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MasterCard Forcing PayPal To Pay Higher Fees 260

Posted by Soulskill
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."
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MasterCard Forcing PayPal To Pay Higher Fees

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  • by Microlith (54737) on Friday March 22, 2013 @04:45PM (#43251283)

    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.

    • by DanielRavenNest (107550) on Friday March 22, 2013 @04:48PM (#43251321)

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

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

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

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        Well, it's in your fairytale dreamland, that's certain.

        • by sgbett (739519) <slashdot@remailer.org> on Friday March 22, 2013 @04:58PM (#43251491) Homepage

          In Big Bad Ben Bernanke's fariytale dreamland he is seeking help from the Childlike Empress, so that together they can convince Atreyu to believe in the USD, lest it blink out of existence through lack of faith.

          I'd say its a coin flip as to which one your money is safest in :)

          • Are you suggesting that Bitcoin is as safe as the USD? One of those still works when the lights go out...
            • by Anonymous Coward on Friday March 22, 2013 @06:10PM (#43252251)

              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.

              • 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.

                I'm curious, how do blind Americans cope? Here in the UK the notes grow larger as denomination increases.

                As an aside, I think we have better portraits too: rather than previous prime ministers we have the likes of humanitarians [wikipedia.org], naturalists [wikipedia.org], composers (albeit overrated IMO) [wikipedia.org], philosophers [wikipedia.org] and engineers. [wikipedia.org] The queen is on all of them, naturally, but having her face on things is pretty much half of all she does.

                • Blind folks are at the mercy of bill sorting different denominations in their wallets and the honesty of the people they trade with here in The States. As for Bitcoins, there's a story circulating at work about a $400K California home for sale for cash OR 5500 bitcoins. It would be very neat to see things like that happen!
                  • Sounds like the US government doesn't comply with its own ADA.

                • by hedwards (940851) on Friday March 22, 2013 @07:32PM (#43253069)

                  They take their pay in singles.

                  But, AFAIK, the Bureau of Engraving has been directed to change that because of a lawsuit over that very issue. I'm not sure when the change is supposed to take place, but as far as I know the USD will be coming in different sizes in the future.

                  Which for me is kind of a shame as it makes sorting a bit harder, but it's completely necessary.

            • by hawguy (1600213) on Friday March 22, 2013 @07:04PM (#43252815)

              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.

            • by mysidia (191772)

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

              That raises an interesting question... what happens to the blockchain, when the internet goes down for a while? How long do bitcoins continue to exist, when there is no bitcoin network? how does it ever get reinstated?

              What if bitcoin is the only currency, and there's no way to pay workers to get it back up and running?

          • I'd say its a coin flip as to which one your money is safest in

            That's because you don't have any money. People with serious money will stick with the USD because historically it is safer than gold.

            • by quenda (644621)

              That's because you don't have any money. People with serious money will stick with the USD because historically it is safer than gold.

              Isn't that what they said about the US housing market?
              People with "serious money" have a diversified portfolio.

      • Let's see what happens after the current BitCoin bubble pops before making any prognostications about is long term viability.

      • That's not directly. That is through a foreign currency.

    • by jeffmeden (135043) on Friday March 22, 2013 @05:07PM (#43251605) Homepage Journal

      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.

      • by nabsltd (1313397) on Friday March 22, 2013 @05:43PM (#43251979)

        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.

      • by Anonymous Coward on Friday March 22, 2013 @06:07PM (#43252215)

        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.

        • Re:security (Score:3, Interesting)

          by rduke15 (721841)

          banks and credit card companies don't understand the concept of information security

          They do. But they are not concerned about things like password theft, because neither the bank nor their customers lose money that way.

          So nobody cares about what you may perceive as bad security. As this PDF [microsoft.com] linked from this recent /. story [slashdot.org] shows, only third-party suckers lose money when a bank password is abused.

        • by Jah-Wren Ryel (80510) on Friday March 22, 2013 @06:59PM (#43252769)

          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.

          • by suutar (1860506)
            Ah, thank you! I remembered hearing about this model and wanting to use it but not who had it available or what it was called. Now to go talk to BoA about a credit card.
          • by hedwards (940851)

            That's unfortunate, I've wanted that for years, but none of the banks and credit unions I do business with offer them. But, then again, I've rarely had problems with this, so it's probably not as useful as it seems. And retailers really shouldn't be storing credit card numbers past the point where they're used.

            Really, that's the correct solution, retailers shouldn't be permitted to store these numbers for longer than it takes them to bill the card. They get a transaction ID for it, which is all they really

            • by Jah-Wren Ryel (80510) on Friday March 22, 2013 @08:05PM (#43253363)

              For me, the benefit is more about exercising control over what the mechant bills me. The anti-fraud stuff is secondary. These disposable numbers give me the safety of mind that the merchant won't be charging more than I want, be it through error or one of those bogus reocurring charge things.

              For example, I purchased a year long subscription to Consumer Reports because I wanted to look up some of their reviews for a couple of big purchases I intended to make last year. Their billing model is to automatically charge you for a renewal. I gave them a disposable number good for just one year's worth of subscription so that I didn't have to worry about them auto-renewing me when I wasn't paying attention and then having to fight it out to undo the charge. So now insterad of auto-billing me, they've sent me a couple of emails complaining that their system could not bill me. Makes me smile that I turned the tables on them. (as an aside, I think Consumer Reports has lost their way, adopting some really anti-consumer business practices - auto renewal and littering their website with identity trackers)

              There are other ways to do the same, like using a cash card bought at the local convenience store. For me, disposable numbers are just the most convenient way to exercise that control.

        • by Darinbob (1142669) on Friday March 22, 2013 @07:12PM (#43252881)

          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.

      • "what good is it unless you for some reason already have money stored at the bank of paypal"

        I keep nothing in my paypal account. I have it set up with my debit card to charge my real bank account. But it means that the final retailer does not have a record of my debit card number. Paypal is an anonomiser, nothing more, living on the microinterest they get in the time it takes for the escrow to clear.

        The other obvious option is that MasterCard and Visa could institute easy-to-use one-use HTTP links and vi

    • by jandrese (485)
      But but think of the merchant fees that they might miss out on! This is a case of the old business model preventing a company from making the transition to the new world.
    • by rduke15 (721841) <rduke15@noSpaM.gmail.com> on Friday March 22, 2013 @06:24PM (#43252419)
      <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.

  • Pass the buck (Score:5, Insightful)

    by dciman (106457) on Friday March 22, 2013 @04:49PM (#43251347) Journal

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

  • by default luser (529332) on Friday March 22, 2013 @04:49PM (#43251353) Journal

    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!

    • by 54mc (897170)
      Interest?
      • Interest on credit cards is nothing new, but there used to be usury laws that helped one distinguish between MasterCard and Louie the Loanshark.
      • by isorox (205688)

        Interest?

        Never paid it. Each month a direct debit pays it off. I just get referee. And, free insurance, and free cash back. The retailer pays for this, but they don't give me a discount if I pay by debit card, so why should I?

        • by Carewolf (581105)

          The retailer pays for this, but they don't give me a discount if I pay by debit card, so why should I?

          They don't? That's stupid of them. All my retailers charge 0.5% extra if you use a credit card instead of a debit card.

    • by mattack2 (1165421)

      The credit card companies are making money indirectly through my use of them, but on each individual purchase, I am paying the same _or less_ than if I were paying via cash or check, and it's more convenient than either. Of course I am counting cash back in that calculation.

      They're paying *me* to get a free (interest wise) average 15 day loan of their money, since I pay in full every month. One of my cards did change back to having an annual fee in the past year or so, but IIRC when I figured it out at th

    • Both kinds have existed since CC became popular here in Oz, I got my first CC in the early 80's, it had no annual fee. I had one in the 90's that charged an annual fee but had a lower interest rate. Annual fees are rare (gone?) now, most likely due to all the complexities of middlemen in some common transactions (ATM networks, paypal, etc). Also the annual fee comes all at once so it tends to make the card holder scream "ouch" when it is due, "taxing" a small amount from every transaction is generally seen
  • by sribe (304414) on Friday March 22, 2013 @04:51PM (#43251379)

    I smell some antitrust concern here...

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Your concerns are noted and ignored. The goverment would also like to know who is sending money to who. Since they can't know, they'll have no problem with extra being charged instead. For now. Eventually it will require disclosure of all paypal transactions.

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

      Bet.

      • I guarantee you that PayPal is already sending the government all the information that they're asking for.

  • by Lendrick (314723) on Friday March 22, 2013 @04:53PM (#43251407) Homepage Journal

    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.

    • by Beerdood (1451859) on Friday March 22, 2013 @04:59PM (#43251507)
      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).
      • by Spoke (6112)

        GreenDot MoneyPaks cost $4.99 to purchase. You're much better off funding your PayPal account with an ACH transfer.

      • by dj245 (732906) on Friday March 22, 2013 @06:32PM (#43252507) Homepage

        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.

      • by Darinbob (1142669)

        The only reason PayPal exists is because some companies will only accept PayPal transactions, and because eBay strongarms sellers/buyers into accepting PayPal.

    • by Artraze (600366)

      Indeed. It is a little nice to see folks you don't like slug it out, and I dare say my opinion of Paypal almost went up slightly.

      Still, we have to face that fact that in the end all this information is ending up in the same place. It's just a matter of who makes money selling it.

    • It's yet another AvP situation: Whoever wins. We lose.

  • ... and I'm hardly surprised. Mastercard has a stick up it's ass lately about that kind of thing.

  • So, this article is basically saying that if you receive credit card payments from PayPal and you aren't registered then you have to pay more? well, paypal has to pay more, but the savings will be passed on to you. Is there any source of what transactional data is shared? As someone who works with electornic funds transfer software, I only ever see non-personablly identifiable info in transactions. I can't say I blame Mastercard either, fraud is a major problem in this world. so until I see some real evide
    • Is there any source of what transactional data is shared

      All of it.

      Before the modern era of internet driven big data there were companies like Acxiom (est. 1969) aggregating data from credit cards, store cards, gas cards, telephone books(*), and whatever other consumer data they could get their hands on so it could be resold for market analysis.

      If you use any form of electronic identification, they know what products you buy at which stores and at which time. This then is used to profile people so that companies like bulk mailers can target the wealthy, or the p

    • by Anonymous Coward on Friday March 22, 2013 @05:35PM (#43251897)

      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 [mastercard.com] 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.

      • by Ungrounded Lightning (62228) on Friday March 22, 2013 @07:02PM (#43252793) Journal

        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.

        If that were the case, they could scale the PayPal fee structure according to the aggregate PayPall loss rate.

        Nope. Looks to me like it's about profit from monitizing the customer data and trying to replace that revenue stream because they were unable to get the data from the PayPall transactions.

        • If that were the case, they could scale the PayPal fee structure according to the aggregate PayPall loss rate.

          This article is literally about scaling the PayPal fee structure. You can't just say "nope".

  • I would be fine with this except Visa and MasterCard are already acknowledged as a single Monopoly (see old American Express court battles). The fact that they will follow each.

    The real question is not if Visa will follow Mastercard, but will American Express (the number 3 card) will follow Mastercard.

    • by nospam007 (722110) *

      "I would be fine with this except Visa and MasterCard are already acknowledged as a single Monopoly (see old American Express court battles). The fact that they will follow each. "

      I guess, since PayPal is a bank registered in the EU, we will see a PayPal Credit Card Real Soon Now.

      • by cmdrbuzz (681767)

        PayPal have already tried the credit card thing, not that popular it seems.

        That and they'd have to set up their own payment network to avoid MasterCard and VISA, or convince AMEX to carry them...

    • by ebno-10db (1459097) on Friday March 22, 2013 @05:32PM (#43251871)

      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.

  • by Anonymous Coward

    Saving up to buy a nice widget used to mean something, now everyone just buys junk after junk with no planning, all while accruing enormous debt. This house of cards is just waiting for the right wind to knock it all down.

    Quite frankly we deserve it.

    • by poity (465672)

      Who's 'we'? Certainly not the people who pay their bills on time.

  • Crap ... (Score:4, Interesting)

    by gstoddart (321705) on Friday March 22, 2013 @04:58PM (#43251493) Homepage

    So the company I won't do business with because I don't trust them is being sued by the companies I'm stuck with because the ones I won't do business with won't share enough of our data with them?

    So, we're fucked then -- the megacorps have utterly won the privacy and financial data battle, the advertisers know everything you do because of it, Google and everybody else reads your email, and the government can collate the whole damned thing if they declare they Need To.

    Dammit, the tinfoil isn't working any more. :-P

    • Re: (Score:3, Insightful)

      by EmagGeek (574360)

      Just pay cash for stuff.

    • by KeithJM (1024071)
      If I read your post correctly, you should be fine. You're saying you don't do business with Paypal. Then why should you care if Paypal is charged higher fees? I also didn't see anything in the article about anyone suing anyone (though I wouldn't rule that out).
  • Providing a CC account to PP is a recipe for CC theft which happened to me one time too many. When I signed up for PP, the system demanded a CC for overdraft so I provided a CC that I was going to close shortly. I never needed ANY overdraft because the PP account was tied to a bank savings account soley used for PP transactions and I simply moved $$$ between banks when I wanted to make a transaction. The bank account has no overdraft and has zero connection to the bank where my payroll check is direct de
    • by XanC (644172) on Friday March 22, 2013 @05:28PM (#43251823)

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

      • by roc97007 (608802) on Friday March 22, 2013 @05:40PM (#43251953) Journal

        I think he's saying that he maintains two bank accounts, the one in which his paycheck gets deposited, and a separate, unconnected bank account he uses specifically for paypal. It's actually a pretty good strategy.

    • by wbr1 (2538558)
      The fees will cause PP to raise fees across the board, as an excuse they may say its easier accounting. It wont matter whether the original source of the money is a CC, connected bank acct, or a wire transfer to PP from Nigeria. Ergo, it wont matter if your CC is connected or not.
  • I'm not exactly sure how all this works, but when I buy stuff from paypal, I deposit directly from my credit union into the paypal account and then pay from there. To my knowledge, MC and Visa aren't involved at all. Unless there's something I'm not understanding?

    Moreover, there's a way to use your bank's billpay feature to put money directly in your paypal account. Neither of these strategies appear to involve MC/Visa. Mind you, either of these strategies take time for the transfer, so you have to plan

  • by houghi (78078) on Friday March 22, 2013 @07:25PM (#43253009)

    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.

    • by Maudib (223520)

      "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."

      This is true for the most part in the U.S. too. With the exception of stuff like hotels & airlines where the CC company has a deal in place*, credit cards do not get line item details for the vast majority of transactions. There are tons of companies starting up right now to try and figure this out, however there are real t

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