For a 3% discount, would customers agree to use something that worked just like cash, where the transfer was instant and couldn't be undone? Then you don't have to worry about fraud, chargebacks, etc.
Fraud is an industrial level enterprise. You absolutely need fraud detection if you're accepting payment that isn't cash.
So it's not that I get 3% off by not supporting chargebacks, but whether I want to have a dollar under a payment system that supports someone emptying me out without recourse.... and the answer is often no.
It is fantasy to think they'd get a 3% discount. The goods in stores that take only cash do not tend to be cheaper than those that do.
They know what people are willing to pay and will charge the price. If they see people are willing to pay $99 with a credit card, then they'll be willing to pay that with cash.
In NYC they most definitely do. A lot of the corner stores will change you less with cash. I'm not sure it is a the card payment or that they are keeping the sale off the books, but something that might cost me $18.50, I'll pay $18 for.
The reality is except for a few of the really major cities those types of stores are usually more expensive than their larger counterparts in virtually all other cities in the US.
In my city I'm not going to get cheaper groceries by going to the smaller stores. They are more expensive regardless of whether they support credit cards or not. They may be superior and certain other aspects but price is not one of them.
My guess is the opposite may be true only in places where owning a car is expensive or inconvenient.
Everyone pays their own credit card fee as a line item on the receipt, merchants are required to print it on the receipt. If customers actually had to pay their own fee's on each swipe you'd see a lot less people reaching for the Platinum card and instead for the no frills local bank credit card. You'd also see immense downward market pressure on swipe fees as now card issuers have to compete against each other.
The reason merchants might not pass it all to you if that they get a lot more sales volume when they support credit cards, so they can still be more profitable while paying for some of those fees.
I know I'm going to get hated for saying this, but the businesses that charge extra for credit card use under $10 are trying to extract as much out of you - they're aiming to get the best of both worlds. The price of their goods are still such that they're assuming you'll pay with a card.
At the end of the day a business has several costs. Rent, cost of shipping, utilities, etc. When these go up so do the costs of goods. Credit card fees are no different in that regard. If they hated it that much they wouldn't support credit card payments. They do support it because then know it'll bring in more revenue than without - and will easily pay for itself and more.
Some cards cost merchants much more than others, but they are contractually forbidden from differentiating their prices based on that. It's anticompetitive. Lots of "buy now pay later" schemes work similarly, when afterpay was (or is) a big thing they charge 7% and forbid the merchant from including that cost in their prices.
If the consumer had to bear the cost of their payment choice, no problem, but the reality is consumers with low fee payments are paying slightly more than they should for everything and those with high fee payments pay less than they should for everything.
I didn't see this anywhere else though. It probably made sense for computer shops because most transactions one would do there would be sporadic, big, and planned.
(Since then, the Mastercard/Visa fees went down to 0.2-0.3% due to EU rules, so probably those discounts are less popular now).
In the US offering different prices when paying by cash vs card was a violation of the agreement with Visa, as is putting a minimum price threshold for card usage.
It's still fairly widespread though, and occasionally makes the news. Might explain why you didn't see it often.
In the US, not only does Visa now allow cash discounts and minimum price thresholds up to US$10, but they also allow, in most states, credit card surcharges (sometimes subject to specific state-law legal requirements).
Visa still officially disallows minimum price thresholds outside the US and certain related territories like Guam, and credit card surcharges outside the US - but I nevertheless see them plenty often here in Germany in small shops. I think the permission to offer cash discounts is global.
Yes, being able to illegally evade taxes is an easy way for businesses to lower prices slightly.
I'm not sure subjecting everyone to poorly regulated (even in the EU it's fair from ideal) monopolies/oligopolies that are legally entitled to literally tax every single transaction in the economy (in addition to the complete loss anonymity and all the implications of that) is not a too high price to pay for some reduction in tax fraud...
In many jurisdictions, cash payments can allow the retailer to avoid on-paying sales tax or VAT, as well as mark stock shrinkage as a loss for their own tax purposes.
Countering this would require very careful auditing of electronic toll records and paper receipt processes, which are in most cases trivial to evade if well-prepared.
And you can’t always be sure that the shrinkage - without the cash - is reported to the manager of the retailer by the person on the till, especially if an unofficial handwritten receipt is provided by the cashier.
I recall seeing a situation involving a very large champagne purchase on New Year’s Eve in cash for 25% off and a “till receipt problem”.
Obviously any electronic payment system needs to be secure internally but society lasted a long time and made fine progress when having your wallet stolen meant losing your money.
It would be fine to require a person to charge their debit card with a finite amount rather than have it be funded up to the limit of the supporting account and that would solve the last problem compared to cash.
The key difference from cash, in the US, is the ability to abuse cards at a later date without the physical card. For someone to steal your wallet, they have to be colocated with you and can only steal as much as you're walking around with.
As long as debit cards have a magnetic stripe and have their full number printed on them, and that information is useful, this problem remains.
Which the EEA/UK has also (partially) solved by enforcing Strong Customer Authentication (SCA) that mandates that (most) transactions require MFA.
It's not a difficult technological problem to solve. A card's chip should be able to guarantee that the card is physically present for any transaction.
Obviously online payments would pose a problem, people would need to either own USB card chip readers or banks would need to do something new and special.
The physical card can communicate via NFC, and there's a smartphone app you can use with it. For PCs, you can buy some fancy NFC interface if you want, but you can also have your phone act as a reader, the PC connects to it over the local network.
Maybe something similiar could work for banking cards. They all have NFC anyways.
On the other hand, you might as well just have an app that is registered with the bank on your computer/phone (like how it works for smartphone NFC payments) and skip the card.
An older example was getting transaction authorisation numbers. You would either get a long indexed list on paper, or you could receive then over the phone (voice or text). This was then mostly replaced (about 10 years ago) with hardware (H/T)OTP type tokens that required your card to be inserted in the token and PIN authenticated. Later on that too was replaced by a cardless version, and that one then was replaced (for consumers) with mobile apps.
The combination of minimum software versions, online authentication, transaction limits, daily limits, and time-locked temporary limit increases (so you can buy a car with your phone, but you have to up the limit a couple of hours ahead of time for it to take effect) make it pretty safe with acceptable risk for the bank. And then there's of course the standard fraud detection and prevention departments, so if you do something unusual that also involves a lot of money, you're likely going to get a call.
For business use, there are other systems, generally two types like EU-wide smartcards or bank-specific smartcards that can be used to authenticate and authorise. You'd use an USB or NFC connected method for that. Sometimes that involves entering a PIN on the device itself before the computer can talk to it, but that does make the OTP exchange very fast. You'd still have limits or multiparty authorisation setup in your organisation so you don't end up with one person just moving a couple of 100K around on their own.
And then there's some overlapping systems, apparently this one is going EU-wide: hhttps://en.wikipedia.org/wiki/EIDAS and apparently some implementations include useful things: https://www.idin.nl/en/businesses/ like age confirmation where the business doesn't need to know who, what or where you are just if you're of age (and not even a specific age). Granted, nothing is perfect, but it's a whole lot better than finding some S3 bucket somewhere with JPEGs of ID cards. As long as they don't do dumb stuff like trying to MITM TLS, it's progress. The overlap is in the concept where you can use some electronic means to prove who you are to get something done.
When adding a card to a taxi app for example I get SCA prompt for a zero amount, but then they can charge me for any amount without subsequent SCA flows.
Presumably those subsequent transactions wouldn’t have a liability shift to the issuer but it still means that they can at least temporarily steal all your money until your chargeback claim goes through.
The whole concept of “card number” is rotten. What’s needed is an oAuth2-type system where every payment needs to redirect to the bank (actual redirect, no stupid hacky iframe like SCA/3DSecure is) and where you can see the merchant and set the max amount (and whether one-off or recurring) and the bank records that and keeps a list of authorized merchants so you can revoke them at any time. The merchant then must use this token to pull money, and can't pull more than what the token allows - just like your usual oAuth2 scopes.
What I suspect is that the "mandatory" bit is by law (and the law has flexibility, which covers this taxi app scenario) but there is no technical solution to make it mandatory, thus a non-compliant merchant can still drain your account until your chargeback claim goes through.
https://www.checkout.com/blog/exemptions-to-sca
> If you attempt an exemption and the bank returns a decline code indicating that the payment failed due to missing authentication, you’ll have to reattempt the payment with your customer but this time utilizing SCA.
If you have an unprotected vector fraudsters will find and exploit it. They're literally paid to do so.
I've seen fraudsters that are ridiculously persistent to make $2,000 in a year. But they just keep poking at it at a certain point you're able to ramp that up to $80,000 in a month I know they're good it was completely worth it to him for several years.
How I've seen people spend hundreds of hours to generate a few hundred dollars worth of in-game currency or on-site reward points.
Well, not until you get hacked.
We might be happy with instant, no-undo transactions until our device gets hacked and our bank account with many thousands of dollars gets drained, through no fault of our own.
Then suddenly, complex fraud detection and transaction reversals seems like an awfully good idea.
Because the issue here isn't about chargebacks where you genuinely made the transaction but the business failed to deliver, and maybe you lose a couple hundred dollars. The issue here is about when you never authorized transactions at all, and you lose all your savings.
And there fees are 1/10 of that of credit cards, as a result of giving up these benefits.
One of the most fundamental basics of trading has always been trust.