Mastercard Cuts Off Third Party Transactions

strredwolf writes "Mastercard has cut out third parties from charging on behalf of merchants. This affects folks paying their auctions and goods via Paypal, Yahoo! Paydirect, and potentially ebay's Billpoint. It may also affect Paypal's Mastercard-backed Debit Card, but there's no word from Paypal as far as I can tell." Word has it paypal is trying to negotiate a side deal with Mastercard.

Comments

mastercard sucks

[tiwason]

Note they are not "cut off" until May 1...

Anyways... Mastercards sucks... All the CC companies don't seem to care about the merchant at all.. Since internet transactions don't have a signature, there is little recourse for the merchant to do anything if a customer disputes a purchase, or is it easy to determine if a card is stolen in the first place. The whole system needs to be overhauled, but they make more money from chargebacks, so they aren't in any hurry...

Re:mastercard sucks

[Sircus]

I'm also a merchant, and wouldn't want the client to bear any more of the risk. The problem here is that whereas a bricks-and-mortar merchant gets a signature , there's no provision for anything like this for online transactions. Since the risk lies entirely with the merchant, there's no incentive for the CC companies to come up with even the most basic PIN-number systems to replace signatures for cardholder-not-present transactions. So they don't.

Just because I know the risks involved in accepting online transactions doesn't mean there's not a better way. As far as I can see, it'd be possible to reduce the risks for all concerned, but since this would cost the CC companies money, I don't see it happening until someone legislates it, or someone big enough (Amazon?) starts demanding they do it.

What, is MC tired of being in business?

[Uncle Gropey]

With today's "everywhere accepts every card" world, the only 2 reasons I can think of to use any certain card are: convenience and APR. I don't see how inconveniencing most of Mastercard's internet-using customers is going to help their bottom line.

This is funny.

[mindstrm]

So paypal cant'just accept a proxy transaction for someone...

but can I simply deposit money in my paypal account?

See, that's a business transaction between me & paypal, not between me and a merchant, which is how it SHOULD be.

Otherwise you get weird things happening, where MC can't deal with the merchant directly.

Re:CYA

[osgeek]

Sounds like Master Card is hurting, and is trying to drum up some more business or something to cover the nut.

I'm sure that that's a factor in their decision, however, one in twenty victims of online fraud is a rather alarming and actionable statistic in its own right .

I really feel sorry for all of the shareware developers who depend upon Kagi.com to process their fees. This will really hurt the individual software developers who provide a valuable service.

Porn sites

[techstar25]

Let's not forget that EVERY SINGLE porn site in existence uses a third party for billing. That is why the name on your credit card statement is always something like "California Billing". This means no more mastercard for porn sites at all. That will kill 50% of thier business. Porn sites probably make up the largest percent of online sales, so this doesn't bode well for e-commerce in general.

Kagi

[Reziac]

Do we know that this is going to affect Kagi? (serious question)

To protect cardholders!?

[Lord Bitman]

If merchants are forced to deal with cardholders directly, this means that rather than using a trustworthy 3rd party a credit card number which is used to withdraw an ammount agreed apon by the cardholder, Cardholders must deal only with merchants, people they dont know. Some people would rather only pay with paypal, who they know isnt going to steal their number in a year. If I have to give out a credit card number directly to someone selling "I Fucked Your Mom" tote bags, well, I wouldnt, would you?

old business vs. new business

[spoonyfork]

I guess I don't understand why the established companies that are under threat by a new way of doing business don't offer those services themselves instead of trying to fight them.

Take the RIAA companies for example. If they made their own "Napster" that didn't suck (and didn't cost an arm and a leg for very little content), they would be in like Flynn. The same goes for MasterCard, Visa and the like. If they created their own "PayPal" that didn't suck, they would be ahead of the game because they're already established.

Frankly, I'd rather use MasterCard's "PayPal" rather than PayPal because we all know that PayPal is kinda shady.

Great Timing Guys!

[The Cat]

Right in the middle of a recession, lets beat up millions of small businesses! What a great idea! And because they're all working 17 hour days to find customers, they won't have time to do anything about it! Fantastic!

Hear that Congress? They just cut the legs out from under half the market for the companies that are going to put most of the unemployed people in this country back to work.

The big businesses win, and the small businesses pay. What a surprise.

I've about had it with the "we're only trying to prevent fraud and abuse" line. NEWSFLASH: There will ALWAYS be fraud. This is just an excuse to screw over customers and merchants while grabbing at more money and control.

Re:Great Timing Guys!

[persaud]

Having failed to compete with PayPal in the marketplace, the banks are resorting to regulation

Citibank is the largest issuer of credit cards, with 20% voting rights in MasterCard and 10% in Visa. Wells Fargo (Billpoint), Bank One (eMoneyMail) & Bank of America (Checkfree) have each exited their respective P2P payment service. The remaining bank-owned service, Citibank c2it, has a grand total of 350,000 customers to PayPal's 13 million members, even after spending a rumored $100 million for exclusivity on AOL in Aug 2000.

A recent Hyperion whitepaper on identity management claims 20% of credit-card fraud is due to fraudulent _merchants_ and only 2% is due to credit-card theft by non-merchants. Aggregators like PayPal protect an individual user from having to give their credit card number to a large number of smaller merchants.

A free-market solution would compute risk profiles for aggregators, based on their customer screening policy. Higher risk would mean higher rates, providing impetus for better screening. Aggregators are a valuable extension of the existing banking system, having greatly increased the number of nodes in the online network (13 million for PayPal alone).

As David P. Reed points out, the value created by Group Forming Networks (GFN) is exponential (he cites eBay as the prime example). It's not just the number of nodes in PayPal's network - it's the fact that repeat transactions are clustered around PowerSellers, effectively a "Group" in the PayPal GFN.

The density of these clusters exists nowhere but PayPal. In other networks (MasterCard, Visa, eBay), the PayPal transactions are lost in a sea of unrelated transactions. Unique economic value that has been created by PayPal would be lost (by *all network participants*) if these transactions were forced onto a less-dense payment network.

Visit Mondex. What do you see in the upper left corner? MasterCard International, because Mastercard owns a controlling 51%. Mondex provides technology for e-cash via smart cards, pioneered in Europe. Citibank and Mastercard intend to own electronic payment online, but Mondex did not forecast the US emergence of PayPal prior to smart cards.

PayPal now processes payments for more than one-fourth of all eBay auctions. In 2001, they cleared more than $3 billion in payments. They process more than 200,000 transactions daily. Although PayPal remains a fraud target, they are the micropayment solution of choice for small business, online service providers & many web communities.

The proposed rule by MasterCard would take effect on May 1st, so there are 30 days for MasterCard customers to comment on the proposed change.

Re:Great Timing Guys! (Keep Congress out of this)

[dada21]

Regulating who should be given a merchant account and who shouldn't is crazy. They are in the business (Mastercard) to MAKE MONEY. If you force them to support everyone, then all that will happen is ALL Merchant rates will go up. For some small companies, they pay 7% to the merchant. For large companies, they pay 1.5%. Why is this? Because the large companies have a habit of getting customers who don't dispute their bills often, and don't give major headaches to the merchants account companies.

I am a small business owner. I pay more for my merchant account than I would if I collected money through paypal. I probably only collect $5000 a year through my merchant account. I got the account because I KNEW the merchant account companies eventually would do this. If you want to be in business, its not that hard to get a merchant account. Have a bank account for a year, with a positive balance. Have decent credit. Have a business plan. Go get merchant account.

This is NOTHING about big vs. small business. Those big businesses were once small also, and they had to go through WORSE hoops to accept credit and charge cards. Plus, when you see a tiny merchant on the Internet who accepts credit cards, what a lot of people think is "I may as well go for their cheaper-than-usual price, if I get screwed, the merchant account company will credit me back if I don't get anything." And that hurts all of us in added credit card overhead costs.

No thanks, Congress. Keep your noses where the Constitution tells you to, and let the free market handle the rest.

Re:Burn your MC and get a VISA

[a_n_d_e_r_s]

Actually I think you will find that in the originals terms it probably says that they have the right to change the terms as they see fit and that you have the right to not accept those changes and end your card before the new terms take effect.

Nowhere does it probably stand that you have the right to change the terms.

I wish more people would actually read the small print before signing contracts.