the rent seekers. This weight should be lifted as soon as possible.

Either by economic competition or by regulation.

For the competition angle to work, companies must be able to rewards customers for using payment solutions that circumvent the credit card fees.

Couple of years ago EU already slashed maximum fees (in the EU) and now it's about 0,2% or something like that...

Most likely because of that there are no "benefits" tied to CC nowadays here...

This argument gets brought up repeatedly on HN (most recently on Patrick’s last post about credit card rewards). The counter argument is that there are costs associated with securing transactions and fraud prevention that do benefit all credit card users. The “tax” does result in a downstream benefit.

Well, give customers a choice to pay extra for buyer protection.

Most transactions are repeat business and require no trust intermediary.

Visa makes double digit $B profit. %100 reason it is not because of fraud. It's the lie they sell you. All card issuers and Stripe too.

There is an alternative: use cash.

> Most transactions are repeat business and require no trust intermediary.

I'm not an expert in this field, but I know enough to be humble when it comes to cybersecurity. I don't think fraud prevention is that simple.

I cannot use cash online and it’s a much bigger hassle offline.

We have the computers to make easy instant payments cheap. Let’s do it.

I think this should be the main response. If the fees were charged to the customer they would be able to make an informed choice. But as it is the fees are already included in the price, so you are just losing if you don't use the credit card and get rewards.

But it also isn't easy to charge the customer for the fee because it is different for different cards. I don't even know if there is a reliable way for the average business to know the fee, the card company just tells them at the end of the month.

Businesses don’t need to know they exact percentage to the thousandths decimal. They could easily charge all credit card users x%. If they do not, it is because they benefit by people using credit cards because the business is betting they will be able to collect more than x% via people being willing to spend more if they use a credit card rather than other methods of payment.

Note that some businesses do not want to place this bet, and have long had lower debit card prices (such as US gas stations).

https://link.springer.com/article/10.1023/A:1008196717017

Dan Davies' book on frauds has a whole chapter on scams where you open a business, buy goods and pay in cash for a year or so, then order lots of goods on credit, sell them, take the money and run. Cryptocurrency people call their version rug pulling.

You’re mixing two different scam concepts.

None of this is a problem with a debit card that’s debited to a bank account on real time.

If you say "when I sent this business my money or goods in the past, they always send me goods or money, so I trust them" you are vulnerable to exit scams and rug pulling. One of Dan Davies' examples is a darkweb market where the mechanism to hold money in escrow until the buyer received the goods was expensive and annoying for sellers, so trusted sellers ask buyers to not use it; eventually those sellers take one last batch of orders, don't send anything, and disappear with the money.

I don’t need Mastercard to intermediate my each and every one of my transactions with Amazon, Uber or Burger King.

There is a time and place for intermediaries, but most transactions don’t need them.

You are welcome to use many different payment rails with Amazon, Burger King, etc. Between them Patrick McKenzie and Dan Davies are pretty good on why people use the rails they do, and which blood wrote the financial regulations governing them.

All of the alternatives are more cumbersome than just unlocking my phone and tapping the terminal.

That's the thing that has to change.

Can't you just whip out a card, stick it in a reader, enter your pin, click "yes" and pay by bank debit? If you are using a smartphone app that is an intermediary right there.

Its hard to be specific without knowing what country you live in.

I live in Germany. I want to pay by bank debit, worldwide, with my smartwatch. I don’t want the smartwatch maker to be an intermediary to the transaction, it’s just a tool I use to store my payment credentials.

That is the biggest BS I've heard in some time. Maybe go ahead and compare the interchange fees of AMEX compared to other cards and then there benefits and income requirements.

If it's not obvious it's the whole points/cashback scheme in Canada and especially the US what's driving up the fees for businesses and in the end all customers no matter the payment method.

Either we should have regulated maximum fees like the EU introduced and/or allow sellers to charge fees for certain payment methods - now the only option is to not accept AMEX at all.

Stripe is here to make it stay. VCs will not let it go.

I wonder how central bank digital currencies will play into this. E.g. for the digital Euro, the ECB intends it to be included under legal tender [0] laws making acceptance of digital cash mandatory wherever you can pay in cash (i.e. every physical POS).

I expect most digital wallets to be made obsolete by such a measure, because most of the use of a digital wallet as described by the post is easy, nearly free digital transactions by end-users. Everything else can be done using your regular bank account. An ECB-backed alternative to Paypal, Venmo, Cash App et al. would certainly be more trustworthy to citizens and the compulsory acceptance by merchants will artifically solve the chicken-egg problem that most such private companies have.

Ditto for debit cards, which would pose a threat to Visa and Mastercard.

I'm curious what kind of ecosystem will exist around CBDCs.

[0]: https://finance.ec.europa.eu/digital-finance/digital-euro/fr...

This is a common misconception around the definition of legal tender.

A shop is perfectly within their rights to refuse to sell you something if you are not willing to use their accepted payment methods.

Legal tender simply means they can't sue you if you offer to settle their debt using a legal tender currency. If they have refused to sell you the item, there is no debt, therefore no obligation to accept any particular instrument

https://www.bankofengland.co.uk/explainers/what-is-legal-ten...

While that may be legally the case right now, the EU explicitly intends to limit this practice. E.g. in the proposal on the legal tender of cash published last year by the Commission [0], which will also apply to the digital euro, it mandates:

"To ensure the effectiveness of the legal tender of cash, this Regulation applies also to ex ante unilateral exclusion of payments in cash and to the access to cash", where ex ante unilateral exclusion of payments is defined as "a situation when a retailer or service provider unilaterally excludes cash as a payment method for example by introducing a ‘no cash’ sign. In this case, the payer and payee do not freely agree to a means of payment for a purchase;"

In Article 7, the regulation requires that member states monitor this practice and, if it undermines the intention of the legal tender (i.e. merchants must sell you goods for cash), they shall apply "remedial measures".

Also: IANAL, but at least in Germany, implied-in-fact contracts render the contract of purchase "signed" the moment you receive the good over the counter from the merchant. If you haven't payed by then, you are in debt to the merchant and from what I would say, the legal tender rules apply.

[0] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A20...

It'll be interesting to see the impact of "instant settlement" systems that are based around ISO20022 like FedNow, PromptPay, Osko and others.

If my bank can offer direct instant settlement between my account and another person's, then why do I need any other services? If they can associate my account with a line of credit, why do I need a Visa/MC and why do they need to pay the network and interchange fees?

I my on-phone secure element (ie the "wallet") can support an app that is not EMV with all of it's legacy complexities, then why keep all that infrastructure?

All of that goes away.

> Cash App is, if you squint, a wallet. Block product managers would probably heavily dispute this characterization and say, truthfully, that their core user feels like they’re using Cash App rather than using their linked Bank of America debit card when they are paying with Cash App.

APMs

The article is mostly good.

But it would have been munch more clear if Alternative Payment Method (APM) was directly acknowledged.

Because it’s easy to conflate wallets from APMs.

My experience servicing financial products is that "big data" markers have significantly more signal than FICO scores...

I guess it depends on what your product is. For stripe, FICO is sufficient.

The infinitives are so very, very deeply and unnecessarily split.

Splitting infinitives is perfectly cromulent English. That's a fake rule invented by Latin snobs trying to make English sounds more like a Romance language.

good thing there is no rule against it then!

The world needs SEA instant transfer and payment systems. Paynow, is an instant ba k transfer, thus incurs 0 fees.

It's crypto/web-wallets, not traditional wallet.

The article only briefly mentions crypto and is instead about products like Paypal, Cashapp, Venmo, and the like.

That's my mistake; edited.

If it were, what's wrong with that?

Crypto is a Ponzi scheme.

Nope

Ethereum is a VM for example. Quite hard to see how it can be construed as a pyramid scheme tbh.

On Aug 15, 1971 this statement becomes true for US dollar - Executive Order 11615

All currencies, including crypto, fiat, and chickens, have been Ponzi schemes since the beginning of time and will continue to be until the end of time. It's fundamental to their nature.

When the state does it, it's not ponzi until the state implodes and then it is.

Currencies lack the suggestion that holding them will bring you a profit. That isn't true of chickens, which are significantly better in investment terms than currency - holding chickens definitely will bring you a profit, unless you screw it up.

You can use Ethereum without ever speculating in crypto-native assets like ETH. Transacting in USD-backed stablecoins is a major use-case of Ethereum.

Do we have any evidence? Why would anyone use a USD derivative instead of just USD?

Lower transaction fees, available to people without USD bank accounts (most of the World), and you can use smart contracts for more complex transactions than sender -> receiver.

I’m very bearish on crypto generally, but DeFi has started to catch my attention a little bit, as it does have potential to shake up finance more broadly.

I asked if we have evidence because the author made an interesting point in a recent interview on the "Bankless" podcast:

"When we hear people like Tether saying we're successfully banking the unbanked, you can look at the median transaction over the Tron network, and it's between $100 and $300. If you looked at comparable numbers in the US for credit card transactions, the median transactions is between $40 and $80. And so, do you buy that they're banking the unbanked third world who are moving a lot more money around than people in the US do?"

Actually cryptocurrency perhaps more resemble a pyramid scheme because early investors profit disproportionately from latecomers, who buy at inflated prices. Transaction fees play a key role, as miners or validators earn significant fees, often benefiting early adopters with large holdings who promote network usage. Thus, high fees primarily enrich those already invested, leaving newcomers to bear the cost.

Well, I thought it was going to be about cash-wallets. Like, cool leather ones, or a nifty money-clip option or something. Was disappointed it's about web-wallet things.

Author's name rings a bell

Kalzumeus.com

Reply on news.ycombinator.com