Comment by boplicity | Hacker News Reader

Comment by boplicity | Hacker News Reader

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> 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.

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