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Comment by henry700 | Hacker News Reader

The cashback you are given back is taken from a fraction of the fee levied on merchants by the Payment Processing company they use. The only thing holding this system together is the lobby (also funded by a part of the aforementioned fee on merchants) by the Payment Processing industry to uphold laws that prohibit more expensive payments for more expensive payment methods, and also the extensive marketing (funded by guess what). It's an extremely simple yet ingrained system, and the only way to topple it and stop paying hidden costs thinking you're getting an extremely good deal on cashback, is to peel back the curtains and realize it, and make most of the politically-active part of the country's population to do so too.

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Credit card isn't more expensive than its main competitor, cash, though. It's just the costs of credit card acceptance are transparently added to each transaction, while the costs of cash are distributed over the whole day's cash transactions and so more opaque.

Merchants have a psychological (and in some countries, legal) barrier to charging more for cash than other payment methods, even though it's the least efficient. Given this, cash-back is the best way to share the efficiency gains with the end user. Maybe if Pix or Twint or debit cards or what-have-you are so efficient, they should also give consumers cashback.

It could give cashback if it cost 3% of the transaction. But it’s it’s actually much cheaper. For credit cards you have to pay for the brand, the issuer and the acquirer. And each gets a nice cut.

Reducing merchant fees seems like a mistake if you are in competition with both cash (which has high intrinsic merchant costs) and credit cards (which has low intrinsic costs, but which are padded so they're closer to the costs of cash, with consumer cashback coming out of this padding). I'm certainly not going to _choose_ to receive less cashback, as a consumer.

I mean, the cashback is paid for out of the fees you pay for the service. In a world with low capped charges (EU etc) then you'll just pay less, which is equivalent to cashback and much fairer.

So long as the price is the same for cash and card (and Pix?), then you should pick the one that gives you the best kickbacks. I don't think capping CC fees will actually lower prices for consumers much (because merchants prefer round prices for psychological pricing). For evidence, see the fairly uniform pricing of products sold in euros between countries, despite varying vat rates between eurozone countries.

> see the fairly uniform pricing of products sold in euros between countries, despite varying vat rates between eurozone countries.

Huh, not sure I agree with that (the uniform pricing thing). I mean, one should believe that, but it doesn't appear to be true. For example, recently I saw a tablet for 208 euro (converted from GBP) on amazon.co.uk, approx 220 euro from amazon.de and 360 euro from amazon.ie, for the same item.

I was really surprised because I figured electronics would be pretty similarly priced across the EU/UK, but apparently not.

Pix costs are very low and the fee for the merchant as well. They pay less for it and get the money instantly. That’s why many small merchants only accept pix and some big merchants offer discounts for payments using it.

Discounts for Pix vs cash sound cool and a fine alternative to cashback via the payment system. Though I can imagine this might be hard in some countries, where there is a strong pro-cash lobby.

I don't think you mean transparently - credit card costs are invisibly added..

Cashback is just giving part of the profit margin of the fees charged on the transactions to the customer. I would rather that profit margin gets split between the customer (lower prices) and merchant. Also, didn't the EU eliminate cashbacks by precisely price capping transaction fees?

I've seen merchants giving a discount for payment with Pix. And a few stores refuse credit cards and only accept debit and Pix (and cash?).

Also, isn't the main competitor to CC the debit card? And now in some countries instant payments? Is debit that rare in the US?

Although to be honest I'm not 100% sure if it isn't some tax evasion thing.

But, who do you get to call in a world like that? I think the West really likes customer service and security.

Suspicious transactions are a legitimate use-case for payment processing. If you don't fully trust who you're buying from, the scam preventions, chargebacks, refunds etc. work fine. But buying lunch or small chocolates, cigarretes etc with credit cards is INSANE.

Why do you think PIX doesn’t have customer service or security? It’s regulated by the central bank but operated by private companies.

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