[sgdread]

I understand why they do it: they trying to bring down transaction costs with payment processors. These fees on small amounts is death by thousand cuts.

But, I believe, there is a way: they can introduce wallets for $1-2 patrons: put $10 in a single transaction, then charge the wallet once it is a time to pay to creator. This should aggregate small transactions into larger ones and significantly cut the costs.

[Obi_Juan_Kenobi]

You do not understand what happened.

They did aggregate up until this point, at least for most patrons and creators. If you did a regular pledge with a monthly charge, you only made one transaction a month. Similarly, each creator got paid once a month with one transaction. The exception was per-post patronages, which do indeed have more fees and are less suited to the micro-payment model. That is NOT what this was about, though.

The real motivation was to support gated content.

They want to bring creators into their subscription system, where you pay a fee to access content. They had a problem, though, in that people could pledge, access content, and then simply cancel their pledge before getting charged. To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion about when people get charged (do you pro-rate the first charge, with or without the next month, etc.) because people would pledge a certain amount and see a different amount charged. The alternative is to have people on their own billing cycles, which is much less confusing for customers, but eliminates the possibility of aggregation.

Basically, they want to abandon the goodwill/patronage model and become a subscription service, likely because the latter model is far more lucrative.

[eridius]

You're ignoring the fact that increasing the number of distinct fees charged to Patrons translates directly to more money for Patreon (because Patreon was charging a much higher fee to Patrons than they themselves are actually paying on the transaction). Their public explanation was that a traditional subscription model is simpler, but it's obviously worse for users and the only reason to do that instead of the alternatives (such as the wallet approach) is so Patreon can get their cut of those extra fees.

[chipotle_coyote]

As Wikipedia would say, "[citation needed]". The transaction fees to patrons that Patreon proposed of 35¢ plus 2.9% are real familiar to anyone who's worked on a payment processor. Patreon was essentially passing the transaction fees they would have paid onto patrons, and they would not have been making a material amount of extra money for themselves if they'd stuck with the new system.

[eridius]

That’s a rate that a brand new company just starting out might get. For that to be the actual rate Patreon is paying they’d have to be extremely incompetent.

For comparison, both Square (which is not known to provide the best rates) and Stripe advertise better than 2.9% + 35¢, and that’s the rate you’d get without any negotiation at all.

[richardknop]

35¢ plus 2.9% is for average e-commerce and small business clients. A company like Patreon that does large volume of transactions will almost always be able to negotiate a much lower transaction fees with payment processors.

[radix07]

I don't see how a 'wallet' doesn't handle the CUF... Patreon should already have the money in what is basically a pre-paid account. You just have a minimum amount that can be paid into the wallet. There should also be pay in/out schedules so things are aggregated/automated on both sides. They could even make interest off of the floating money and work a bit like a bank. This should be their bread and butter, optimizing transaction cost. Plenty of other sites do this sort of thing for real businesses, I don't see why it is so complex...

[mratzloff]

It really does seem incredibly straightforward. A patron adds $20 to a wallet and pays a low transaction fee. Can even configure their account to automatically add $20 whenever funds are low. Money stays in Patreon's bank account. Patron can't get their money back once it's in the wallet. Every month Patreon charges a percentage to disburse all money to the creator's bank account.

What am I missing?

[xocyabencl]

It's simple to explain in the context of this discussion. But probably doesn't seem as simple to the average user, who wants to donate $1 to a creator, and will feel like some kind of scam is going on if they are asked to add $10 to their Patreon balance first.

[xocyabencl]

Thinking about it some more, Patreon may end up eating the additional fees for the first payment (for CUF posts), increasing their cut a bit on other posts to make up for that, then aggregating the recurring charges.

[radix07]

I am guessing they can make more off of an increased number of credit card transactions with some sort of deal with Stripe or whomever. It also allows them to obscure when and how much they are getting paid when it really doesn't need to be that complicated.

[hobarrera]

If I want to donate $1 per month to somebody, cashing out $20 in advance is quite a bit -- it'd probably discourage a lot of people, since the initial investment is too much.

[mratzloff]

It was just an example. It could be whatever the user wants to pay; since they're paying the fees for each transaction, it makes sense to keep some money in a wallet.

[simonh]

> A patron adds $20 to a wallet and pays a low transaction fee.

I wonder if they have problems with anti money laundering regulations? Financial transactions are supposed to clearly indicate the beneficiary. If you're paying into a wallet that gets divvied up later, that's not possible so showing the paper trail of who benefits gets difficult.

[jdmichal]

How do those look now? I imagine the beneficiary of the transaction is clearly Patreon. The fact that they happen to have another transaction that pays money to someone else is fine. I mean, we don't expect to have to write several checks to various patients and families when we give money to St Jude. Or, more interestingly, look at how escrow works in a real estate deal, where the buyer and seller transactions go to the escrow company, which is then responsible for distributing it to the various parties.

Now, since it's basically acting as an escrow payment, Patreon might have some laws restricting what it can do with that money while it's holding it. For instance, they likely cannot legally earn interest on that money. Similar to how the security deposit held for a rental cannot yield interest unless that interest is paid to the renter.

[jdmichal]

Automated road tolling systems have the exact same economic problems as Patreon. And the pre-charged wallet with $xx minimum fillups is exactly the model they chose. Judging by the longevity of their systems, it seems to work fine.

[xfkechyk]

as was mentioned below, you don't really have a choice with road tolling systems. i don't like having to pre-load $xx, but it's better then the only alternative. people can stop interacting with Patreon, but you can't really avoid toll roads very easily.

[james-skemp]

At least in the Illinois Tollway you do: pay more by stopping at each toll.

That's sort of the same thing here, right? Prefill a wallet and you don't have to pay extra for processing fees (equating to convenience going back to tollways).

[chii]

you have no choice with road toll. unless you plan on teleporting or walking.

[amckenna]

You could just take a different route

[Dylan16807]

> To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion

But if you actually ask people whether they want the first couple charges to have weird timing, or whether they want to pay significantly more in credit card fees that don't go to the creator...

[sgdread]

> They did aggregate up until this point

Still an issue if most people support 1-2 creators with $1-2 pledges.

[Kurtz79]

I really don't get the motivation of the change, aside from basic greed.

I mean, it seems like a dream business model, you basically channel donations to content creators taking a cut, collecting goodwill along the way.

Their service cannot be more than a (refined and well designed as you want) CRUD app with payment processing, it's hard to imagine having such high costs that is not profitable.

[geofft]

> I understand why they do it: they trying to bring down transaction costs with payment processors. These fees on small amounts is death by thousand cuts.

Then they should have never strayed from the original model, where they charge you once per month for all your pledges, causing only one fee paid to the payment processor.

(If they needed to accommodate people pledging small amounts to very few creators, they could have introduced some sort of quarterly, biannual, or even annual payment option instead of just monthly. I'm curious if they evaluated this option and what they concluded.)

[hinkley]

My coffee shop has a sign: $0.50 fee for card transactions under $5. I’ve seen that sign over the years at a dozen places. The idea isn’t entirely novel.

And you’re right, in that perhaps they should send $3 every three months or. $6 every six if you’re only giving to one person.

[marshray]

The reason you don’t see that everywhere is it’s specifically against the merchant agreement to charge cc customers extra. The only places I’ve ever seen getting away with it are very small shops and government agencies (like the auto tag office) that legally cannot pay those costs out of ordinary revenue.

[brigade]

Not between 2013-2016; there was a federal settlement that included the provision that merchants can add a surcharge for credit payments, overriding any merchant agreement.

Which was recently thrown out on appeal, so that’s fun for any place that was relying on it.

[lysp]

> so that’s fun for any place that was relying on it.

Places can simply work out a monthly total the cost of CC fees and increase their prices overall (or on specific products) to recover that cost.

[slg]

Gas stations seem to still regularly have a credit card price that is different than their cash price.

[ceejayoz]

https://usa.visa.com/support/consumer/visa-rules.html

Q. Why are there different prices for paying with cash vs. with my Visa card?

A. A merchant is permitted to offer discounts for paying in cash, however, the discount must be given as a reduction from the standard price.

[steffan]

It's semantics: I believe the wording or the typical agreement states that you may not charge a customer more for using a card. It does not, however, prohibit providing a 'cash discount'.

[slg]

Which is why this whole debate seems a little silly from a practical perspective. It doesn't matter whether a fee is paid by the seller or the buyer or if a difference in price is a discount or a surcharge, it all washes out in the end. How Patreon or gas stations frame the difference is simply marketing. Patreon's mistake was just poor marketing.

[aeorgnoieang]

OT, but why don't programmers say or write "It's syntax". Different semantics, in the programming language sense, isn't what that phrase usually means.

[geofft]

I think that's not corporate policy and is something individual franchisees do, hoping no credit card company compliance officer will refuel at their store and notice (or possibly not even knowing it's prohibited).

[DrJaws]

That's illegal on my country, they cannot change the price for different payment methods.

[vetinari]

Which country it is?

Payment cards are not a legal tender, so you can do whatever you want, provided you didn't sign a contract not to do.

[francoisfeugeas]

In France for instance if you accept credit cards, it is illegal to add a fee for accepting it.

You can impose a minimum purchase amount for accepting it though.

Certain professions (i.e., taxis) are even forced to accept credit cards.

[vetinari]

> In France for instance if you accept credit cards, it is illegal to add a fee for accepting it.

Are you sure, that it is by law, though? In most countries, it is a contractual obligation: when you make a contract with your bank or payment processor, one of those terms & conditions is not to discriminate against the card payers. The purpose is to force the processing fees on the merchant, otherwise the cards would be at a disadvantage and would not get popular. For a case study, see Southeast Asia (1. cash rules there; 2. you can pay with a card, but you will have to cover the fees too; 3. as a consequence, everyone uses cash, see also point 1).

In the case of taxis, I would understand if they voluntarily had terminals for their own protection (so they would not get mugged for few banknotes), but forcing them... that sounds wrong.

[DrJaws]

Spain, and its the same thing as the user from france. They cannot charge you any extra fee for using cards or any payment method.

[hinkley]

Could be. There are a lot of places with minimum orders for credit card too. That probably works easier for the business anyway.

[ajkjk]

Maybe it's just me, but, I think it's so fucking stupid that it costs money (which goes to private businesses) to spend money in the modern world.

(and no, bitcoin doesn't fix that at all)

I think if we were in an alternate universe where the government managed a free utility for digital payments no one would find it strange for a second.

[spookthesunset]

It has always costed money to to spend money and there are pros and cons to each method. All that stuff isn't free even if it isn't directly measurable most of the time.

Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc.

Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc...

Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc...

It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.

[FireBeyond]

And in the meantime, banks are making money on investing, lending out funds deposited. And not doing too badly: http://money.cnn.com/2017/03/03/investing/bank-profits-recor...

Major US banks made $171B _profit_ last year. Lets not pretend that they're already bending over backwards to lower costs on transaction processing.

[spookthesunset]

> Lets not pretend that they're already bending over backwards to lower costs on transaction processing.

It's a free market and you as a merchant are free to pick your vendor. In addition, you don't even have to accept credit cards if you want--you can just take cash or check, or even just cash. Of course people entering your store might not buy anything from you because who the hell carries around cash or checks anymore, but no jackbooted thugs will force you at gunpoint to accept credit cards.

The credit card industry is a huge, highly competitive industry with little barriers to entry. Massive market forces are at work squeezing the margins for transaction processing fees to as little as possible.

My bet is that transaction fees are priced at what they are because:

- its cheaper than handling cash or checks

- it results in more revenue, even with the "cash back" discount given to CC users.

- it is more traceable and easier for your bookkeepers to manage

And to be honest, I believe many small business who take cash only do so because they aren't reporting all their income. When it is off the books cash-only, you can pocket the sales tax, underreport income tax, pay your vendors cash under the table, etc. I also believe that if their margins are so thin they can't afford a 2% transaction fee they probably have no business staying in business anyway. Whatever they are doing is more likely than not a value-destroying NPV-negative project to begin with. (see also: just about every business shown on those "save my bar / save my restaurant / save my hotel" TV shows)

[jimmaswell]

>Credit cards are super quick to use at the register.

At least they used to be. Chips ruined that. Now I have to stand there staring at the screen for half a minute waiting to respond to prompts and to pull the card out at the end. For most transactions, cash is probably faster than using a chip.

[maroonblazer]

This used to be the case for me until very recently. I've noticed that the two grocery stores I frequent most are suddenly significantly faster. Like almost instant (less than 2 secs). This is in Seattle. So, it'll probably be that way everywhere eventually.

[Natanael_L]

In Sweden, in most stores, you insert the chip and enter the PIN just after the transaction starts, and then once everything is scanned you just confirm the total price (which is very quick).

[LeonidasXIV]

In Denmark you just use NFC/Contactless. Hardly anyone ever types in PIN numbers and it is also very quick.

When I was visiting Sweden the terminals did not support NFC or I was just doing something wrong.

[Natanael_L]

NFC support is getting more common in Sweden now. Retail stores has been slow with it until now, though.

[russjr08]

This is why I’m a big fan of NFC payments when available. I find it to be pretty much instant, instead of having to wait what feels like 30 seconds for the chip transaction to process.

Though I’m in the US. I hear chip transactions are way faster in other countries where they’ve been using that system for a while.

[jarrettch]

It's even worse when your chip starts to fail, as one of my has started to do very recently. You have to put the card in three times(and wait for it to fail 3 times) before you're allowed to use the swipe function. Took longer than cash.

[jimmaswell]

Recently I tried the chip and it failed, then I tried the swipe and it said to use the chip, then I used the chip and it said I had to use the swipe, and finally the swipe worked. First time I ever had a chip fail, and it's a pretty much brand new card, so it was most likely the machine's fault.

[jjuhl]

I don't see the problem. If waiting a little is such a big deal then you are in too much of a hurry already and/or too stressed out. Relax. Take it easy.

[bbarn]

Where are you, out of curiousity? I find most of the chips are no slower than using a swipe card was before.

[Miredly]

I lived in Spain for a year, and everyone had chips there. My US card always drew eyerolls as they had to find the /old/ machine and dust it off and find someone who remembered how to use it. I was excited that we were getting chips here in the US, but of course they fucked it up and for whatever reason it takes ages for your chip to be read, and there are frequent chip read errors.

[chipotle_coyote]

In the US, it depends entirely on the point-of-sale system. Some are just as fast; some are a lot slower. My guess is that the slow ones are using the same old CPUs that the previous "stripe-only" ones did, which just aren't powerful enough to handle the added cryptography requirements in a reasonable amount of time.

[labster]

Chip cards work super-slow in the US. I often pay in cash because it's so much faster. I take the same chip card to the Netherlands and it works in a few seconds.

[btilly]

I have the same experience in Orange County.

Everyone hates the chip.

[jimmaswell]

The US

[Oletros]

I have been used cards with chips for years and now contactless payments and they are a lot quicker than swipping the card. In less than 5 seconds is done

At least in Spain

[aidenn0]

I assume spain is chip and pin?

In the US it's chip and signature, and you can't sign until after the chip verification (either signing a paper receipt, or with a stylus on the terminal screen).

In addition chips are new and some terminals are painfully slow (30 seconds) to verify. I'm not sure I've ever seen one finish in under 5 seconds, though a few merchants have terminals that come close to that.

[WorldMaker]

The sad fact is the terminals are painfully slow because US banks don't think US customers want or are capable of using PINs.

When you use a PIN you get a nice two factor signature from the card chip: it signs the current timestamp and the PIN you knew, and can do both as quickly as chip's processing capability and the bandwidth between the chip and terminal allows.

US banks came up with a dumb compromise just like most of their websites use Wish-It-Were-Two-Factor auth and secondary "Security Question" passwords, the chip cards in the US are doing their own Wish-It-Were-Two-Factor: sign a timestamp, wait some amount of wall clock time, sign a different timestamp.

Most of the wait in a chip purchase in the US is artificial just to make sure that two timestamps are "sufficiently" different. US banks should just give people PINs and stop this silliness.

[kmonsen]

Why can't you though? I feel that is an implementation detail that is leaking out. The machine can do two things at once and only use the signature if the transaction is successful.

[Oletros]

Yes, chip and pin, and for amounts smaller than 20 euro you don't even have to put the pin if you configure the card

[bobalob_wtf]

Chip & signature sounds awful (and pointless!) Why would they not use PIN?

We now have contactless payments for under £30 in the UK, similar to Apple pay but you just place your card on the reader.

[xfkechyk]

that's because of shitty software. chip should get faster: https://paymentweek.com/2017-5-2-wait-no-more-quick-chip-tec...

[nojvek]

Yeah but a >1% fee is ridiculous. We all know visa, Mastercard, PayPal are drowning in cash.

I had high hopes for bitcoin like currency having a flat fee in cents and an optional percentage few for insurance if you do want a charge back and other nice credit card like features.

But bitcoin is riddled with its own charge mania nowadays.

[musage]

> Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc.

Holy God. I might as well say it's all equally free, since when the heat death of the universe is done with, there will be no difference between something having existed or taken place or not.

[Retric]

With the new chip system I swapped to cash for many transactions because it's faster.

[aquadrop]

I use contactless chipped card everywhere and it literally takes less than a second for most payments.

[Retric]

I am not going to use such an insecure payment method.

[aquadrop]

What's insecure about it? Heard of a lot of cases where money were stolen from people banks accounts/cards using scamming, viruses etc (and witnessed one right when it was happening), never heard of problems because of card being contactless. It also lets you not to flash your pin in front of the whole store for many of the payments. I think on the convenience/security scale it's very high.

[overcast]

Apple Pay takes all of about two seconds. No way you are paying with cash faster.

[Retric]

Paying for lunch is pull out cash and go vs. handing card to waiter waiting on them then signing and go.

In that case cash can save ~5 minutes.

[upvotinglurker]

That was true before the introduction of chip cards, though. The waiter's having to carry the card to the staff area of the restaurant, complete the transaction (by swiping), then return the card to you, probably interweaving some of their other duties along the way, took up most of the time. Their having to wait an extra few seconds for the chip reader seems a drop in the bucket.

[overcast]

You don't have to hand anything over with near field stuff. You put it near it, ding, done. Saving you 5 minutes + time it takes for you to exchange cash. If you're dealing with a waiter for lunch, you're already wasting a ton of time.

[morsch]

I don't think it's stupid that it costs money, but I am surprised fees are still as high as they are. I suspect it's got something to do with how opaque the processing fee is for the customer.

If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits.

[1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-...

[2] https://www.reuters.com/article/us-mastercard-results/master...

[3] https://www.reuters.com/article/us-paypal-hldg-results/paypa...

[jarrettch]

Merchants absolutely can pass on the fees or give "discounts" for cash, at least in the USA. Gas stations are one of the major businesses that practice this.

Anecdotally, I worked at a company store years ago where we would charge customers paying with cards a 2.75% fee, which is what we were paying. And that store was operated by a Fortune 500 company.

Also, virtually every small private business I go to in Los Angeles charges some fee, or has stipulations, for credit card transactions.

[wpietri]

This wasn't originally the case. Passing on the fee was for a long time against most merchant agreements. Which makes sense from the credit card company's point of view: they don't want shoppers to have any reason not to whip out the card.

The big change came in January 2013 after a big court judgment. Adding fees, though, is still illegal in some states: https://www.creditcards.com/credit-card-news/business-surcha...

[jarrettch]

Thanks for that link.

Made me wonder about the stores/restaurants I frequent here that do charge, apparently they're still ok to do so after 2015(link from the comments in your linked post): https://oag.ca.gov/consumers/general/credit-card-surcharges

[mcguire]

Where? I haven't seen any in years, at least in the southeast.

There are more stores not accepting credit cards than charging extra.

[jarrettch]

Maybe I should've mentioned "Los Angeles" higher in my comment, but looking at the sibling comment to yours, apparently there are plenty other states where it is legal to pass on the fees as a surcharge as well. Obviously your situation may vary.

[BillinghamJ]

In London, there's quite a large number of merchants who have now stopped accepting cash - requiring cards/NFC only.

[revelation]

PayPal fees are high because 1) people pay it and 2) fraud.

Credit card "processing fees" however are high because of the stupid rewards programs that Americans are so addicted to because it makes them feel like they are "sticking it to the man" and getting money back, to the point of having dozens of plastic cards in their wallet. Of course with processing fees at >1% of gross value no cashback or airline miles program is ever going to make you come out ahead.

In the EU there are no silly rewards games and fixed processing fees of at most 0.3%.

[kalleboo]

In places like the EU and Australia, credit/debit card interchange fees are capped very low (like 0.3% low).

[syshum]

I would, I in no way want to give that kind of power to government.

I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it

[wahern]

If you receive your paycheck electronically, the transfer likely occurs over the ACH system, the primary operator of which is the Federal Reserve. The Fed also runs FedWire. The Federal Reserve has actually been at the forefront of electronic payment and settlement systems since their advent.

Though, the Federal Reserve is quasi-public/quasi-private. But for any systemically important transactional system you can be sure that the government is plugged in one way or another. The Clearing House company is the main alternative to the Federal Reserve electronic systems for interbank transfers (they're the "private" ACH operator), and they're heavily regulated, with the Federal Reserve given substantial oversight authorities.

[syshum]

Ok, And.

Just because the current system sucks and needs to be replace, does not mean that replacement should be another Government Run System.

As I stated in my original comment the government is too closly integrated to today's electronic systems as it is

I want the government out, not more ingrained

[nojvek]

I'm still optimistic that we'll have a digital currency solving this problem well in the future. Distributed, auditable, scalable, international transactions at ridiculously low fees.

[otterley]

It costs money because there are significant fixed and incremental costs to handle it: Fixed because of the labor and value of the technology, and incremental because of fraud. Much of the incremental cost is fraud insurance.

[kalleboo]

There are many ways banks could reduce the fraud, but US banks don't need to since nobody is protesting the fees. In Europe however, where interchange fees are regulated to low levels, they have been quick to adopt/mandate features like chip-and-PIN and 3DSecure that lower fraud.

[FireBeyond]

And yet somehow US banks manage to struggle by not even making it to $200B/year profit, having to survive on $170B or so...

[vonmoltke]

Can you name an American consumer financing company that even breaks $100B in revenue?

[kalleboo]

Some places have systems you'd like. For instance Denmark has the "dankort" debit payment network where small merchants only play a flat annual fee and no per-transaction costs whatsoever.

[AdmiralAsshat]

They couldn't even do it with physical mail. You're paying the government every time you send a letter for the cost of that postage stamp. And the postal service in the US is pretty much constantly under-funded.

What makes you think we could do it digitally?

[drewbug]

Like Europe, right?

[mdemare]

Payment costs in the Netherlands (ABNAMRO bank, english): https://www.abnamro.nl/nl/images/Content/022_Zakelijk_nieuwe...

Note that nearly all fees are flat fees.

[betenoire]

You pay to have some handle the transaction details for you. It's a service. You are free to mail dollar bills, though you'll use a service you need to pay for there, too.

[cameldrv]

They do... It's called ACH.

[nojvek]

The only reliable way to do large transactions internationally without percentage based fees are wire transfers.

Even they have a $15 fee and sometimes a $15 receiving fee as well.

Ideally you'd have zero fees for transactions under $5. $5-$X0000 would have a percentage based fee and thereafter a flat fee for large transactions.

[PeterisP]

USA wire transfers have so high fees because banks don't want to offer such payment methods, so they charge extreme markup (their cost is less than 1$, so 15$ is 1400% markup) on that.

In general, real time payments for large amounts can be made for <1$ (both fedwire system for its participants and various EUR systems do that), and consumer payments that can be (a) batched and sent in bulk and (b) get delivered e.g. at the end of day, not in real time, those have a cost of ~$0.01 (perhaps 0.02 in case of small volumes) to the bank.

So, in EU, everyone has access to something that's pretty much equivalent to USA "wire transfer", and it might cost e.g. some 40 cents or can be offered to consumers either "for free" as part of a common services bundle/maintenance fee.

[nojvek]

EU blows my mind at so many levels. Many countries with different cultures and languages working together for common good of citizens.

I have really hopes for the Euro

[thedirt0115]

Then people would game the system. If someone wanted to send $100, they'd send 20 payments of $4.99 and 1 payment of $0.20... at least I would :)

[ryanatallah]

It seems very likely that the change was motivated by payment processor fees. Patreon uses Stripe to process payments, which charges a flat rate of 2.9% + $0.30 per successful charge. Compare that to the proposed fee patron fee structure of 2.9% + $0.35 — where presumably the extra $0.05 per transaction is the cut Patreon takes off the top for themselves.

[sago]

> the proposed fee patron fee structure of 2.9% + $0.35

The problem was that was per pledge. So if, like me, you support a couple dozen creators at $1-$3 each, you would expect to pay 24 x $.35. But all those payments are charged in one transaction. So they are only paying $.30. It isn't 5c per transaction they were planning to skim, but $8.

[stormbrew]

Part of the change was no longer aggregating the charges but running them through individually. They wouldn't have been pocketing most of the fees.

Which honestly makes it even more baffling an idea.

[nojvek]

I believe the idea was to give the money to creators immediately rather than end of month when they charged everyone.

[stickfigure]

...which is still baffling! The core value of Patreon is microtransaction aggregation. This isn't just "product management screwed up a feature", it's product management doesn't understand their own product at all. Crazy.

It's like designing a fancy new electric car but leaving off the wheels.

[kalleboo]

It's like designing an electric car, but requiring you to use a diesel generator to recharge it.

[Pyxl101]

You're assuming that Patreon will issue all of those charges at once.

However, they talk about that problem in the article. What if a Patreon supporter pledges/makes a subscription on Day 1, then another on Day 2, and a third on Day 3, and so on?

In their original blog post [1], they spoke about how, ideally, they'd issue each of those charges to the supporter immediately; and then begin recurring billing 30 days later after that date. However, if those charges are made on different days, and the anniversaries occur on different days going forward, then they don't have the opportunity to condense them into a single transaction.

Patreon are looking for a solution where someone can create a subscription, be billed for it immediately (i.e. not wait for beginning of next month), and then continue from there with recurring monthly payments. With a naive system each subscription would have its own cadence, preventing transaction consolidation. They also talk about how, if they have a standard monthly billing period, then there are issues with waiting until the next period to make the first charge.

Perhaps they didn't explain this as well as they could have, but it made sense to me. It seems like a "Patreon Wallet" could indeed be a solution to a lot of these problems. Refill your wallet with a single large transaction, then draw funds from it when pledging to support creators.

[1] https://blog.patreon.com/updating-patreons-fee-structure/

[sago]

If I back a new creator, it charges me immediately (I think, at least it seems that way from my billing history), but going forward I'm billed with the rest of my support in one transaction (definitely). I really don't see the problem.

[ceejayoz]

Patreon's docs until recently noted that they get charged 1.9% by Stripe, so there's more than $0.05 being skimmed there.

[conductr]

Don't forget it's now 2.9% of $1.37 instead of $1.00. Reducing their piece by another 1 or 2 cents depending on how Stripe rounds

[ceejayoz]

Patreon does enough volume to qualify for discounts - their Stripe rate is 1.9%, not 2.9%. (This used to be on https://patreon.zendesk.com/hc/en-us/articles/204606125-How-..., but it's gone now.)

[nojvek]

Looks like they wanna be nice guys running a marketplace at 5% and claiming to be good guys.

And then VC dogs biting them to make fatter profits so they find ticket master like shoddy processing fee scams.

[hutzlibu]

minus their likely bargain with Stripe. I doubt they pay as much as a small customer.

[dawnerd]

Weird that they’d even use stripe as they could likely skip the middleman and save more money. Stripe is great for small business. Patreon isn’t that.

[BillinghamJ]

Stripe isn't really a middleman. In fact, as they also handle the acquiring process with efficient high-volume rates, generally fewer parties are involved than normal.

Even for very large businesses, actually processing cards directly is pretty difficult and generally not worth doing. Instead you can just get a processor like Stripe or Adyen to give you good rates on an interchange-plus model.

[dsr_]

Whereas Paypal will apparently do 5% and 0.05, which makes the dollar go to $1.10 instead of $1.38.

[breakingcups]

That's what they did before the announced fee changes. After the fee changes were supposed to go into effect they we're no longer aggregating pledges. Madness.

[viraptor]

Would that put any extra requirements on them? They're not just a middleman in that situation, they actually hold the funds. That sounds close to the PayPal for a long time: we've got accounts and transactions and deal with real money but we really really are not a bank, promise, please don't regulate us as one!

[jordanb]

Alternately they could have patrons pay in arrears: You give your donations and then you pay at the end of the month. One transaction on the card and then it gets divvied up.

[thatfunkymunki]

That is how it currently works... I get one patreon transaction a month even though I have weekly pledges. That's part of what made this change so frustrating and greedy

[jogjayr]

Maybe they felt the cost of fighting fraud there would be too high? Scammer signs up as a patron to his own account with stolen credit card, gets paid, Patreon can't charge the (now-cancelled) card at the end of the month?

They could delay payments to creators by a month to combat this but then they're holding the funds for a month, which brings you back to the original problem of seeming like a bank.

This seems like something Stripe could address, maybe.

EDIT: Just saw the other reply that explained this is how it currently works. I'll leave my original comment up though

[caf]

Isn't that how Apple App Store / Google Play end up working as well, though?

[protomyth]

> put $10 in a single transaction, then charge the wallet once it is a time to pay to creator

They already group the transaction on the 1st of the month for me. I use PayPal, is it different for other payment types?

[javajosh]

If you keep people's money and move it around for them, you start looking like a bank, and you get regulated like a bank. I think this is why online games let you buy tokens with real money, and the tokens sit in your account. (It's probably of critical importance that there exist no way for the tokens to be converted back into currency - which is why regulators were and are far more concerned about online gold farming than the game devs themselves. It's good to be the bank.)

[chipotle_coyote]

Having worked many years ago at There, a now defunct-in-all-but-name Second Life competitor: you're absolutely right. We could let people buy "Therebucks," but it would have been illegal for us to let them convert Therebucks back to cash.

WRT Patreon, I'm 99% sure that this is the reason they didn't propose something like a "balance card" where patrons just give them $X and both pledges and fees get deducted from that -- since that money's being held and then paid to someone else, it could end up being too close to a "money transmission service." (I'd thought there was a non-zero chance that this was a motivating factor in this change to start with, actually; coming so soon after a huge investment round sure makes it seem like there was a condition to that investment that spurred this change. Christie Koehler wrote a good post about that on her blog, although I don't have the link handy.)

[thedirt0115]

How do this work for services like Playstation or Steam, which have wallets like you're describing? Is it just the fact that you can't take money back out or what? (I have no idea about laws regarding banking/finance/etc)

[chipotle_coyote]

I'm pretty sure it's the "can't take money back out" that's the deciding factor, yep. While I'm not positive, I think this is even true for (non-banking) government agencies -- I can load value on a transit card, but I can't take it back off as cash.

(Edited to add: of course, this means that Patreon could have done a balance card thing if they were willing to say "but you can't get your balance back if you cancel," but I doubt that would have won much more love than the per-transaction fee idea did...)

[caf]

Or indeed Apple App Store, Google Play.

[chipotle_coyote]

Those aren't the same, though. You can pay for a subscription with the App Store, and you can buy in-app "tokens" for games. But the subscriptions are being charged when they turn over each month (Apple will bundle charges together that occur on the same day, but that's it, AFAIK), and you can't exchange tokens back for cash. So Apple is never "holding" your money.

[caf]

I was thinking more along the lines of buying iTunes cards to load money onto your "account", which you can then later use to purchase digital goods, at which point the funds are disbursed to the content creators, minus Apple's rake.

How is that different from putting money into a Patreon account, which can later be allocated to content creators, at which point the funds are disbursed, minus Patreon's rake?

[bstrand]

Here's CK's blog post: https://subfictional.com/my-theory-patreon-doesnt-want-to-be...

[sgdread]

You can go creative (though, I'm not lawyer, nor accountant): have a minimum payment limit: 5$, for instance; if pledge is $1, then ask to pre-pay 5 units in advance (and be transparent why this has to be this way).

[LoSboccacc]

The problem if I understood correctly their previous strife is when you finance patrons across taxation boundaries. If they have to collect vat, they need separate transactions, even if that drived up transaction costd

[Denvercoder9]

> If they have to collect vat, they need separate transactions

At least in Europe that's not true. If I buy milk (6% VAT) and beer (19% VAT) in the supermarket here (The Netherlands), I don't have to split that in two transactions.

[LoSboccacc]

sure it's true for goods and services if sold to a single state, but if you sell across state boundaries you're required to register and pay your vat to each state where the sale happened and track those transactions along with the source