Hacker News Reader

> I'm not confident in my country's ability to create its own payment processing platform

You live in Canada, which already has better options than the U.S., though the sittuation is getting better in the U.S.

For example, Interac is free for most people and very easy to use.

Debit payments often cost merchants less than 10 cents per tap. The local gelato place only takes debit or cash; if you don't have either, they're happy to accept an Interac payment, and do so more often than you'd think.

Part of the problem is that the incentives are misaligned. People want their points systems. Merchants want customers, but they also want lower transaction fees. Most customers have debit cards that would be much cheaper for merchants, but choose to use their credit cards, because they want the "rewards."

While the 3% or so that a bank charges might seem low, if you look at this from a low-margin business, that 3% may actually be much higher percentage of their net profit.

Regulation concerning rewards systems could go a long way towards shifting the system to be much less costly for businesses.

There's not much hope of real change here; Canadian banks are very profitable, and are a cornerstone of our economy. It's very unlikely that politicians will do anything to risk that.

There are other problems with debit vs credit cards as well (depending on country a bit). If someone fraudulently uses your credit card can generally just report it and you aren't on hook for it nor out of money while it's being investigated. If someone fraudulently uses your debit card you are usually out of the money until matter is resolved. And you won't necessarily get the money back via bank, you might need get it from merchant. In CC case merchant would need to sue to get the money if they still believe you actually made the transaction.

I used debit cards a long time and always had the bank cover fraudulent charges despite not being required to.

I gave up on them when the IRS discriminated against debit for identity verification when applying for COVID EIP.

I don’t see why those would be a problem with the use of a PIN or other multi factor authentication.

> Most customers have debit cards that would be much cheaper for merchants, but choose to use their credit cards, because they want the "rewards."

I bet most people paying by credit are really using debit cards, but pick "credit" at the register because they don't want to enter a pin. Partly for security, but mostly because credit is faster/easier.

Doubtful in Canada - the times I've even had the choice between "debit" or "credit" on a PoS terminal are very few - typically here you pick "debit or credit" and if you've got a Interac card with Mastercard/Visa it automatically uses Interac.

Unless you're 100% profitable, its always a higher effective %. If you're running somewhere closer to 10% (remember that it needs to be after all costs/paychecks/etc), that's nearly a third of your profit.

Anything optional that skims off the top cuts into profits extremely quickly.

I think this is the wrong way to look at it. If 3% fees mean a company is 7% profitable, it's 7% profitable, not 10%.

Businesses which accept credit cards get the business of customers who want to use credit cards. Those which don't, do not. Me? I want to tap my watch, get my 2%, and leave. I do not want to reach into my pocket, extract my debit card, and enter my PIN. Not a dealbreaker, I do business on the regular with two places which are cash and debit. But it's my preference.

Yes, there is an underlying coordination problem here. The major payment networks are quite probably engaging in anticompetitive behavior, as the lawsuit we're talking about indicates. But this does not, at all, mean that businesses which accept credit cards are penalized financially for that decision, on the contrary, in expectation we would find that most are rewarded for it, on the simple evidence that most of them do, in fact, accept them.

Separating it from any other costly incentive to do business, free samples, flyers, discount sales, loss leaders, is just special pleading. A cost benefit analysis includes costs and benefits, or it is unworthy of the name: and customers doing business are a benefit to that business.

"This will reduce your profit by nearly 30%" is accurate, and real profit is about all anyone cares about (or should care about). Many people would not choose that, if they could choose, but it's effectively required at the moment.

You are still assuming that the company will do the exact same amount of business, with or without credit cards. That's after I went to considerable effort to explain your error. You're just repeating it.

Good luck.

Countries like India and Brazil have shown that you can successfully run payments infrastructure nationally. Turns out it's not all that difficult or expensive or at all. India's NPCI processes 500m transactions daily with an annual budget of about 50m dollars. They make a profit over that while keeping the system free for a majority of users.

[1] https://www.indiatoday.in/business/story/npci-rs-500-crore-p...

$59.5 million seems like a drop in the bucket compared to the rent that these middlemen are taking. And was the COVID-tracking app an abject failure because it didn't get public adoption or because the technology wasn't fundamentally sound. Because if it failed because of the former, then simply regulating companies to use it (or even just putting it out there as a cheaper option to outcompete Visa) would solve a lot of those adoption problems.

It is a drop in the bucket relative to what middlemen are taking, definitely. I wasn't meaning to draw a comparison in that sense though, so much as I was trying to say "look at how simple this problem was, how expensive it was to fail at solving it, and how much worse it could be if we took on something truly challenging".

The app itself was deficient in testing, had security issues, wrongly told thousands of people to quarantine, was not as accessible as it should have been, and was overall very mediocre software. If that's what my federal government can deliver (albeit through contractors and middlemen all the way down), I don't want them anywhere near my finances.

Public adoption was mandatory for a time, so that aspect couldn't have failed.

And of course, the Canada Revenue Agency is clearly able to manage people's taxes and aspects of finances safely and securely, but that has decades of effort and tremendous financial investment behind it. A greenfield effort seems a lot less safe, and I trust the public service much less to execute on that coherently, consistently, and effectively enough to deliver something better than we presently have.

Because damn near everything to do with covid was a massive fraud and crime, too

I see I have a downvote. But I'm not wrong and I can prove it. ArriveCAN was a gigantic scam, 90% of covid also was

Countries can build payment networks. It's doable. They already run central banks that facilitate payments, you use them every time you write a check. In Japan, they turned transit cards into a payment network. India and Brazil built smartphone payment apps and they're the most popular form of payment in their respective countries, to the point where USTR is shitting its pants about it.

The underlying issue is not if we can build the network (we can) but getting people to actually use it. For example, if we wanted to repeat the Japanese success of IC cards here, we'd run headfirst into the problem that our public transit networks aren't big enough to be a credible Visa/MC alternative:

- Most public transit systems large enough to issue their own fare cards and readers are also regional monopolies, because there's not enough transit demand to sustain multiple companies with different routes. If I'm in Pittsburgh, all the buses and trolleys are run by PRT. In the Wasatch Front, it's UTA. Those agencies have little interest in becoming banks; they operate the fare cards mainly to keep fare payment easy, and they don't need to coordinate with anyone because everyone already joined into a single large transit agency.

- Metro areas with multiple transit agencies often have political differences that make coordination difficult. For example, in Long Island, NY, Nassau County's NICE bus system had legacy Metrocard fare payment that wasn't upgraded to OMNY until a month or two before Metrocard was completely ripped out and shut down. A rare exception to this would be the San Francisco Bay Area where there is an insane amount of political fragmentation and somehow they all wound up taking Clipper.

- A lot of Americans just never touch trains or buses enough to actually need a transit card.

- A lot of transit agencies are just surrendering to Visa & Mastercard and taking credit cards now anyway, even though transit fares are exactly the kind of microtransaction that is ill-suited for those networks.

Ironically, the best bet for an American-run payment network would actually be to nationalize E-ZPass[0]. In fact, in 2008 Congress passed a bill specifically mandating a unified toll payment system, but nothing came of it because the bill had no actual teeth. The main problem with this idea is that E-ZPass transponders won't fit in your wallet; you'd have to launch a separate form factor for an "E-ZPass Card" and at that point you run into all the same problems I just mentioned with making a unified transit fare system.

[0] E-ZPass is an RFID transponder system for toll payment that is very well-adopted along the east coast.

> In fact, in 2008 Congress passed a bill specifically mandating a unified toll payment system, but nothing came of it because the bill had no actual teeth.

E-ZPass now has interoperability with the Central United States Interoperability Hub (which reaches as far west as Colorado and as far south as Texas). We're much closer to the point where you can drive anywhere with a single transponder than we were back then. The main thing missing now is California cooperating with anyone else.

I like the idea of my toll road account also being useful for public transit, if nothing else. But it's difficult to imagine toll road operators and public transit operators seeing a big incentive to cooperate in that way. Even though they're both "pay for transit," their intended/typical users are very different (people who can't/won't drive vs. people who not only drive but are privileged enough to pay for less traffic).

You know what’s funny is that, thanks to the interoperability, all of my family members have switched their toll transponders to the Illinois I-Pass because Illinois charges no monthly fees or additional surcharges and doesn’t care where you live or what state/country your car is registered. I’m sure there are other participating toll authorities with no fees, but all the places my family members live do.

So really, you only need one state to adopt your unified transit fee idea.

> I like the idea of my toll road account also being useful for public transit, if nothing else.

Halifax, NS used to have bridges where the toll transponders worked to pay for parking at the airport - super convenient. Alas, they've since removed the tolls on the bridges, so the transponders are now useless and traffic in the downtown is even worse.

I mean there are options. It's not like people in Brazil or Europe can't make electronic payments. That said, I do think the US is very prone to public services being made worse and poison-pilled on purpose.

Wallet/Qrcode payments in many countries are roughly free. Visa/MC/Banks charge roughly 3-5% when you account for all fees (ie: Stripe). The security angle is also BS because these costs are hidden from consumers as they are thrown on merchants who will average them out again on consumers.

They are draining/milking the cow. At some point, they had significant value in quick information transmission when the internet and smart phones weren't really a thing. But now the only advantage is chargebacks/refunds which coincidentally, the experience there is being made shittier.

Still, not worth the 3-5% premium. Glad many merchants are starting to charge for credit card use and push back.

> I don't mean value-generating in the profiteering sense, but in the "this is worth operating on public funds because, ultimately, it is more than worth what tax payers put into it".

Very sure the amount those companies make yearly is worth saving.

> We tried to make a COVID-tracking app and spent $59.5 million, and it was an abject failure.

and then we just…kept letting those people stay in charge of spending our money.

and there’s a story of very expensive incompetency like that every quarter at minimum.

On that general note, I think the comparison point to look at for 'state of the art' in the subject would be India's just plain excellent UPI system (https://en.wikipedia.org/wiki/Unified_Payments_Interface) and all its supporting infrastructure. It's seriously great in a way that's hard to understand for people whose only context is being familiar with Western credit card or bank transfer systems. Nigh instant payment reconciliation, free and extremely convenient for individuals, operational costs small enough that it's practical for everyday micro-transactions for the poor (I'm talking on the territory of 5¢ in USD terms) which makes cashless payments extremely practical for even ordinary street merchants.