Ask HN: Do we need to pay billions in fees to Stripe, Block, PayPal and Visa/MC?

Hacker News Discussion ↗

What Payment Processors Actually Do

  • Commenters stress that Stripe/PayPal/Square sit on top of card networks (Visa/MC/Amex/Discover) and banks, solving UX and onboarding, but most core cost/complexity is in the underlying rails.
  • Key functions: fraud/risk management, chargebacks, regulatory compliance (KYC/AML/CTF), cross-border/FX handling, dispute management, and value‑add tools (inventory, tax, POS integration).
  • Several argue they are effectively specialized insurance businesses underwriting transaction and counterparty risk.

Why Fees Are High and Persistent

  • Interchange and network fees fund not just operations but rewards programs; merchants and non‑reward users cross‑subsidize affluent cardholders.
  • In the EU, interchange caps (≈0.3–0.5%) show fees can be much lower than typical US ~2–3%. Some see US fees as oligopolistic rent extraction.
  • Others argue that even tens of billions in profit is small relative to trillions in volume, and worth it for convenience and safety.

Consumer Protection, Fraud, and Chargebacks

  • Strong disagreement: some say most everyday transactions don’t “need” chargebacks; others note industrial‑scale fraud and account takeover make reversibility and fraud coverage essential.
  • Chargebacks protect against both unauthorized use and merchant non‑delivery, but are also abused (“friendly fraud”) and raise costs.
  • EU systems with stricter consumer law + strong authentication (SCA, chip+PIN, banking apps) rely less on card‑based protections.

Global Alternatives & “Digital Cash”

  • Many countries already use cheaper bank‑to‑bank systems: iDEAL (NL), BLIK (PL), Bancontact (BE), UPI (IN), PIX (BR), BankAxept (NO), various SEPA/instant transfer schemes in Europe, QR or app‑based systems in Asia, government‑backed systems in Mexico.
  • These often have instant settlement and very low fees but limited or no built‑in chargebacks; disputes fall back to consumer law and courts.
  • For P2P, systems like Zelle/Venmo/interac‑like tools act as near‑cash; scams and irreversibility are recurring complaints.

Can a New Network Replace Visa/Stripe?

  • Technically feasible but extremely hard: it’s a multi‑sided market (consumers, merchants, banks), with huge bootstrapping and trust problems.
  • Closed‑loop models (Amex/Discover‑style) avoid Visa/MC but require controlling issuing, acquiring, and network, plus absorbing credit risk.
  • Crypto and Lightning are mentioned as conceptually interesting but widely viewed as UX‑poor, volatile, energy‑wasteful, and regulatory‑problematic.

Public / Regulatory Paths

  • Ideas floated: FedNow‑style instant rails, central‑bank digital currency, EU “digital euro,” regulated interchange caps, forcing fee transparency, or treating payment rails as public utilities.
  • Skepticism that US politics and bank incentives will allow large fee reductions without strong regulation.