eWay is still 2.6%, hopefully that changes too.
So thanks Stripe for your awesome API & team.
Whilst I'll happily congratulate Stripe for the investment, I don't myself see it as a good thing. With Stripe having investments from both Visa and AmEx they have little incentive to challenge the current fee structure. Stripe processes its payments in the US through a strategic deal with Wells Fargo, who have a substantial (> $1 billion) investment in Visa, who in turn have an investment in Stripe. Do any large retailers or merchants have similar investments in Stripe? I don't believe they do.
If you're a merchant I wouldn't see Visa and American Express investing and taking equity in Stripe as a good thing. These are companies that have every possible reason to keep credit card fees as high as possible and prevent regulation from reducing them (which is exactly why Australia's fees are much lower - they're regulated).
I like Stripe as a company. I think they do great stuff. But a Stripe that's received investment from the card networks is a Stripe less likely to make disruptive moves to break the monopoly card networks have today.
Do they? Consider Brazil or the Netherlands, countries where the dominant way to pay for things online is by direct bank transfer. In the case of the Netherlands, iDEAL represents 54% of online transactions and offers instant transfer out of a customer's bank account at virtually zero cost to a merchant.
Compare that to Visa in the US, where you get your payments several business days later at a substantial fee. What valuable service is Visa providing? They're not. I don't believe you'll be able to find a single large merchant in the US who thinks Visa provide anything approaching a valuable service.
[1] http://bmimatters.com/2012/03/19/understanding-visa-business...
Take the laissez–faire attitude in government, with a sprinkling of corruption at the highest levels of the financial industry, and you get merchant costs that you have in the US.
Wow, what a claim, right?
Let me ask you this. In what industry in the history of the world's economies can prices (such as those that banks / credit cards charge merchants) remain so stable in a truly competitive environment?
Let me help you. The answer is NONE.
I was not diving into VISA's market power, their ability to price their services, nor other politics.
Perhaps not on micro-scale, but on macro-scale it's certainly arguable that over priced goods extract value from an economy unnecessarily. In a way perhaps this sort of tactic can have negative overall effect on economy, and thus create negative value.
Otherwise it would seem the word "value" has no real meaning.
If this were a drawing, total value would be a summation of cost to provide the aervice (C), price to the customer (P) and benefit to the customer (B). Value captured by VISA is P-C and value captured by customer is B-P.
--------------------
A farmer asks an engineer, a physicist and a mathematician to build the most efficient fence around his flock of sheep.
The engineer builds a square fence around the sheep and says "That's the best I can do".
The physicist builds a circular fence, then says "That's the best I can do".
The mathematician smirks and takes a meter-long length of fence, wraps it around himself and declares triumphantly "I define myself to be outside!"
They're providing value to consumers. Here are some of the features I love about my credit card:
- Purchase protection; I feel totally confident in buying anything, even from sketchy sites and strange stalls, because if there's a problem Visa immediately reverses it
- Rewards: I have hundreds of thousands of miles from credit card rewards. This represents literally thousands of dollars in value the cards have provided me.
- Concierge: I sometimes have my concierge serve as a VA.
I know literally zero about credit cards beyond what I know as a user, but I can imagine a couple of reasons why that would be plausible, ranging from "There is more credit card fraud in the US" to "The market for credit card rewards in the US is more aggressive, and a 1.75% fee is a net loss for many US rewards cards". Can this really be dismissed out of hand like that?
And most transactions are online authorized anyway and issuers run real-time fraud detection systems.
The extra interchange in the US doesn't go to Visa but instead to the banks that issue the cards -- much of which then, in turn, gets passed to consumers in the form of rewards. So, whether it costs more depends on your definition of "cost" -- but Visa itself does indeed incur much higher fees in the US (since they're paying more to banks). To a large degree, it's just a different equilibrium.
That aside, I'm one of Stripe's cofounders. We're not beholden to credit cards: Stripe was the first major payments company to support Bitcoin; we support Alipay; we support ACH. We funded Stellar. And we have more in the works.
But we should acknowledge that credit cards are by far the dominant instrument today. The purpose of this partnership is to help build products that improve the experience of accepting credit cards on behalf of the businesses that use Stripe. (And there sure is plenty of improvement possible there!)
But it is good, I think, to be a little skeptical about vertical integration - which isn't a bad thing per se, but you do have to wonder whether investments by the established card networks will have any impact on Stripe's ability to disrupt the space and work to benefit the merchant, rather than the bank (or both!). It's really good it sounds like that's not the case.
> The extra interchange in the US doesn't go to Visa but instead to the banks that issue the cards
Whilst this is true, it's also true that until 2008 Visa was owned by the issuing banks, and since Visa IPO'd the banks have maintained significant investments. So I don't think it's quite as clear cut as "the banks vs the networks". They have a somewhat symbiotic relationship.
I think it's pretty clear that there's no appetite in the US on either the banks or the networks to reduce interchange unless forced to by regulation. And I think that's going to happen one day just as it did for debit cards, and it will be really interesting to see how the payment processors react to that - whether they lobby against it, or for it.
Thanks for the kind words about Stripe!
> Whilst this is true, it's also true that until 2008 Visa was owned by the issuing banks, and since Visa IPO'd the banks have maintained significant investments. So I don't think it's quite as clear cut as "the banks vs the networks". They have a somewhat symbiotic relationship
This is not really the issue. Yes, Visa was owned by banks (so was MasterCard) but they have always taken between 5 and 10 basis points of each transaction (it is not like the fees came down after becoming public). The interchange is high in the US because they ABA and other groups lobby aggressively to keep them that way. Also, given the prevalence of credit cards in the US, the networks have been able to negotiate aggressively with the merchants. When Visa introduced their Signature card product, they increased the fees arguing their product does not have a 'fixed limit' so consumers will spend more which will help the merchant so they should pay more in fees. Amex makes the argument even more so and that's why their interchange tends to be in 3-7% range -- most merchants are not smart enough to do the math and say their customer segment is not really the 'typical' Amex segment and if they don't accept Amex, the customer would have just used a Visa / MC instead. So these rates prevail.
If you ask me why rates are different across geographies it really comes down to the will power of the govt. to set the terms. Most emerging economies see Visa / MC as a threat as their entire country will become dependent on a foreign entity to process payments. They generally tend to set pro-consumer regulations (but largely to annoy Visa / MC/ et al.).
To my knowledge only in the US (maybe Canada) where it is illegal for a merchant to discriminate against a credit card user. After a lengthy lawsuit, the networks and the merchants settled that the merchants can give a 'discount' on cash transactions but cannot put a surcharge on card transactions. The math is the same but the psychology very different.
I wish the rates are fixed amount per swipe and not a % of the transaction amount. Why should it be? If the networks operated seamlessly and allowed new entrants, it would have been like today's cloud computing pricing (almost a commodity) but alas we get only IBM style pricing.
I hate credit card companies from the bottom of my heart but until there is another payment vehicle that is just as convenient it will be stupid of any entity not to partner with such providers.
Absolutely agree. The EU determined that interchange is illegal and now caps it at 0.2% for debit and 0.3% for credit (yes interchange, not scheme fee). After a transition period of course. And surcharging now becomes illegal again as the fees are that low.
http://europa.eu/rapid/press-release_IP-15-4585_en.htm
> I hate credit card companies from the bottom of my heart but until there is another payment vehicle that is just as convenient it will be stupid of any entity not to partner with such providers.
Banks will never get their shit together and the lack of a global clearing standard will mean we'll forever have to rely on payment schemes.
I think it's fair to call Stripe out on this because you position the 2.9% as a "it's not our fault, it's the payment instrument, we're happy to pass on savings if you use alternatives like Bitcoin etc." But you are not passing on the very significant savings of debit cards.
How significant? Whereas credit card cards are in the ballpark of 1.5-2% plus 10 cents, major debit cards are just 0.05% + 21 cents.[1]
That's right.. 0.05%.
So why is Stripe charging 2.9%?
[1] Visa interchange rates: http://usa.visa.com/download/merchants/Visa-USA-Interchange-...
If the rationale for this is simplicity then why break out Bitcoin or ACH? Why not just fold them into the blended rate too? Of course it would defeat the whole point of them.. Just as this defeats the whole point of Durbin fee regulation.
Durbin has positioned debit to fill the role that Bitcoin has failed to: a low fee consumer payment method unburdened by reward programs. It's about as cheap as Bitcoin, but it has near universal adoption already, basic consumer protections and well oiled rails.
I seriously doubt merchants would find breaking out debit from credit too complicated especially if the rate was significantly lower. I'd understand doing a blended debit rate that combines regulated and exempt debit cards, which I'm guessing would come in well below 2%. Merchants would go bonkers for that! But blending debit and credit in the post-Durbin landscape makes about as much sense as blending Bitcoin and credit.
One price for credit, one price for debit, one price for Bitcoin.. That sounds pretty simple.
So... Is it really simplicity driving this, or is it the fear of the credit fee crossing 3% if you broke out debit? To be honest I hope it's not that you're secretly hiding a big profit center in regulated debit markup because that would not be so transparent.
[1] http://www.federalreserve.gov/paymentsystems/regii-average-i...
How is it going anyways?
Since when? Obviously you know more than I do, but the top result on Google for "stripe ach" still says you don't.[0] I am halfway through building a platform that requires both CC billings/refunds as well as ACH debits with Chargify and if I can do everything through Stripe it would save me several hundred dollars a month.
[0] https://support.stripe.com/questions/plans-or-suggestions-ab...
What would be a game changer for Stripe is to have ACH processing in the realm of 1-2 business days instead of the 5-6 days it currently takes. This would probably require some fancy exchange of money between accounts behind the scenes, but if they can pull it off it may be worth paying for.
Also, though it's US$0.25 a tx, it's actually on the order of US$0.15-0.20 at some other places. But for us our volumes are low, and their API makes it worth it.
Ahh. I have a question. If I use Paypal, not in the traditional Paypal way, but strictly as a credit card processor (paypal pro), they provide discounts at relatively low volumes:
$0 to $3,000 month - 2.9% + $0.30 per transaction
$3,000 to $10,000 month - 2.5% + $0.30 per transaction
$10,000 to $100,000 month - 2.2% + $0.30 per transaction
But, Stripe sticks to it's guns at 2.9%, unless we're doing $1 million+ a month. Seems odd. Do you ever plan on discounts for volumes like shown above?
Either is fairly easy to integrate, and if you're running an out of the box ecom package, likely already done for you.
I could probably get slightly better rates with an actual merchant account, but it's a confusing road to go down, with lots of intentionally overcomplicated models.
My biggest beef, as a seller, with cc processing, is the unfair nature of chargebacks. We don't get many, but the system is so biased towards the buyer that buyers can (and do) get away with straight up fraud. My second beef is the scam of rewards and miles cards. The "rewards" are funded entirely on the backs of the merchants.
Did I miss that announcement? Because accepting e-checks has been a huge request from our clients. I just went through the documentation again but I have not been able to find how a person can pay through ACH. Would you mind pointing me in the right direction? Thanks!
In Australia the bank pays Visa.
So yes, I think it costs Visa that much extra to process a payment in the US. Clearly so.
Also, in Australia a Visa transaction is handled by Visa, while in the US the transaction is handled by the card issuer. In Australia we get Visa/Mastercard cards with our bank's barding on it, in the US you get the bank's card with Visa/Mastercard payment clearing.
At least that is how I understand it. All I know is that each Visa debit/credit transaction costs me $2.50, while EFTPOS costs me nothing. Same card, different button on the EFTPOS terminal. PayWave is Visa, not EFTPOS. Pay that $25 tank of petrol with PayWave, get slugged 10% in processing fees :(
Yes, actually, it does. Payment processors like Stripe (technically, an ISO) and its merchant acquirer partners must pass through most of their fees as interchange to the bank which issues a card. Those fees are much higher here in the U.S. versus Australia, where they are regulated.
A typical U.S. payment processor charges ~2.3%, of which the processor retains 0.5%, 0.1% goes to Visa, and the remaining ~1.7% goes to the card issuer. (This averages out card-present and card-not-present sales across all sizes of merchants, and is just a rough estimate, so no judgement on Stripe's fee level, which is reasonable for a simple blended rate for e-commerce.) All of the processor's product development, marketing, operations, profit, etc., have to come from that small 0.5% margin. (That said, it's still a good business, with 50% margins at scale.)
What's best for the merchant is what's lost in much of these discussions. The continued fragmentation of the industry has left merchants struggling to navigate necessary customization and even more difficult documentation; although Stripe has led well in this area. Since accepting alternate payment methods and the ability to switch processors is prohibitively difficult, competition is artificially constrained - leaving "fees as high as possible". That's why we're building http://accepton.com Would love to chat: jonathan [at] accepton {dot} come
Can't wait for some competition to come to Poland. (for the record market price for currency conversion is way below 0.5%).