[Meekro]

Visa and Mastercard have a pretty effective duopoly, too! Their fees and chargeback procedures are a drag on the entire economy. Getting banned by them effectively kills your ability to accept payments, and many legal but politically unpopular businesses find themselves in the crosshairs.

[mailslot]

Can we include Equifax, Experian, and TransUnion to the list of monopolistic anti-competitive financial companies?

[bilbo0s]

Not to put too fine a point on it, but we've almost immediately started down the road that HN user fyoving is cautioning us against. The idea that our government is going to go after financial firms is a bit fanciful. (In all honesty, legally speaking, fyoving is even correct in asserting that they aren't even going after tech firms.)

When you're getting people's hopes up by making them think that something is going to happen, and then nothing happens. People immediately blame big banking, big finance, big tech, corrupt politicians, corruption in general, etc etc. Which is entirely understandable. People get upset at dashed hopes. They look for something or someone to blame. And to be fair, sometimes it's even true that corruption is part of the reason.

But this time I have a strong suspicion fyoving is likely correct for a more systemic reason. Any sort of action against a lot of these companies, tech or finance, won't pass muster with the courts. It's not corruption, it's just the law. Which we can change, but it's really hard to do so because there are good reasons for some of these laws. (One way to address that problem though is to add new laws instead of changing the current ones, but there is going to be natural resistance against that too.)

I suspect that's the entire reason a certain segment of politicians are trying to bring action against the tech giants within the parameters of current law. Because they know it won't work already. They know how the supremes will rule on any such actions. (Rulings the supremes won't even have to hand down because the agencies in question will probably decide against wasting the time taking any actions in the first place.)

It's terrible. A likely diversion of 10 years minimum, during which no one will actually be able to gain any traction towards changing the laws because these elites will be wagging the dog making people think something is going to happen under current law. We should have pushed for changes in the law first. Then gone after the big businesses. But that was probably just a pipe dream of mine anyway. It was never gonna happen.

[refurb]

Are you arguing that politicians would spend ten years investigating companies with the full knowledge they won’t get anywhere with it beyond political brownie points?

If so, I agree 100%.

[briantakita]

I agree < 100% as this is one of many benefits for a politician to take this stance. Another benefit is leverage over an industry. Leverage is a tool that can be used for different purposes. Even if the courts thwart one possible outcome, there are other possible outcomes.

[rellui]

The shitty thing about Equifax is that there's no way to not be a part of their credit score system. For Visa and MC, I can choose to not use their cards and go with something else. With Equifax, I can't stop using their service to stifle their business. I'm amazed the government is not intervening in cases like these where the end consumers have no choice in the matter.

[Consultant32452]

I'll go one level further and add the three bond ratings agencies that played front and center for the economic meltdown: Moody's, Fitch, and S&P.

[arcticbull]

Chargebacks are overwhelmingly positive. It allows you to use your credit card fearlessly knowing the card companies have your back. Truthfully, if they decreased payment volume or "dragged the economy" card companies wouldn't offer them.

[cmroanirgo]

> Chargebacks are overwhelmingly positive.

Not in my experience! Chargeback can kill small businesses rather easily. My dad used to run a timber store. His biggest chargeback was around $5k. The 'card owner' who we vetted, by giving correct name, home address and cvc. The 'card owner' asked it to be delivered around the corner (which is not unusual). 48hrs after delivery (1 week after ordering) later the bank did a charge back...

A large supplier near us got stung for >40k with a single chargeback.

Both instances had documented proof that the retailer has all the information about the card holder & had all reasonable evidence to assume it was the right person.

Most trade people I know, these days ask for 'staged' payments, to ensure a) cashflow & b) reduce risk of chargeback.

It's made me wonder why any retailer puts up with it.

That said, for internet purchases, I appreciate how awesome it is!

[indymike]

The issue here is fraud, not the chargeback. The outcome would have been the same with stolen cash, just with more lawyers.

[ethbro]

The issue is relative size and power, which does speak to antitrust.

If Visa, MasterCard, Amex, et al., or PayPal make a decision, most businesses have little recourse. The cost of not accepting cards is too high.

Ergo, payment processors can essentially set their own terms.

[arcticbull]

The 'buyer' still has the goods, and now has the money too. You can sue, and probably get them arrested for fraud. If they have the identification information they say they do, it should be a slam-dunk case. It's as though they walked in and took the lumber after closing time. The system isn't to blame, the clown who defrauded the mom and pop shop committed a crime, and there's lots of ways to do that.

[AnthonyMouse]

The problem with chargebacks is that they're mandatory, even in cases where the seller is more trustworthy than the buyer. Then you end up with all the losses associated with buyer fraud even if the overwhelming majority of legitimate buyers would have enough faith in the seller to waive the ability to conduct a chargeback in exchange for a discount in the amount of the fee that has to be charged to cover them.

The fee should be on the customer side and they should have a choice whether to pay it per transaction. Paying for insurance is fine, being forced to pay for it when you don't need it is not.

[arcticbull]

> The problem with chargebacks is that they're mandatory, even in cases where the seller is more trustworthy than the buyer. Then you end up with all the losses associated with buyer fraud even if the overwhelming majority of legitimate buyers would have enough faith in the seller to waive the ability to conduct a chargeback in exchange for a discount in the amount of the fee that has to be charged to cover them.

This is actually accounted for in the merchant interchange rate. It varies by MCC (merchant category code) [and potentially merchant to merchant] and the frequency of chargebacks is built into how much the merchant pays for processing. Further, that bubbles up to the customer in terms of the pricing. Merchants may offer cash or other payment method discounts, so in a sense, what you're asking for already exists. Merchants do not opt into it because it's not in their interests.

That said, that's not how the math works out. If a buyer has a number of chargebacks, the buyer may be investigated and has their account suspended or is charged with fraud. This works both ways. Again, merchants and payment networks are aligned in this case, both make money on greater transaction volume, this feature increases transaction volume, that's why it's there, otherwise it wouldn't be there.

Also, paying per-transaction isn't really insurance as it leads to massive adverse selection risk. The most helpful chargeback for me personally was a two thousand dollar chargeback against Expedia where they refused to refund a refundable ticket. I filed a chargeback and I got the money back within a few days.

It's a good thing, unless you've got data to back your case.

[AnthonyMouse]

> This is actually accounted for in the merchant interchange rate. It varies by MCC and potentially merchant to merchant and the frequency of chargebacks is built into how much the merchant pays for processing.

But the number of chargebacks is as much related to the frequency of buyer fraud in that industry rather than anything the merchant can control. If it's all buyer fraud then the rate is high, but how do you solve that other than by moving the liability back to the buyer?

> Merchants may offer cash or other payment method discounts, so in a sense, what you're asking for already exists.

It exists in person, but where's the equivalent that allows you to pay cash over the internet? Cryptocurrency, maybe, and now we're back to monopolies and market share because you can't really accept something people aren't familiar with and don't know how to use.

> If someone has a number of chargebacks, the customer is investigated and has their account suspended or charged with fraud.

One of the most common sources of chargebacks is identity theft. Someone makes a purchase on a stolen card and then the real cardholder gets the bill and disputes the charge. The merchant in that case did nothing wrong but has to eat the loss, even when the identity theft was enabled by the cardholder's negligence. Then we get more such negligence, and lose the demand-side market pressure for higher security like two factor authentication and replacing credit card numbers with public keys that could have prevented the fraud, which increases costs for everyone.

But investigating the customer whose name is on the account does you no good in that case, because even if it was proximately their fault, it wasn't them who actually committed the fraud and it won't be their name on the account next time when some other negligent customer carelessly gives all their information to a fraudster because it costs them nothing to do so.

> Again, merchants and buyers are aligned in this case, both make money on greater transaction volume, this feature increases transaction volume, that's why it's there, otherwise it wouldn't be there.

It's there because the credit card companies don't give customers the choice.

> Also, paying per-transaction isn't really insurance as it leads to massive adverse selection risk.

All insurance leads to adverse risk selection. That's the nature of insurance. It's why you can't buy life insurance when you're 114 years old. Should we force them to sell it anyway and then make everyone else pay for it?

> The most helpful chargeback for me personally was a two thousand dollar chargeback against Expedia where they refused to refund a refundable ticket. I filed a chargeback and I got the money back within a few days.

And you would have otherwise had to take them to small claims court, which would have been more inconvenient.

Meanwhile if you paid 3% more on purchases totaling $200,000 over the last decade due to the increased buyer fraud, have you really come out ahead?

> It's a good thing, unless you've got data to back your case.

We would have the data if we gave people the choice.

[arcticbull]

> But the number of chargebacks is as much related to the frequency of buyer fraud in that industry rather than anything the merchant can control. If it's all buyer fraud then the rate is high, but how do you solve that other than by moving the liability back to the buyer?

You are. Retail price is adjusted to account for interchange which is adjusted to account for risk. Merchants can offer cash discounts.

> It's there because the credit card companies don't give customers the choice.

Again processors make money when transaction volume is higher. If this reduced transaction volume why would they do it?

> Meanwhile if you paid 3% more on purchases totaling $200,000 over the last decade due to the increased buyer fraud, have you really come out ahead?

Average merchant interchange is around 3% and there are 2% cash back cards, so it’s 1% net, meaning I’d be out $2000, so break even. Not to mention the interest-free one month loans, car rental insurance, loss insurance, warranty extensions and so on.

> We would have the data if we gave people the choice.

So you’re speculating in spite of the fact interests are currently aligned. And setting aside that the choice specifically exists for all brick and mortar merchants - so is there some reason they’re a poor sample?

[AnthonyMouse]

> You are. Retail price is adjusted to account for interchange which is adjusted to account for risk. Merchants can offer cash discounts.

That's not moving the liability the buyer, that's just part of the insurance cost. It doesn't cause the buyer to be less careless or care more about security. And there is still currently no plausible cash-equivalent over the internet.

> Again processors make money when transaction volume is higher. If this reduced transaction volume why would they do it?

Insurance companies make more money when everybody has to buy insurance. How is that an argument for forcing everybody to buy insurance? "Middlemen make more profit" is an argument against.

> Average merchant interchange is around 3% and there are 2% cash back cards, so it’s 1% net, meaning I’d be out $2000, so break even.

You're using peak cash back and average interchange fees. The cards with 2% cash back aren't the cards with 3% interchange fees. And you're not accounting for the merchant losses from the chargeback itself which causes them to have to charge higher prices. Meanwhile a legitimate $2000 chargeback is atypically large.

Those numbers go even further south for people with bad credit who can't get a cash back card and then have to shop at low income merchants who suffer a high customer fraud rate, meanwhile they won't be making a large legitimate chargeback because they can't afford purchases that large to begin with.

> Not to mention the interest-free one month loans, car rental insurance, loss insurance, warranty extensions and so on.

Marketing gimmicks that purposely sound valuable but aren't worth very much in practice.

> So you’re speculating in spite of the fact interests are currently aligned.

You're asking for data so I'm asking to run the experiment. How else do you get better data?

And your claim that the interests are aligned ignores the cost of the insurance. If you can get a discount for waiving your right to a chargeback for a merchant you trust, it's basically free money, and your interests are both aligned in not paying for insurance you don't need. If the fee is then high to have a right to do a chargeback against the shady merchant you don't trust, maybe there is good reason for that.

> And setting aside that the choice specifically exists for all brick and mortar merchants - so is there some reason they’re a poor sample?

The sample is confounded because many merchants don't offer a cash discount but many credit cards still offer cash back, and cash is slower, so many customers prefer credit cards for reasons outside of the ability to refuse charges later.

But even then, many people nonetheless pay cash, especially when the discount actually exists. If the value of being able to do a chargeback was so great, why would anybody ever do that? More importantly, why shouldn't they be able to, including over the internet?

[pjc50]

The customer being able to decline chargeback per transaction is nonsense, because the primary use case is fraud; you don't want the fake "customer" being able to decline the real cardholder's ability to chargeback.

(There are chargebackless payments such as bank transfer; the £5k wood example above would be a good case for that.)

[tracker1]

I'm pretty sure that they should be included as well here... the bigger issue is at what point, and to what extent should civil rights protections extend to publicly available platforms. ie Public Spaces in Private Ownership.

[tomrod]

Is that right? I thought there were several payment service providers and interchange networks.

[lotsofpulp]

Visa/MC/Amex/Discover for Americans, with Visa being far in the lead.