The nice thing about Stripe is that they have really shaken up the online payments here in Australia. They are 1.75%+30c per transaction here, and that caused the others to drop down to that as well (even Braintree which was one the last IIRC).
In the US Stripe charges 2.9%. That's 66% more than in Australia. Do you think it costs Visa that much extra to process a payment in the US? No, it clearly does not.
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.
> In the US Stripe charges 2.9%. That's 66% more than in Australia. Do you think it costs Visa that much extra to process a payment in the US? No, it clearly does not.
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!)
All due respect but I believe you are leaving out a key piece of information: that the Durbin Amendment regulated down the cost of debit cards to next to nothing (not unlike Australia's interchange regulations), yet Stripe still charges the same as credit cards.
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]
Only some debit cards are covered by Durbin. (Those issued by US banks with more than $10 billion in assets.) So, sure, we could break that out... but quoting "X% for most cards and Y% for Durbin-regulated debit" isn't exactly straightforward or easy to understand/model. We calculate our fees based on the blended cost of processing. (Plenty of transactions cost more than 2.9%.)
Over 60% of debit transactions are covered by Durbin.[1] For those Stripe is taking 0.05%, an extraordinarily low fee payment method, and marking it all the way up to 2.9%.
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.
No, all debit was regulated. As @pc said, the difference is whether or not the issuing bank has $10 billion in assets. Some kinds of prepaid debit cards are also excluded from the regulation.
I do always appreciate your willingness to comment here on stories about Stripe, so first of all thanks for taking the time to reply. I know so many people who have great experiences using Stripe and love the services you provide - I've evangelized them myself on occasion.
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.
Yeah, I agree that you need to be careful navigating these kinds of relationships. That said, I think part of the reason we've been able to do deals like this is because we're so clear that we're on the side of the businesses using Stripe. If we were pushing an ulterior agenda (our own wallet, a particular payment instrument, etc.), we'd close off other avenues. You can only work with Alipay and Visa and Apple by being neutral. (And, yeah, the bank/Visa symbiosis is indeed... nuanced.)
hey pc, one of your many happy customers. when will you give us the new stripe dashboard that you promised a while ago here on HN ? Stripe dashboard UI needs a big change and needs it asap.
I don't use stripe nor a Visa fanboy but I know this industry very well -- I spent awful lot of time there.
> 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.
> 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.
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.
> 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.
Dear Patrick, are there any plans to incorporate SEPA payments and/or SEPA Direct Debit into Stripe? Europe is a huge market. Many people here don't even have credit cards. I think you would gain a lot of traction in Europe if you would incorporate this...
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.
We're using the beta. They charge US$0.25 a transaction, and US$1.00 for a failed transaction (e.g. insufficient funds, frozen account, etc). No %age of transaction is taken off the top (yet). API works as well, though their client libraries aren't quite up to date with it yet, and you have to setup a webhook because ACH processing takes several days.
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?
Why would you want to leave PayPal Pro, for Stripe, if you're getting a lower rate w/ PayPal? Assuming the effective rate, including your monthly fee is still < Stripe.
I view it as almost a commodity. Stripe does offer some unique value, like their Connect piece (https://stripe.com/docs/connect). Paypal pro has more flexible fraud controls, though many of them are extra cost.
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!
I still do not understand why yee guys got involved in Stellar which was a clearly a rehash of the earlier Ripple scam up to and including same system, interface and people working on it.
> Do you think it costs Visa 66% more to process a payment in the US than Australia? The answer is, of course, it doesn't.
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?
Fraud rates in the US are very, very low. I don't know the stats top of my head for CNP (Card Not Present or Online Fraud) but in general the industry as a whole was running at around 8-12bp couple of years back. It is not something that will materially change interchange rates. International fraud rates tend to vary but not 0bp. Many European countries adopted Chip and Pin early on, which reduced fraud rates but not to the point that will explain a 60+% diff. See my other comment on lobbying in the US.
At this point, a large portion of the fee goes to fund rewards. Despite that, there's been an inexplicable shift in payment volume to debit cards which have little or no rewards.
Maybe attributed to debt conscious millennial generation? I believe this is why financial management services like Simple and Moven that offer only debit cards are becoming more popular.
In the US the bank gets paid by Visa for each transaction.
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 :(
"In the US Stripe charges 2.9%. That's 66% more than in Australia. Do you think it costs Visa that much extra to process a payment in the US? No, it clearly does not."
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.)
"If you're a merchant I wouldn't see Visa and American Express investing and taking equity in Stripe as a good thing."
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
VISA provides a valuable service, and they need to get paid. It's not like Stripe is now just another cog in the machine. Well, this likely secures their future.
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.
> What valuable service is Visa providing? They're not.
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.
This argument is silly. Value is determined by price and benefit. If VISA were not providing value, then no one would pay for their services. However this is not the case and we can find through unverified online sources that, "VISA creates value for all its stakeholders during the process. Cardholders’ benefit because of convenience, security, and rewards associated with card payments. Merchants benefit from improved sales by offering payment method options to the customers. Banks get new revenue streams through card fees, late payment interests, and transaction fee cuts." [1]
You are living in a dream world. Give me access to Visa / US banking infrastructure and I'm 100% certain I can find ways to bring down costs by at least 99% and probably at the same time make it more secure and consumer friendly.
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?
The point I was attempting to make was VISA does provide value. This value is estimated as the price clients pay plus the estimated benefit clients receive. This previous post also mentioned that you would be able to provide the same value VISA does given the same market opportunity (albeit at a lower price). Therefore I believe we are in agreement.
I was not diving into VISA's market power, their ability to price their services, nor other politics.
I guess based on those definitions wouldn't you need to subtract value based on the differential between services provided vs cost of said services if in fact they are being offered at unreasonable price?
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.
It would have to be true that the price VISA is able to charge is in excess of the total customer benefit. But then no one would buy VISA's services because it is not worth the money they would have to pay.
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.
Your response tells me you're somehow missing the point. Sort of reminds me of a funny joke I heard a long time ago. I don't know original source, but I found this joke, in many similar iterations, across many forums online:
--------------------
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!"
Meanwhile I pay ~6.5% for every transaction using PayPal because of their clever combination of first charging for cc (3.5%-3.9% for international transactions) and then another 3% mandatory currency conversion fee because they don't allow withdrawing USD to USD accounts not in US (so living in Europe I don't have any options other than to convert USD to my currency on their terms).
Can't wait for some competition to come to Poland.
(for the record market price for currency conversion is way below 0.5%).
Surpassingly low for Stripe. Here in Norway it is cheaper than in the US but still quite more expensive than other options (no set up costs though). 2.4% for local cards and 2.9% for international cards. And to charge in USD you need a US bank account otherwise you are hit with a 2% conversion fee (ridiculously high).
eWay is still 2.6%, hopefully that changes too.
So thanks Stripe for your awesome API & team.