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MasterCard Forcing PayPal To Pay Higher Fees

Posted by Soulskill on from the and-they'll-pass-the-spendings-on-to-you dept.

iComp sends this quote from El Reg: "PayPal, Google Wallet and other online payment systems face higher transaction fees from MasterCard in retaliation for their refusal to share data on what people are spending. Visa is likely to follow suit. The amount that PayPal has to pay MasterCard for every transaction will go up as the latter introduces new charges for intermediated payment processors. This change is on the grounds that such processors don't share transaction details, which the card giants would love to get hold of as it can be used to research buying patterns and the like. Companies such as PayPal allow payments between users, so the party (perhaps a merchant) receiving the money doesn't need to be registered with the credit-card company. PayPal collects the dosh from the payer's card, and deducts a processing fee before passing the cash on to the receiving party. MasterCard would prefer the receiver to be registered directly so will apply the new fee from June to any payment that is staged in this way."

25 of 260 comments (clear)

  1. Card to Card payments by Microlith · · Score: 5, Insightful

    Perhaps if Mastercard and Visa hadn't allowed PaypaI to usurp what they could very well have done themselves, long ago, they wouldn't be in this situation. I've always wanted the ability to painlessly send someone money, directly, and it's idiotic that paypaI (and other 3rd party wallet services) are the only way to do it. Completely redundant.

    1. Re:Card to Card payments by DanielRavenNest · · Score: 5, Funny

      > I've always wanted the ability to painlessly send someone money, directly,

      Behold: http://bitcoin.org/en/

      It's not everywhere yet, but it will be soon.

    2. Re:Card to Card payments by wiredlogic · · Score: 4, Informative

      That is an insecure option since checks have your account number on them which can be used for fraudulent access to your money. PayPal's escrow through an email address is far safer.

      --
      I am becoming gerund, destroyer of verbs.
    3. Re:Card to Card payments by jeffmeden · · Score: 4, Interesting

      Perhaps if Mastercard and Visa hadn't allowed PaypaI to usurp what they could very well have done themselves, long ago, they wouldn't be in this situation. I've always wanted the ability to painlessly send someone money, directly, and it's idiotic that paypaI (and other 3rd party wallet services) are the only way to do it. Completely redundant.

      The problem with those kinds of transactions is that they are inherently risky, since there is not a merchant on hand to blame in the event of a chargeback. Visa and Mastercard stayed the hell away from that nightmare, and it is telling that only a company as skeezy as PayPal has managed to make it profitable for so long.

      It used to be that Paypal and similar services weren't there to take away transactions from normal merchants (since only small "peer to peer" transactions, like you mention, went through them) but Paypal has grown to be a behemoth that has elbowed it's way into every online merchant's payment options, for some strange reason (what good is it unless you for some reason already have money stored at the bank of paypal?). Mastercard and Visa are naturally skeptical, because PayPal is basically taking mindshare that they could easily shift to their own credit service (if they wanted to start being regulated like a legitimate business, that is.) This is the writing on the wall that PayPal should either rethink their strategy, or accelerate it. Visa, in their own right, has started basically a competitive service (V.me) and is actively going at merchants to reclaim some ground.

    4. Re:Card to Card payments by nabsltd · · Score: 5, Insightful

      Paypal has grown to be a behemoth that has elbowed it's way into every online merchant's payment options, for some strange reason (what good is it unless you for some reason already have money stored at the bank of paypal?).

      I can pay using Paypal, Google Checkout, etc., without ever giving my credit card number out to random websites.

      That's huge, as I don't have to trust the website quite as much. It still may be a scam of some sort, but at most I would be out the cost of that single transaction, since they won't be able to run up charges on my card.

    5. Re:Card to Card payments by Anonymous Coward · · Score: 5, Insightful

      Basally the problem is banks and credit card companies don't understand the concept of information security. like at all.

      Their transaction security model is vulnerable to replay attack (once a merchant has my credit card number and billing address they can charge my card whenever they want)

      What PayPal does is require me to log into their service and authorize any transaction before it will be executed. Thus they act as a buffer between my dangerously incompetent credit card company and the potentially villainous merchant with whom I am dealing.

      All banks and credit card companies have to do to kill PayPall forever is bring their transaction security model out of the 19th century.

    6. Re: Card to Card payments by Anonymous Coward · · Score: 5, Insightful

      USD doesn't work so well when the lights go out either. All the notes are the same size - unlike every other currency I've handled there's no easy way to tell them apart without being able to see them.

    7. Re:Card to Card payments by Jah-Wren+Ryel · · Score: 4, Informative

      All banks and credit card companies have to do to kill PayPall forever is bring their transaction security model out of the 19th century.

      What's worse is that they already have exactly that security model. Visa bought Orbiscom a few years ago. Orbiscom is the creater of "disposable" credit card numbers. You log into their system, specify a maximum limit and an expiration date and they generate a credit card number for you that is linked to your primary account. After a merchant charges that number it "binds" to them so that no ther merchants can charge it. Once the credit limit or expiration date is hit, the number stops working completely.

      Only a handful of banks use this - Bonk of America is probably the biggest one, they call it "shopsafe." But the only reason they use it is that they inherited it when they bought MBNA. I've been using Shopsafe for nearly 15 years now for all of my online purchases and I've never had a problem. MBNA used to advertise that they never had even a single case of fraud with ShopSafe, I don't know if that's changed or if BoA is too stupid to continue advertising it that way.

      --
      When information is power, privacy is freedom.
    8. Re: Card to Card payments by hawguy · · Score: 4, Informative

      Are you suggesting that Bitcoin is as safe as the USD? One of those still works when the lights go out...

      Don't count on your paper US dollars working when the lights go out. I was in an area with an extended power outage -- the grocery store down the street had emergency generators to keep the freezers and lights on... but they couldn't get their cash register system up and were unable to make any sales (not even cash sales) until the registers came back up. It took most of a day to get the registers working.

    9. Re:Card to Card payments by Darinbob · · Score: 4, Interesting

      But only if you also trust PayPal. PayPal is not regulated well under most banking or consumer protection laws. PayPal will lock up your money if there's a disputed transaction, with no recourse for the seller (it's hard to separate PayPal from eBay here, since eBay mandates the use of the PayPal option and it's the biggest use of PayPal). I'm baffled why someone would be worried about security of banks or credit cards but then happily get into bed with PayPal.

    10. Re:Card to Card payments by hedwards · · Score: 4, Informative

      Check21 is why nobody with any sense uses checks anymore. The inability to get the check back after it's been processed makes it a lot more of a PITA to deal with forgeries than it used to be.

    11. Re:Card to Card payments by Jane+Q.+Public · · Score: 4, Interesting

      "That wasn't viable until the Check21 act was passed in October of 2003. Paypal was already 3 years old by that point. And really, it wasn't until the past 2 or 3 years that banks have been accepting customer-side deposits by scanning."

      That's not even remotely true.

      A check is nothing more than an order for a bank to pay somebody money. While banks prefer that they take the particular form that the bank issues, they don't have to. Checks have been written and accepted on underwear, and even on the side of a pig.

      A check has never had to be scanned. It can be handwritten, printed, or anything else. Ever since the 90s, you have been able to get check printing software (and even the legit kind of machine-readable magnetic ink) that let you print your own checks with any bank and account numbers on them. And they are legally LEGITIMATE checks, as long as they are authorized by the account holder.

      I had somebody pass a printed check on my account once, without my permission. It didn't look anything at all like a normal check from that bank. But the bank didn't bat an eyelash. They just paid it.

  2. Pass the buck by dciman · · Score: 4, Insightful

    Guess end users will be seeing a fee increase coming our way. Awesome.

    1. Re:Pass the buck by Krojack · · Score: 5, Insightful

      I think on every transaction PP should list:

      PayPal Transaction fee: $x.xx
      *Mastercard Fee: $x.xx

      * This fee is due to PayPal refusing to tell Mastercard what it is you're buying so they are now charging PayPal more. Their end cost has not increased, they are just greedy and want more money.

  3. You have to pay to play! by default+luser · · Score: 4, Insightful

    You remember when credit cards used to have annual fees? They didn't just forget about those costs, they just found new ways to make money off you!

    --

    Man is the animal that laughs.
    And occasionally whores for Karma.

  4. can they get away with this? by sribe · · Score: 4, Interesting

    I smell some antitrust concern here...

  5. No idea who to root for in this... by Lendrick · · Score: 5, Insightful

    Paypal and Mastercard are both horrible companies. I suppose I should side with the company trying not to share my personal data, but Paypal is incredibly sleazy and dishonest in its own right.

    1. Re:No idea who to root for in this... by Beerdood · · Score: 5, Interesting

      I know! It's like watching two school bullies argues start to argue over something, as you're secretly hoping they'll get into a fight and both be suspended.

      I could see MasterCard taking more of the hit for this though, Paypal funds can be added without any fee from a bank account, or with some new MoneyPak thing I'm just reading about for the first time - I forsee more people using this option if they have hefty fees when transferring from a credit card (Because the whole reason you're using Paypal is because you can't use your credit card in the first place, the money will be transferred if it has to be).

      --
      Global warming and other natural disasters are a direct effect of the shrinking number of pirates - Gospel of the FSM
    2. Re:No idea who to root for in this... by dj245 · · Score: 4, Insightful

      I know! It's like watching two school bullies argues start to argue over something, as you're secretly hoping they'll get into a fight and both be suspended. I could see MasterCard taking more of the hit for this though, Paypal funds can be added without any fee from a bank account, or with some new MoneyPak thing I'm just reading about for the first time - I forsee more people using this option if they have hefty fees when transferring from a credit card (Because the whole reason you're using Paypal is because you can't use your credit card in the first place, the money will be transferred if it has to be).

      There is no way on this earth I am giving Paypal my bank account number. They have a long an continuing history of tomfoolery regarding people's money. I need a way to dispute their withdrawals if needed, and with ACH, once the money is gone, it's gone. With a Visa or Mastercard, generally you can dispute it.

      --
      Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
  6. Re:People STILL use CCs with PP? by XanC · · Score: 4, Insightful

    Your solution to your credit card number being vulnerable to theft is to give away your bank account number instead? Brilliant!

  7. Re:This woudl be ok, but... by ebno-10db · · Score: 4, Insightful

    I would be fine with this except Visa and MasterCard are already acknowledged as a single Monopoly

    And heaven forbid that the we regulate any monopoly or finance company in a meaningful way. Thanks to one of the most absurd SCOTUS decisions ever, they can charge interest rates that would embarrass Louie the Loanshark. Even worse may be the transaction fees, which even without the "special rates" for PayPal, etc. are something like 3%. Ask anybody with a small business that has to take CC's to stay in business, and see what they think of it. In organized crimes cases this is called skimming, but apparently it's ok if you're incorporated. In Australia the fees are regulated to 0.5%, and the credit card companies still do just fine down under.

  8. Re:SLightly confusing summary by Anonymous Coward · · Score: 5, Interesting

    MasterCard already has access to personal data from the card issuing side (they can know everything your bank knows about you, which is considerably more than what a merchant might know). The issue here is that PayPal is acting as a screen so MasterCard/Visa cannot be sure of the nature of the downstream merchant (this is the data they are not getting from PayPal). This has monetary consequences for MasterCard because some of their fee structures differ by industry, but more significantly they track chargeback and loss rates by merchant industry. I think this is less about monetizing purchasing data (though there is certainly an element of that) and more about scaling their fee structure to known loss paterns.

  9. Please do by rduke15 · · Score: 5, Funny

    <quote>I've always wanted the ability to painlessly send someone money</quote>

    Please do! Here is my IBAN number: CH14 0025 5255 F665 2263 0

    Thanks.

  10. There's things they LOVE to know about. by Ungrounded+Lightning · · Score: 4, Interesting

    The excuse trotted out will be one of... Drug dealers, Terrorists, Or tax evasion. Maybe all three.

    Actually, those will be the real reasons, too.
    What, you think the feds care what you're spending your money on? You're delusional.

    Actually, they'd love to know about a lot of your spending. For instance:
      - If you buy a gun: Then they'll know who to search if/when they decide to confiscate them.
      - If you buy gold, silver, or other long-term store-of-value commodities: If/when the dollar weakens they can make those illegal to possess and confiscate them to try proping pu the failing dollar and heading off a competing currency, forcing people to stick with the printing-press fiat money. (They already did that with gold during the Great Depression.)
      - If you buy a bunch of long-shelf-life food or other "survivalist" supplies. It's stuff to raid in a crisis and an indicator of who the non-sheep are.
      - If you buy political literature of a non-mainstream nature.
    I could go on for pages.

    --
    Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
  11. USA: get your shit together by houghi · · Score: 4, Informative

    In Europe (at least in Belgium and the Netherlands and probably in other countries as well) VISA, MasterCard nor any other credit card company will know what you used your card for.
    They will see where you bought it, but not for what.
    So if you pay with it at a supermarket, they will not know if you bought only alcohol or baby food or condoms.

    In Belgium it is even illegal to do any analysis of what type of stores or how you use your credit card. So no analysis if you spend it in other countries, online, at gas stations or just for getting cash from a machine. (In the Netherlands this is allowed)

    This all because of privacy and protection of the consumer and other communist shit. Yet those companies still make money.

    So if Europe can do it, so should the US be able to pass a law for the people to not let credit card companies know this kind of detail (or any other type of company).

    Also when I pay with my card, the company that I do my payment is not allowed to do anything with it. The companies I worked for were not able to do any analysis on credit card sales, because we only had the transaction number, the last four numbers of the card and some other stuff to make it possible to identify the sale, but not enough to link different sales to one person even when done with the same card.

    Oh, and while you are at it, change to using the chip reader like the rest of the world. It is so much safer (not perfectly safe). If the rest of the world was able to pay for the change, I am sure you could bare the cost as well.

    --
    Don't fight for your country, if your country does not fight for you.