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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.
A company like Paypal, on the other hand, runs a sort of 'virtual currency' service, which is a true aggregator and a factor on the sellers side as well.
/. who like the service. It's convenient to be able to send money across the country without a wire service, and it's even convienient enough to send money to a friend that's buying me a theatre ticket. But usually those are small enough to just transfer it out of my bank account, for larger e-bay purchases I use a credit card and so this seems to be aimed mostly at micro-retailers. In NYC those are the ones that won't accept credit cards for purchases under $20 cuz they are charged $1 or $2 per transaction from CCBill type services, I'm sure things are similar elsewhere.
So they are just trying to get a cut of PayPal?
I'm prolly one of the few
The nice part about paypal is it lets you collect money without becoming a "merchant". Essentially, if someone wants to send $100 through paypal, they can use a mastercard and you won't have to sign a contract with various merchant services agencies to collect that money.
What I see: Mastercard could make a killing by cutting out the middleman (PayPal) and starting a new "personal merchant" program of sorts. Now, you can use your Mastercard Auctionman account to collect money from anyone around the world!
Makes sense....
Hmm?
What do you mean the system has to be overhauled?
One of the chief reasons the system is as big as it is is because the risk is shifted away from the client!
It has always been heavily on the merchant to make sure things are valid, to ensure that the credit card is valid, that it's being used by the right person, etcetera, becuase the merchant is the one that loses if it's not.
These companies cater to merchants by making sure they have a huge customer base who wants to USE their credit cards to buy things, and they reduce the amount of actual cash the merchant has to handle. THe onus has always been heavily on the merchant to keep things in order.
Since internet transactions don't have a signature, yes, it IS easy for the merchant to get screwed. But it's their choice.. they know the temrs.
This affects folks paying their auctions and goods via Paypal, Yahoo! Paydirect, and potentially ebay's Billpoint.
No, it doesn't affect Billpoint, not even potentially, because that's backed by Wells Fargo (so the transaction goes to Mastercard-partner from Wells Fargo, which has a merchant account).
This isn't a big deal at all - most e-commerce operations have merchant accounts. My guess is that Mastercard wants established businesses to sign up with it rather than keep using PayPal when they've plainly gone past the "mom and pop" stage.
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One of the chief reasons the system is as big as it is is because the risk is shifted away from the client!
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I'm all for the client.. but at least give the merchant some recourse as well....
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It has always been heavily on the merchant to make sure things are valid, to ensure that the credit card is valid, that it's being used by the right person, etcetera, becuase the merchant is the one that loses if it's not.
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For non-internet sales that is all well and good. How do I tell if its being used by the "right" person online? Address verification does nothing... No signature to compare it against. If you in a biz where you are not shipping something, its basically going on your gut feeling if the person is genuine or not, which is not a good way to do biz.
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These companies cater to merchants by making sure they have a huge customer base who wants to USE their credit cards to buy things, and they reduce the amount of actual cash the merchant has to handle. THe onus has always been heavily on the merchant to keep things in order.
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You do know mastercard and the likes makes more money off of me for a fraudulent transaction... On top of you giving all the money back (obivously), they also charge you $10-25 per chargeback, so you loose money.. they have no risk..
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Since internet transactions don't have a signature, yes, it IS easy for the merchant to get screwed. But it's their choice.. they know the temrs.
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No shit, and I play by those terms.. but its a little too much to ask for some reform???
I went and listened to what Mastercard had to say on the subject at the ETA conference in Orlando last week.
There is a very blurry line here for what they call aggregators. On the one hand they do not consider Ticket Master and Amazon aggregators but they do consider us to be. When asked why, it was basically no comment. At some point they may have to choose.
What they did make very clear is that they want to retain competitiveness with Visa. The adult industry, between top players mentioned in a previous post, process in excess of $1.2b every year not including Paypal. That kind of money can produce a lot of pursuading I can assure you.
What I can also tell you is that Mastercard is being very cooperative in finding a solution with all these players and we are confident of finding a solution. Certainly nothing drastic is happening for quite a while.
Robert
WebsiteBilling.com
There's a longer version of the article at Yahoo (longer than the one on USA Today's own site - weird). There's a statement from MasterCard that I don't understand. Quoting the (longer) article:
I don't know how MasterCard would know the difference. What about the transaction would indicate to them who the PayPal user is and whether that user is selling things on an ongoing basis?
Maybe they are referring to the fact that you need a Business account or Premierre personal account on PayPal to accept credit card payment?
<sig>Guvf vf abg n frperg zrffntr
This has been prohibited for as long as I've had my merchant account (over 12 years). It's called "factoring", and it's there to prevent account kiting schemes among other nasty types of merchant fraud.
About time the CC companies started enforcing the policies they make every other merchant abide by, yet turn a blind eye when it comes to online transactions.
And thus alienate the millions of banks and financial services companies that rely on selling (expensive) merchant accounts for their very livelihood.
This business is multi-tiered, just like the alcohol-distribution business. You've got the Big Four at the top (Visa, Mastercard, Amex, Discover), the merchant account companies, the banks (who sometimes double as the merchant account company), and finally the merchant. You scratch my back, I'll scratch yours.
Intercarve Networks, LLC
Having been the victim of credit card fraud, I personally think that this will be a "good thing".
I tried paypal for a few transactions then closed my account when I realized they have an uncontrolled access the my $$$.
So as far as I am concerned, Paypal is insecure, uncontrollable service and should be restricted from doing bussiness by Mastercard (which by the way has contractual aggrements to protect me and laws enacted to regulate their bussiness).
Money Orders still work. Just a bit slower.
Chris
The whole premise is so fucked. People ask why capitalism sucks and here we are having to beg these assholes to make us into interest slaves.
Type the word usury into Google and see why the Greeks and the Roman civilizations really fell. Why did the Chinese dynastys continually rise and fall? Any system based on wealth accumulation by usury gets top heavy and falls because the wage slaves on the bottom rung eventually get violent.
The only thing that keeps american capitalism one step ahead of the game is the advances in technology keeping distractions within reach of the average disenfranchised joe. But that technology itself always been a direct result of the US's plural culture rather than some innate know how. In the same vein, the US's economic success has got jack shit to do with business sense. Economists are nothing more than pundits and sycophants, ask any statistician. The US is ahead so it stays ahead until it gets behind. Whoopdie fuckin' doo. That doesn't mean there's anything particularly special about its circumstances.
The government should handle the currency, not these fucking user bastards. Why the fuck is it that Congress has thousand of hours to talk about whether free citizens of the US should be allowed to trade broadcast TV shows and songs, but they can't get off their asses and come up with an e-currency. That's what the government is SUPPOSED to be for!
So, I'm ranting, I could edit it, but I think I'll just post anonymously.
As soon as I learned of paypal around 1998, I instantly saw the possibilities of kiting. Just transfer $1000 to a friend that has agreed to give you $990 of it back to you and keep the $10 for themselves, bam, instant cash advance, without the associated fees and lack of grace period. You could string up tons of interest free debt if you played your cards right doing that. I believe it's also illegal, so don't try it.
I've had enough abrasive sigs. Kittens are cute and fuzzy.
I think Mastercard intends to steal all of Paypal's customers ... probably a good idea ... Paypal seems to charge a high percentage to give merchants and consumers lousy service while they hold all your money.
http://www.maestrocard.com/internetpurch/
KC
Regulating who should be given a merchant account and who shouldn't is crazy. They are in the business (Mastercard) to MAKE MONEY.
So are the small businesses. We have just as much right to MAKE MONEY as THEY DO. The difference is we don't have the opportunity to SCREW THEM OVER with some ARBITRARY BUNCH OF CRAP.
If you force them to support everyone, then all that will happen is ALL Merchant rates will go up.
I'd rather they just STAY OUT OF OUR CASH REGISTER. Thank you very much.
For some small companies, they pay 7% to the merchant. For large companies, they pay 1.5%. Why is this?
It's called price gouging. The small companies don't have the clout to fight it, so they pay extra. And it's not just the merchant accounts. It's everywhere. Simple as that.
. If you want to be in business, its not that hard to get a merchant account.
We already have our system set up. NOW they decide to screw over half our customers. So we pay TWICE because THEY decided to change. That is pure, unfiltered CRAP.
Have a bank account for a year, with a positive balance.
Try to do business, on-line, accepting money orders and checks, from all over the place. Oh, sure. Meanwhile back on Earth, the FACTS are YOU MUST ACCEPT CREDIT CARDS. Customers are not going to sit down and write out a check and mail it. It DOESN'T HAPPEN. If you're in business you already know this, so nice try.
Have decent credit. Have a business plan. Go get merchant account.
Excuse me, but NONE of that is Mastercard's
#%*&@$ BUSINESS. We pay our fees. Our service bureau should not be punished by some arbitrary decision.
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.
Oh, cry me a river. This is ALL about big vs. small business. Big business can afford to set up transaction processing on their own site. Small businesses can't. It makes no sense to set up a full e-commerce structure for a low volume company. Better to spend that money on building a better product.
This is a slap in the face to hard working small businesspeople, and Mastercard knows it. Anything else is spin.
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.
So we should just SCREW OVER the tiny merchant, and let some other company OVERCHARGE the customer so some third company doesn't have to pay extra. Yeah, that's the ticket. Beat up the little company, take the customer THEY EARNED and hand the money over to someone else.
Do you have any idea how completely screwed that point of view is? That is the ultimate in arrogance and exclusivity. Only the people with perfect credit and a bank balance are allowed to make a living, huh? That tiny merchant has JUST AS MUCH RIGHT TO THE MARKETPLACE AS ANYONE ELSE. It is UNFAIR for Mastercard to deny them access to their OWN CUSTOMERS.
and let the free market handle the rest.
Yeah. The free market as dictated by Mastercard. I feel better already.
And how. Days before PayPal's IPO, CertCo filed a patent lawsuit: The suit delayed the IPO by a few days and dampened the IPO, but not substantially. Even by patent-mining standards, the timing of the lawsuit was strange. Who runs CertCo? Deutsche Bank AG and Bank One are both investors and directors. Chairman and CEO:
Unfortunately for the banks, the CertCo lawsuit did not derail PayPal's IPO. Next, they complained that PayPal was operating an illegal banking service, beginning with the fine state of Louisiana. As a result, the FDIC (federal regulators) began investigating whether PayPal "was a bank". Their investigation concluded that "PayPal is not a bank", since: Score: Banks: 0, PayPal: 2
This brings us to attempt #3, the bank option of last resort: private regulation: impose costs on *their own customers* to achieve what could not be achieved through (a) free-market competition, (b) patent extortion, (c) federal regulation.
This is not new. The US Dept. of Justice has prosecuted and partially won (10/09/01) an antitrust suit against both Visa and Mastercard, whose largest controllers are Citibank and Chase Manhattan. More context and history.
The case is currently stalled (01/18/02) pending appeal. Although the case is mostly about opening debit cards to Amex/Discover (instigated by Amex lobbyists?), the findings of fact and examples are relevant to the current discussion.