[AnthonyMouse]

> It was my understanding that in the current system merchants tend to eat the cost of fraud under our current system (see charge backs, rolling reserves, etc.)

1) A significant portion of the cost of chargebacks is administrative, especially for small transactions. The banks at least nominally attempt to prevent customers from defrauding merchants, even if they fail more often than not, because if they didn't even try it would get a lot worse fast. But that costs money, and the money it costs is proportional to the amount fraud/chargebacks and not linearly proportional to the purchase price. Having to go through the chargeback process over a nickel is not something they're about, hence the minimum transaction fees. They also sometimes lose the money because it's not possible to recover it from the merchant for some reason.

2) If you're trying to become a payment processing system with low transaction fees which people can transfer money into using their credit cards, the "merchant" who eats the cost of fraud is you.