Comment by gruez
6 hours ago
But isn't most of the fees a result of the interchange rate, set by visa? The fact that stripe or whatever charges a fee on top, which contributes to the overall rate hardly seems relevant, unless you think all the payment processors are colluding to set their markups higher.
It has been awhile since I dealt with credit card networks, but the parent comment confuses me as well. Before, most of the fees go to the issuer, the network takes about the same as the acquirer (roughly):
Network gets swipe fees, and a percentage of the interchange Issuers get majority of interchange, and carrying interest and fees Acquirer gets the markup plus whatever admin/maintenance fees
Here's what I found for a reference: https://cmspi.com/back-to-basics-card-network-models-and-glo... which tracks with my experience.
I'm open to be corrected though.
I don't think payment processors like Stripe are colluding, they just have a difficult task. Card and bank payments are very complicated and regulation-heavy. I do get the feeling that credit cards and banks are colluding.
Let's use Stripe as an example, there fee is 2.9% + 30 cents.
That 30 cents - is what's often ignored but makes up a disproportionate amount of the fee.
On a $30 transaction, paying 30 cents is equivalent to a 1% fee.
So Stripe on a $30 transaction is effectively 3.9% in fees (on a $30 transaction).
Interchange (which goes to the issuer), would only be approx 1.75% (of the 3.9% fee charged by Stripe).
> but makes up a disproportionate amount of the fee.
Trying to understand what you mean by disproportionate here. Are the majority of transactions well under $10?
Let's work from the inside out. "Portion", that's a part of something, pro- portion means by, as, of, toward. The -ate make it an adjective, the dis- reverses the meaning.
So it is not based on a portion of the fee (a percentage of it). Disproportionate.
This is bad because it systematically penalizes small transactions, which a proportionate fee does not do.