Comment by AnthonyMouse
2 years ago
By comparison, Stripe charges 0.8% + $0.00 for ACH, which includes any costs they might be paying to the bank, so the upper bound on the cost of their services is 0.8%. 4.4% - 0.8% is 3.6%.
Identify a payment processor that a small business making e.g. $60,000/year in $20 credit card transactions can use that would charge lower fees, if you can.
You're making a huge assumption that their markup is the same for credit card transactions! You're also making broad oversimplified assumptions about the what merchants do in response to transaction fees. Multiple implausible things need to be true for high end card users to be losing out on this scheme. Most likely the high end users come out at least slightly ahead and most of the cost is borne by lower end users and merchants.
> You're making a huge assumption that their markup is the same for credit card transactions!
We can take this from the other end though. A merchant who accepts ACH via Stripe pays 0.8%, one who accepts $20 on a credit card through Stripe pays 4.4%, so the merchant pays 3.6% more with a credit card than ACH, and 4.4% more than accepting physical cash. It doesn't matter how much of each is Stripe's profit unless there is some competitor a small business could use to process credit cards for less. Is there?
> You're also making broad oversimplified assumptions about the what merchants do in response to transaction fees.
In a competitive market, increasing every competitor's costs would cause them to pass on most/all of the costs, because the competition is keeping margins thin and their alternative is to go out of business. This is not an oversimplification, it's what actually happens in real commodity markets.
> Multiple implausible things need to be true for high end card users to be losing out on this scheme.
All that's required to happen is that the merchants are passing on more of the credit card processing fees than the amount of the rewards. Since the fees are higher than the rewards, this is not that implausible.
1. You're missing the very important detail that there are multiple combined fees, and you are trying to compare a rebate for one of those fees to the combined fees.
2. Commodity markets literally are an oversimplification.
3. You are conflating unassociated fees! See 1.
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