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Stripe, Block, and PayPal each solved a massive pain point. PayPal provided a way to pay people and vendors without giving away your credit card number. Squar

Stripe, Block, and PayPal each solved a massive pain point. PayPal provided a way to pay people and vendors without giving away your credit card number. Square made it easy to accept payment in person on a phone, without an extensive upfront underwriting experience and without expensive fixed monthly fees. Stripe did the same as Square, but for accepting online payments. Fraud and Risk come in many forms, and these providers, even with their UX innovations, sit on top of those same rails to reduce fraud. Without those rails, buyers can’t trust sellers and sellers can’t trust buyers. In my opinion, you need to find a way to solve that problem before you can eliminate the fees being captured by these providers.

DeepYogurt 2y ago
> Fraud and Risk come in many forms, and these providers, even with their UX innovations, sit on top of those same rails to reduce fraud. Without those rails, buyers can’t trust sellers and sellers can’t trust buyers. In my opinion, you need to find a way to solve that problem before you can eliminate the fees being captured by these providers. And failing the elimination of those issues there will always be some fees. New vendors can pop in and push the fee structure down if they can run a more efficient operation.
thesausageking 2y ago
The challenger to these will solve for a different problem. Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. For a 3% discount, would customers agree to use something that worked just like cash, where the transfer was instant and couldn't be undone? Then you don't have to worry about fraud, chargebacks, etc.
- rfw300 2y ago
  This is the purpose of Zelle, Venmo, money wires, and checks. But there are many problems they don’t solve, that customers and sellers prefer to be solved and are willing to pay for.
- BeetleB 2y ago
  > For a 3% discount, It is fantasy to think they'd get a 3% discount. The goods in stores that take only cash do not tend to be cheaper than those that do. They know what people are willing to pay and will charge the price. If they see people are willing to pay $99 with a credit card, then they'll be willing to pay that with cash.
  - jnordwick 2y ago
    > The goods in stores that take only cash do not tend to be cheaper than those that do. In NYC they most definitely do. A lot of the corner stores will change you less with cash. I'm not sure it is a the card payment or that they are keeping the sale off the books, but something that might cost me $18.50, I'll pay $18 for.
    - jtc331 2y ago
      Yes, cheaper in the same store, but not usually compared to other stores that don’t have cash discounts.
    - BeetleB 2y ago
      When I wrote that comment I knew someone would come out and use New York City as a counterexample. The reality is except for a few of the really major cities those types of stores are usually more expensive than their larger counterparts in virtually all other cities in the US. In my city I'm not going to get cheaper groceries by going to the smaller stores. They are more expensive regardless of whether they support credit cards or not. They may be superior and certain other aspects but price is not one of them. My guess is the opposite may be true only in places where owning a car is expensive or inconvenient.
  - crtasm 2y ago
    Handling cash has its own significant cost, it's not a direct comparison to a low-fee digital payment.
  - devman0 2y ago
    I think the issue here is who is paying the fee and where is the fee surfaced. A free market solution would work here, but it requires some regulating to create the transparency required. Everyone pays their own credit card fee as a line item on the receipt, merchants are required to print it on the receipt. If customers actually had to pay their own fee's on each swipe you'd see a lot less people reaching for the Platinum card and instead for the no frills local bank credit card. You'd also see immense downward market pressure on swipe fees as now card issuers have to compete against each other.
- tqwhite 2y ago
  I would use my debit card even if it behaved exactly like cash, ie, when the recipient got the money, my only way of getting it back is to sue them or call the police. Obviously any electronic payment system needs to be secure internally but society lasted a long time and made fine progress when having your wallet stolen meant losing your money. It would be fine to require a person to charge their debit card with a finite amount rather than have it be funded up to the limit of the supporting account and that would solve the last problem compared to cash.
  - margalabargala 2y ago
    I understand that Europe is more secure with chip+pin, but in the US, debit cards do exactly what you describe. If fraud happens, you are out money until it is resolved. The key difference from cash, in the US, is the ability to abuse cards at a later date without the physical card. For someone to steal your wallet, they have to be colocated with you and can only steal as much as you're walking around with. As long as debit cards have a magnetic stripe and have their full number printed on them, and that information is useful, this problem remains.
    - Deathmax 2y ago
      > As long as debit cards have a magnetic stripe and have their full number printed on them, and that information is useful, this problem remains. Which the EEA/UK has also (partially) solved by enforcing Strong Customer Authentication (SCA) that mandates that (most) transactions require MFA.
      - margalabargala 2y ago
        Yeah, Europe is ahead on this; I hedged my earlier statements heavily. It's not a difficult technological problem to solve. A card's chip should be able to guarantee that the card is physically present for any transaction. Obviously online payments would pose a problem, people would need to either own USB card chip readers or banks would need to do something new and special.
- multjoy 2y ago
  >Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. Fraud is an industrial level enterprise. You absolutely need fraud detection if you're accepting payment that isn't cash.
  - snotrockets 2y ago
    You also need it for cash, but there fraud takes different form, and need different mitigations.
- stefan_ 2y ago
  EU caps interchange fees at 0.3%, which is probably still too much. The 3% is mostly to finance the various gimmick programs that make naive people think they are "gaming the system" with their 20th card in wallet (and because they can, of course).
- tonyarkles 2y ago
  There's an issue that you're not addressing: what happens when someone who isn't me spends my money? I think people would be happy for the theoretical 3% discount until their account is drained and sent to North Korea with no recourse.
- alberth 2y ago
  You just described debit cards. And there fees are 1/10 of that of credit cards, as a result of giving up these benefits.
  - nazcan 2y ago
    But at least in Canada, only have low fees if they are in person - not online.
- ta_1138 2y ago
  You are missing the opposite side of the fraud picture: Where it's not the business scamming you, but someone taking your credentials and spending up to the limit in a store that deals with no chargebacks. This is, if anything, the larger size of the fraud losses for the Stripes of the world. Fake businesses that use the cards either for testing if the creds are good, or where the owners charge cards that they obtained from some other malicious actor. So it's not that I get 3% off by not supporting chargebacks, but whether I want to have a dollar under a payment system that supports someone emptying me out without recourse.... and the answer is often no.
  - grogenaut 2y ago
    Or further abusing your weak password on a site and then racking up a ton of charges to a product that they're capable of laundering in some way into money for them at any ratio.
  - d0gsg0w00f 2y ago
    But fraudsters can steal your cash too. The difference is that you don't call the bank when someone takes your cash, you call the cops.
- crazygringo 2y ago
  > Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. Well, not until you get hacked. We might be happy with instant, no-undo transactions until our device gets hacked and our bank account with many thousands of dollars gets drained, through no fault of our own. Then suddenly, complex fraud detection and transaction reversals seems like an awfully good idea. Because the issue here isn't about chargebacks where you genuinely made the transaction but the business failed to deliver, and maybe you lose a couple hundred dollars. The issue here is about when you never authorized transactions at all, and you lose all your savings.
- fuzzer371 2y ago
  This has been done with Zelle and people are crying because they're dumb enough to fall victim to obvious scams.
  - Yeul 2y ago
    The idea of buying stuff from a dodgy website just seems strange to me. One of the most fundamental basics of trading has always been trust.
    - com 2y ago
      Wait until you hear about German SME e-commerce and “open invoice” billing. So much trust from the vendor!
- grogenaut 2y ago
  Lol If you have an unprotected vector fraudsters will find and exploit it. They're literally paid to do so. I've seen fraudsters that are ridiculously persistent to make $2,000 in a year. But they just keep poking at it at a certain point you're able to ramp that up to $80,000 in a month I know they're good it was completely worth it to him for several years. How I've seen people spend hundreds of hours to generate a few hundred dollars worth of in-game currency or on-site reward points.
- immibis 2y ago
  Would the customer still agree to that 3% discount, after their computer got infected with a virus and 100% of their money was irrevocably gone?
darth_avocado 2y ago
And the value prop isn’t just the payments. Once you add things like inventory management, front/back of the house integration, taxes and a bunch of other things, you’re simplifying a lot of things for the business at a lower cost than having them pay for every one of those things.
konschubert 2y ago
No. With 99% of my transactions I don’t care one bit about the ability to do chargebacks. I just went grocery shopping. VISA was involved and took a few percent. Why?? I got my groceries. I’m not going to do a chargeback because the salad was bad. Earlier, I bought something on Amazon. Again, VISA took a share. Why? In 15 years of shipping with Amazon they have always hinteres my returns.
- kleinsch 2y ago
  You leave your credit card on the table at a coffee shop. A thief takes it and goes to the grocery store. You’re going to do a chargeback.
  - welder 2y ago
    Nobody uses physical cards anymore... even my kids pay with their toy watch when playing restaurant Edit: Tap pay is ubiquitous in the EU
    - dkasper 2y ago
      Absolutely not true. Some places still don’t even take tap to pay and still use chip.
      - abakker 2y ago
        Yes - for example, Home Depot does not take tap payments yet.
        tonyarkles 2y ago
        This is something I find so fascinating about the American financial system... Home Depot in Canada has taken tap payments and Apple Pay for a long time now.
        crazygringo 2y ago
blacklion 2y ago
PayPal: In Netherlands there is system called iDeal which provide online payments via tokens, without giving any of your data to seller (recipient). It is supported by all banks. It is super-convinient, you scan QR code by bank app on your smartphone if you pay on other device (laptop, computer) or link is opened by your bank app on mobile and you approve payment. You don't need to enter anything, only select your bank from the list. You don't need to pass your payment data to 3rd party like PayPal, there is no place to steal or phish your card or account data in this scheme. Visa or MC could do the same, without additional parties. But no.
- deepsun 2y ago
  Same thing in Ukraine. And it's not because they face less fraud attempts, it's just their tech is years ahead of US.
  - deleted 2y ago
    [deleted]
  - aguaviva 2y ago
    Their tech is years ahead of US. Can you elaborate? (Am new to the topic, so your perspective would be appreciated).
    - deepsun 2y ago
      Hard to pick up one thing among multiple. For example, transfers between accounts are instantaneous, not 2-5 days for ACH (Wire transfers are same-day, but expensive). Electronic menus/payments in cafes are default for at least 3 years now (US has toasttab.com but it's far from being default). If you have a small business account, taxes are paid in one click (app shows you tax to be paid with Confirm button). PS: These features are available in many other countries besides Ukraine, of course. Only in government id/functions Ukraine excels (#2 in the world, after Estonia only).
      - aguaviva 2y ago
Nextgrid 2y ago
A lot of the fraud hinges on the fact that all you need to drain an account is a static card number. A lot of hacks are subsequently piled on top of that to try and make it harder (SCA/3D Secure, captchas, etc), and a lot of busywork is spent tidying up the consequences of that (chargeback handling, etc). You could eliminate a lot of the fraud by moving off a mostly-static identifier to merchant, amount and time-limited tokens the user generates with their bank (or the merchant redirects them there). This would address a lot of the issues - the tokens are useless when leaked (as they only work against the merchant's own account) and can't be misused even by the merchant to go beyond the agreed amount or time limit. This means with such a system you’d immediately eliminate a whole category of fraud, with the only thing remaining being merchant-level disputes like goods not as described/etc, which can easily be made optional and the user can choose to opt-in for the extra fee. Then you would actually have a good case for lower/no mandatory fees at all. One problem you need to keep in mind is that fraud mitigation is a big industry in an of itself (some of it is real, some complete snake oil but relies on the underlying problem being real to sell itself) and wouldn't be in favor of a system that is inherently immune to (at least some types of) fraud.
- martinald 2y ago
  This is already happening, 16 digit PANs are due to be phased out https://developer.visa.com/capabilities/vts https://developer.visa.com/capabilities/vts
  - Nextgrid 2y ago
    The page is light on details, but is it scoped and merchant/amount/time limited? Because if not, it’s yet another “hack” that merely reduces one specific type of fraud (when a card number is leaked) without fully addressing the problem, so the need for chargeback arbitration (and thus associated costs) persists.
    - martinald 2y ago
      In a word yes. You'll still get a lot of chargebacks by the way. With a lot of ecomm I've been involved with the fraud you are talking about is actually a small part of chargeback volume. Most is unhappy or demanding customers, or another type of low level fraud, claiming goods didn't arrive despite a photo of the person literally accepting them from the delivery company. This is absolutely rampant in b2c with smaller merchants (I am aware you mentioned this but not sure if you are aware of the scale of it).
roughly 2y ago
Stripe had a live dashboard over Black Friday that showed the dollar value of all transactions across their network, including those blocked for fraud. The fraud rate was nearly 12% of the total dollar amount of transactions.
- fragmede 2y ago
  Which, we've got to ask about the false positive and the false negative rate. it's annoying when it's really me and I try to charge something and it gets declined, but also the fraud detection can't be 100% effective, so the real rate is probably higher.
katzinsky 2y ago
The whole point of a credit card is that you can give the number out. You're nesting solutions here.
miki123211 2y ago
Most countries that aren't the US basically did this, in one way or another. There are multiple ways of doing so, two-factor authentication (think 3d secure) is one, an oAuth like system where you log in to your bank on their website and consent to a wire transfer is another. There are variations on these ideas, the system we have here gives you a 6-digit code in your banking app which you can enter on any device, trusted or not, and then accept the transfer via a pop-up on your phone, no personal data involved. As far as I understand, both US law and US history heavily incentivize the use of credit cards. There's no nice way for landlords, banks, mortgage lenders and other such institutions in the US to do "background checks" on their customers except through credit scores, and that incentivizes credit card use. There's also a regulatory difference in how credit versus debit card chargebacks are handled, making credit a lot more friendly to consumers in cases of actual fraud. Then there's the historical aspect, in the era where there were no computers, and most vendors could at best call a bank to verify if a card was valid, a debit based system wasn't technically feasible, which is what put the US on the path of credit. A lot of poorer countries had the major cash-to-cards transition a lot later, in the era of chips and dial-up modems, which made debit a lot easier to implement, and so that's what they went with, and debit usually means far lower fees.
- m463 2y ago
  > Most countries that aren't the US basically did this, in one way or another. Most countries that ARE the US put the burden on the business and the credit card companies, and limit the liability to the credit card holder ($50 max, sometimes $500) I've known people in other countries that lost money and they were SOL in comparison. Maybe they have cheaper transaction fees.
  - Iulioh 2y ago
    Nah, that's just because in the US people usually buy with credit while in Europe is mostly debt. If you buy with credit you are using the bank's money, with debt your own and you have less protections in the second case. Trust me, i have meet my fair share of adults who don't own a credit card and if they want to buy something online just charge a prepaid card with the needed amount. American express is not accepted in a lot of places because it is only credit and the processing fees are double that of debit cards. Visa and mastercard debit cards are accepted just because you can't only accept debit cards, a lot of vendors fought for the ability to do so.
zeroCalories 2y ago
These systems act as sort of a fraud insurance. I think in an ideal world we would have low friction low cost money transfers, but people could purchase insurance against fraud. There are complications to this, such as how to be both efficient and avoid abuse, but it would simplify every day life not having to think about a million different payment systems.
analog31 2y ago
I use PayPal for my tiny business. On the one hand, I'd rather not pay them 3% of my sales. On the other hand, if the features of PP (security, buyer protection, ease of use) increase my sales by a palpable amount, then it pays for itself.
fendy3002 2y ago
One aspect that's very important is legal. It's very hard / cumbersome to comply in legal for payment processing in one country, having it to comply in most countries is a massive feat, and an expensive one at that. Though yeah if you already has a mass, pressuring regulation may be easier.
treflop 2y ago
Stripe, Block, and PayPal were never required to process transactions. You can negotiate with a bank to get your own rate and then implement your own secure transaction processing. Visa is still required though. I have worked at companies that bypassed those middlemen. Many companies don’t do it because they are okay with paying higher fees so they don’t have to deal with that extra headache, or because they work at smaller companies that think Stripe, Block, and PayPal invented payment processing when Visa and banks have been around for decades longer.
jongjong 2y ago
I find it weird how fraud protection is used to justify why these companies are so popular because fraud is not something that most consumers care about up front, most people only start caring when it happens to them. Most tend to assume that every tool they use is secure by default. "This product is not insecure" is not a very compelling selling point IMO. It's actually difficult to justify Stripe's popularity aside from media monopolization preventing alternatives from gaining mindshare. Everyone knows Stripe but many don't know about the existence of alternatives.

DeepYogurt 2y ago

> Fraud and Risk come in many forms, and these providers, even with their UX innovations, sit on top of those same rails to reduce fraud. Without those rails, buyers can’t trust sellers and sellers can’t trust buyers. In my opinion, you need to find a way to solve that problem before you can eliminate the fees being captured by these providers. And failing the elimination of those issues there will always be some fees. New vendors can pop in and push the fee structure down if they can run a more efficient operation.

thesausageking 2y ago

The challenger to these will solve for a different problem. Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. For a 3% discount, would customers agree to use something that worked just like cash, where the transfer was instant and couldn't be undone? Then you don't have to worry about fraud, chargebacks, etc.

rfw300 2y ago
This is the purpose of Zelle, Venmo, money wires, and checks. But there are many problems they don’t solve, that customers and sellers prefer to be solved and are willing to pay for.
BeetleB 2y ago
> For a 3% discount, It is fantasy to think they'd get a 3% discount. The goods in stores that take only cash do not tend to be cheaper than those that do. They know what people are willing to pay and will charge the price. If they see people are willing to pay $99 with a credit card, then they'll be willing to pay that with cash.
- jnordwick 2y ago
  > The goods in stores that take only cash do not tend to be cheaper than those that do. In NYC they most definitely do. A lot of the corner stores will change you less with cash. I'm not sure it is a the card payment or that they are keeping the sale off the books, but something that might cost me $18.50, I'll pay $18 for.
  - jtc331 2y ago
    Yes, cheaper in the same store, but not usually compared to other stores that don’t have cash discounts.
  - BeetleB 2y ago
    When I wrote that comment I knew someone would come out and use New York City as a counterexample. The reality is except for a few of the really major cities those types of stores are usually more expensive than their larger counterparts in virtually all other cities in the US. In my city I'm not going to get cheaper groceries by going to the smaller stores. They are more expensive regardless of whether they support credit cards or not. They may be superior and certain other aspects but price is not one of them. My guess is the opposite may be true only in places where owning a car is expensive or inconvenient.
- crtasm 2y ago
  Handling cash has its own significant cost, it's not a direct comparison to a low-fee digital payment.
- devman0 2y ago
  I think the issue here is who is paying the fee and where is the fee surfaced. A free market solution would work here, but it requires some regulating to create the transparency required. Everyone pays their own credit card fee as a line item on the receipt, merchants are required to print it on the receipt. If customers actually had to pay their own fee's on each swipe you'd see a lot less people reaching for the Platinum card and instead for the no frills local bank credit card. You'd also see immense downward market pressure on swipe fees as now card issuers have to compete against each other.
tqwhite 2y ago
I would use my debit card even if it behaved exactly like cash, ie, when the recipient got the money, my only way of getting it back is to sue them or call the police. Obviously any electronic payment system needs to be secure internally but society lasted a long time and made fine progress when having your wallet stolen meant losing your money. It would be fine to require a person to charge their debit card with a finite amount rather than have it be funded up to the limit of the supporting account and that would solve the last problem compared to cash.
- margalabargala 2y ago
  I understand that Europe is more secure with chip+pin, but in the US, debit cards do exactly what you describe. If fraud happens, you are out money until it is resolved. The key difference from cash, in the US, is the ability to abuse cards at a later date without the physical card. For someone to steal your wallet, they have to be colocated with you and can only steal as much as you're walking around with. As long as debit cards have a magnetic stripe and have their full number printed on them, and that information is useful, this problem remains.
  - Deathmax 2y ago
    > As long as debit cards have a magnetic stripe and have their full number printed on them, and that information is useful, this problem remains. Which the EEA/UK has also (partially) solved by enforcing Strong Customer Authentication (SCA) that mandates that (most) transactions require MFA.
    - margalabargala 2y ago
      Yeah, Europe is ahead on this; I hedged my earlier statements heavily. It's not a difficult technological problem to solve. A card's chip should be able to guarantee that the card is physically present for any transaction. Obviously online payments would pose a problem, people would need to either own USB card chip readers or banks would need to do something new and special.
multjoy 2y ago
>Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. Fraud is an industrial level enterprise. You absolutely need fraud detection if you're accepting payment that isn't cash.
- snotrockets 2y ago
  You also need it for cash, but there fraud takes different form, and need different mitigations.
stefan_ 2y ago
EU caps interchange fees at 0.3%, which is probably still too much. The 3% is mostly to finance the various gimmick programs that make naive people think they are "gaming the system" with their 20th card in wallet (and because they can, of course).
tonyarkles 2y ago
There's an issue that you're not addressing: what happens when someone who isn't me spends my money? I think people would be happy for the theoretical 3% discount until their account is drained and sent to North Korea with no recourse.
alberth 2y ago
You just described debit cards. And there fees are 1/10 of that of credit cards, as a result of giving up these benefits.
- nazcan 2y ago
  But at least in Canada, only have low fees if they are in person - not online.
ta_1138 2y ago
You are missing the opposite side of the fraud picture: Where it's not the business scamming you, but someone taking your credentials and spending up to the limit in a store that deals with no chargebacks. This is, if anything, the larger size of the fraud losses for the Stripes of the world. Fake businesses that use the cards either for testing if the creds are good, or where the owners charge cards that they obtained from some other malicious actor. So it's not that I get 3% off by not supporting chargebacks, but whether I want to have a dollar under a payment system that supports someone emptying me out without recourse.... and the answer is often no.
- grogenaut 2y ago
  Or further abusing your weak password on a site and then racking up a ton of charges to a product that they're capable of laundering in some way into money for them at any ratio.
- d0gsg0w00f 2y ago
  But fraudsters can steal your cash too. The difference is that you don't call the bank when someone takes your cash, you call the cops.
crazygringo 2y ago
> Not every transaction needs complex fraud detection or being able for the customer do to chargebacks. Well, not until you get hacked. We might be happy with instant, no-undo transactions until our device gets hacked and our bank account with many thousands of dollars gets drained, through no fault of our own. Then suddenly, complex fraud detection and transaction reversals seems like an awfully good idea. Because the issue here isn't about chargebacks where you genuinely made the transaction but the business failed to deliver, and maybe you lose a couple hundred dollars. The issue here is about when you never authorized transactions at all, and you lose all your savings.
fuzzer371 2y ago
This has been done with Zelle and people are crying because they're dumb enough to fall victim to obvious scams.
- Yeul 2y ago
  The idea of buying stuff from a dodgy website just seems strange to me. One of the most fundamental basics of trading has always been trust.
  - com 2y ago
    Wait until you hear about German SME e-commerce and “open invoice” billing. So much trust from the vendor!
grogenaut 2y ago
Lol If you have an unprotected vector fraudsters will find and exploit it. They're literally paid to do so. I've seen fraudsters that are ridiculously persistent to make $2,000 in a year. But they just keep poking at it at a certain point you're able to ramp that up to $80,000 in a month I know they're good it was completely worth it to him for several years. How I've seen people spend hundreds of hours to generate a few hundred dollars worth of in-game currency or on-site reward points.
immibis 2y ago
Would the customer still agree to that 3% discount, after their computer got infected with a virus and 100% of their money was irrevocably gone?

darth_avocado 2y ago

And the value prop isn’t just the payments. Once you add things like inventory management, front/back of the house integration, taxes and a bunch of other things, you’re simplifying a lot of things for the business at a lower cost than having them pay for every one of those things.

konschubert 2y ago

No. With 99% of my transactions I don’t care one bit about the ability to do chargebacks. I just went grocery shopping. VISA was involved and took a few percent. Why?? I got my groceries. I’m not going to do a chargeback because the salad was bad. Earlier, I bought something on Amazon. Again, VISA took a share. Why? In 15 years of shipping with Amazon they have always hinteres my returns.

kleinsch 2y ago
You leave your credit card on the table at a coffee shop. A thief takes it and goes to the grocery store. You’re going to do a chargeback.
- welder 2y ago
  Nobody uses physical cards anymore... even my kids pay with their toy watch when playing restaurant Edit: Tap pay is ubiquitous in the EU
  - dkasper 2y ago
    Absolutely not true. Some places still don’t even take tap to pay and still use chip.
    - abakker 2y ago
      Yes - for example, Home Depot does not take tap payments yet.
      - tonyarkles 2y ago
        This is something I find so fascinating about the American financial system... Home Depot in Canada has taken tap payments and Apple Pay for a long time now.
        crazygringo 2y ago

blacklion 2y ago

PayPal: In Netherlands there is system called iDeal which provide online payments via tokens, without giving any of your data to seller (recipient). It is supported by all banks. It is super-convinient, you scan QR code by bank app on your smartphone if you pay on other device (laptop, computer) or link is opened by your bank app on mobile and you approve payment. You don't need to enter anything, only select your bank from the list. You don't need to pass your payment data to 3rd party like PayPal, there is no place to steal or phish your card or account data in this scheme. Visa or MC could do the same, without additional parties. But no.

deepsun 2y ago
Same thing in Ukraine. And it's not because they face less fraud attempts, it's just their tech is years ahead of US.
- deleted 2y ago
  [deleted]
- aguaviva 2y ago
  Their tech is years ahead of US. Can you elaborate? (Am new to the topic, so your perspective would be appreciated).
  - deepsun 2y ago
    Hard to pick up one thing among multiple. For example, transfers between accounts are instantaneous, not 2-5 days for ACH (Wire transfers are same-day, but expensive). Electronic menus/payments in cafes are default for at least 3 years now (US has toasttab.com but it's far from being default). If you have a small business account, taxes are paid in one click (app shows you tax to be paid with Confirm button). PS: These features are available in many other countries besides Ukraine, of course. Only in government id/functions Ukraine excels (#2 in the world, after Estonia only).
    - aguaviva 2y ago

Nextgrid 2y ago

A lot of the fraud hinges on the fact that all you need to drain an account is a static card number. A lot of hacks are subsequently piled on top of that to try and make it harder (SCA/3D Secure, captchas, etc), and a lot of busywork is spent tidying up the consequences of that (chargeback handling, etc). You could eliminate a lot of the fraud by moving off a mostly-static identifier to merchant, amount and time-limited tokens the user generates with their bank (or the merchant redirects them there). This would address a lot of the issues - the tokens are useless when leaked (as they only work against the merchant's own account) and can't be misused even by the merchant to go beyond the agreed amount or time limit. This means with such a system you’d immediately eliminate a whole category of fraud, with the only thing remaining being merchant-level disputes like goods not as described/etc, which can easily be made optional and the user can choose to opt-in for the extra fee. Then you would actually have a good case for lower/no mandatory fees at all. One problem you need to keep in mind is that fraud mitigation is a big industry in an of itself (some of it is real, some complete snake oil but relies on the underlying problem being real to sell itself) and wouldn't be in favor of a system that is inherently immune to (at least some types of) fraud.

martinald 2y ago
This is already happening, 16 digit PANs are due to be phased out https://developer.visa.com/capabilities/vts https://developer.visa.com/capabilities/vts
- Nextgrid 2y ago
  The page is light on details, but is it scoped and merchant/amount/time limited? Because if not, it’s yet another “hack” that merely reduces one specific type of fraud (when a card number is leaked) without fully addressing the problem, so the need for chargeback arbitration (and thus associated costs) persists.
  - martinald 2y ago
    In a word yes. You'll still get a lot of chargebacks by the way. With a lot of ecomm I've been involved with the fraud you are talking about is actually a small part of chargeback volume. Most is unhappy or demanding customers, or another type of low level fraud, claiming goods didn't arrive despite a photo of the person literally accepting them from the delivery company. This is absolutely rampant in b2c with smaller merchants (I am aware you mentioned this but not sure if you are aware of the scale of it).

roughly 2y ago

Stripe had a live dashboard over Black Friday that showed the dollar value of all transactions across their network, including those blocked for fraud. The fraud rate was nearly 12% of the total dollar amount of transactions.

fragmede 2y ago
Which, we've got to ask about the false positive and the false negative rate. it's annoying when it's really me and I try to charge something and it gets declined, but also the fraud detection can't be 100% effective, so the real rate is probably higher.

katzinsky 2y ago

The whole point of a credit card is that you can give the number out. You're nesting solutions here.

miki123211 2y ago

Most countries that aren't the US basically did this, in one way or another. There are multiple ways of doing so, two-factor authentication (think 3d secure) is one, an oAuth like system where you log in to your bank on their website and consent to a wire transfer is another. There are variations on these ideas, the system we have here gives you a 6-digit code in your banking app which you can enter on any device, trusted or not, and then accept the transfer via a pop-up on your phone, no personal data involved. As far as I understand, both US law and US history heavily incentivize the use of credit cards. There's no nice way for landlords, banks, mortgage lenders and other such institutions in the US to do "background checks" on their customers except through credit scores, and that incentivizes credit card use. There's also a regulatory difference in how credit versus debit card chargebacks are handled, making credit a lot more friendly to consumers in cases of actual fraud. Then there's the historical aspect, in the era where there were no computers, and most vendors could at best call a bank to verify if a card was valid, a debit based system wasn't technically feasible, which is what put the US on the path of credit. A lot of poorer countries had the major cash-to-cards transition a lot later, in the era of chips and dial-up modems, which made debit a lot easier to implement, and so that's what they went with, and debit usually means far lower fees.

m463 2y ago
> Most countries that aren't the US basically did this, in one way or another. Most countries that ARE the US put the burden on the business and the credit card companies, and limit the liability to the credit card holder ($50 max, sometimes $500) I've known people in other countries that lost money and they were SOL in comparison. Maybe they have cheaper transaction fees.
- Iulioh 2y ago
  Nah, that's just because in the US people usually buy with credit while in Europe is mostly debt. If you buy with credit you are using the bank's money, with debt your own and you have less protections in the second case. Trust me, i have meet my fair share of adults who don't own a credit card and if they want to buy something online just charge a prepaid card with the needed amount. American express is not accepted in a lot of places because it is only credit and the processing fees are double that of debit cards. Visa and mastercard debit cards are accepted just because you can't only accept debit cards, a lot of vendors fought for the ability to do so.

zeroCalories 2y ago

These systems act as sort of a fraud insurance. I think in an ideal world we would have low friction low cost money transfers, but people could purchase insurance against fraud. There are complications to this, such as how to be both efficient and avoid abuse, but it would simplify every day life not having to think about a million different payment systems.

analog31 2y ago

I use PayPal for my tiny business. On the one hand, I'd rather not pay them 3% of my sales. On the other hand, if the features of PP (security, buyer protection, ease of use) increase my sales by a palpable amount, then it pays for itself.

fendy3002 2y ago

One aspect that's very important is legal. It's very hard / cumbersome to comply in legal for payment processing in one country, having it to comply in most countries is a massive feat, and an expensive one at that. Though yeah if you already has a mass, pressuring regulation may be easier.

treflop 2y ago

Stripe, Block, and PayPal were never required to process transactions. You can negotiate with a bank to get your own rate and then implement your own secure transaction processing. Visa is still required though. I have worked at companies that bypassed those middlemen. Many companies don’t do it because they are okay with paying higher fees so they don’t have to deal with that extra headache, or because they work at smaller companies that think Stripe, Block, and PayPal invented payment processing when Visa and banks have been around for decades longer.

jongjong 2y ago

I find it weird how fraud protection is used to justify why these companies are so popular because fraud is not something that most consumers care about up front, most people only start caring when it happens to them. Most tend to assume that every tool they use is secure by default. "This product is not insecure" is not a very compelling selling point IMO. It's actually difficult to justify Stripe's popularity aside from media monopolization preventing alternatives from gaining mindshare. Everyone knows Stripe but many don't know about the existence of alternatives.