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Comment by kmf | Hacker News Reader

What is "the right way", if you're allowed to disclose that? I remember that Square Cash was doing their transfer feature using refunds[1], is that the same way that Stripe is doing it?

[1]: http://jonbwhite.tumblr.com/post/66853226398/how-square-move...

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"Unreferenced refunds" are the 'wrong way': the card networks don't like it for various reasons. ATM networks are starting to offer an API that just does this, which is the 'right way.' Visa OCT was mentioned elsewhere in this thread, for example. This means you have to integrate with a patchwork of different networks if you want to have good coverage.

I don't have any special insight into how Stripe is doing it, but the extremely low cost and the '1-2 days' sounds like unreferenced refunds. I could be wrong.

On a tangent: why does the wrong way cost less money than the right way? Is this a form of price fixing by the credit card companies? I'd imagine Visa could offer these at less money (or free) than MC but it sounds like that's not the case.

I don't have an enormous amount of insight into this, but what I can tell you is that in this industry, pricing is all about risk. The reason unreferenced refunds are cheap is because you're exploiting a loophole in the API, basically. The reason they don't like it is that it messes with fraud calculations, which messes with risk.

The 'right way' is basically a new product, in my understanding and so, like any product, they charge what the market will bear.

That post credits Square with the refund method, but actually they were not the first.

The first I know of is Giftly, a gifting startup (around 2010?). Maybe there are earlier examples.

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