Comment by konschubert
7 hours ago
In the EU, we now have instant, free SEPA bank transfers.
I know that the banks are trying to build a payment solution on top of this technology but it's not really getting traction.
I am wondering if there is a way to bootstrap something bottom-up by offering something to merchants that has a clear value prop.
There is already the EPC QR code, which contains all the data required to initiate a SEPA credit transfer. This code is supported by practically all banking apps (at least in Germany). The standard is public and free (see https://en.wikipedia.org/wiki/EPC_QR_code)
The merchant's system displays this code, you open your online banking app, scan the code, select "SEPA INST" (here's the usability catch!) to make the payment instantaneous, and confirm. Within 10 seconds, the money is transferred to the merchant's account. Either the merchant's bank or a third-party Open Banking API immediately informs the merchant's system (e.g. by push notification or webhook), and a receipt is issued.
Everything is already here, but since this system would be virtually free to use, nobody really has an incentive to push it. It costs money to educate the public, and there is no money to be made. Instead, everyone gets paid handsomely by the card mafia.
In general I'm all for free and European systems, but SEPA payments imo still have pain points:
- you can send money to companies and individuals alike. It's easier to trick people into fake shop payments, a card payment provider requires at least a bit it verification/registration
- it's really hard to dispute/call back sepa payments. The card companies often step in there afaik
The name of the recipient is displayed, and since last October it is also verified against the owner of the receiving bank account. The bank explicitly warns you if they differ. Also, you can't open a bank account anonymously, there is KYC.
You can't dispute or call back SEPA INST payments. But you can't dispute cash payments either. This is just fine for most day-to-day transactions, I don't need insurance when I buy groceries or pay the taxi driver.
Yea, but I think that there is still a business model, if only in consulting or building software solutions to make this easier.
The root of this evil is the deal the card companies made with the EU some 10 years ago: A cap on the interchange fees in exchange for the ban on card surcharges.
If the card processing fees could be added to the customer's bill, it would be in the customer's interest to support a cheaper/free alternative. But since card payments are "free" in the eye of the consumer, why should he be using anything but the most convenient option? And what is more convenient than just touching your card/phone to the terminal? As long as this deal stands, EU merchants will be slaves to the card companies.
There is always opportunity in FinTech.
How did Venmo and Cash app get any traction? After all, we already had PayPal. There was already a way to transfer money to your friends.
How did Robinhood get any traction? We already had Etrade and other online brokers.
Usually by giving away free money to reach critical mass.
Probably not worth it, given that the EU caps the credit card fees at 0.3%, 0.2% for debit cards.
Well the cap is only on the interchange fee, there are several other fees to add to it... example: https://www.adyen.com/pricing
Processing a Mastercard card is "$0.13 + "Interchange+" + 0.60%" where the "Interchange+" would be 0.30% for EU. So more like €0.10 + 0.90% so for €10.00 product, it would be €1 of fee (1.00%). Much less than here in US, but still not negligible for small businesses that run on thin margins (and 20% VAT).
Looks like you missed a decimal. 0.9% of 10.00 is 0.09 so the fee is 0.19 euro on a 10 euro purchase.
You're putting the cart in front of the mule. The important thing is not what merchants want, but what customers want.
> The important thing is not what merchants want, but what customers want.
What many people in Germany want is a payment system that is as anonymous and is as hard to control by some untrusted entitity (both government and banks are very distrusted) as possible and what cash offers. That's basically cash.
Not without reason, in Germany there exists the well-known phrase "Bargeld ist gelebte Freiheit" ("cash is lived freedom").
Agreed. Customers are benefitted either by paying in cash - for the reasons you described - or by paying with cards, for fraud protection and the ability to make purchases online.
Any other payment method will not give customers any benefits over those methods. Unless banks are willing to take responsibility for fraud like with card purchases.
Would this work? https://en.wikipedia.org/wiki/GNU_Taler
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Customers want lower prices. If merchants can offer that with a different payment system, then merchants may choose that.