Visa To Offer Person-To-Person Payments 187
angry tapir writes "Visa has announced it is planning a new service that will let US customers send money directly to one another, presenting new competition to PayPal. Visa already lets people send money to Visa accounts in many other countries, but this will be the first time it will offer the service in the US."
Credit card fees (Score:5, Insightful)
You'd think with the enormous increase in processing power [wikipedia.org] experienced over the past 4 decades, the amount of money required for operating the credit card networks would have plummeted.
So why are credit card fees still anywhere from 2% on up (borne by sellers)?
And is it (much) more expensive to send $100 vs. $10?
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I would guess the reduction in cost is made up for by the increase in salaries and fraud..
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Re:Credit card fees (Score:5, Insightful)
The fact that the amount the CC guys skim off the top of transactions(in addition to their loan-sharking business) has barely budged despite what are almost certainly declining costs leads one to suspect that the market may not be especially competitive.
The phrase "cosy duopoly", in fact, tends to spring to mind...
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In theory, a competitive market will result in the price of a commodity or service equalling its marginal cost of production.
I've never heard that theory - sounds linke something someone would make up to discredit free markets. A competitive market should result in enough profits going to owners of capital that keeping their capital in that market makes sense.
The fact that the amount the CC guys skim off the top of transactions(in addition to their loan-sharking business) has barely budged despite what are almost certainly declining costs
Visa doesn't make any money of "their loan sharking business" - the fact that they never have is what allowed them to invent a new kind of money a few decades ago. But they're playing catch-up now.
Maybe you haven't done much with data center operations, but the cost of har
Re:Credit card fees (Score:4, Interesting)
"A competitive market should result in enough profits going to owners of capital that keeping their capital in that market makes sense."
Sure, but in a competitive marketplace less capital is needed per unit of gross as time goes on and competitors optimize their product/business model. This because they are, again, in a truly competitive market, competing with one another. Since they are, again theoretically, competing with one another they will also compete with each other over customer market share, which should result in in a smaller cost/product ratio on the customer end.
While cross-market competition for investment capital is a consideration, it should not generally be able overwhelm that trend in the long term.
That it hasn't is indicative that the "free market" system we have is not actually competitive. Some will argue that this is because we don't really have a "free market" due to regulations, others will counter that a "free market" does not emerge spontaneously from anarchy, and in the meantime, while theory is being thrown frantically against the walls, joe six pack will still be paying Visa 2% to sell a six pack to the local Visa-wielding wino, and musical chairs and golden parachutes will continue to be the tune blasting over the office intercoms on Wall Street.
Until the house of cards collapses, that is.
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There are free markets, to be sure (except by some stident libertarian standard), for commodity products. The combination of government and private regulations at the Chicago Board of Trade work quite well, and are very focused on contract enforcement and minimizing counterparty risk.
There are less free markets as well, either due to natural monopolies or government-granted monopolies. It's not like you can make any sort of nation-wide claim that "we need more regulation" or "we need less regulation" - the
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A competitive market should result in enough profits going to owners of capital that keeping their capital in that market makes sense.
Staying in business is not guaranteed in a free market. A truly competitive market would result in minimal profit margins for all companies involved.
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Only briefly. A competitive free market is not some magical steady state. Lots of competitors squeezes margins until that creates hard times, resulting in only 3 or so suriviors with pricing power. Margins rise until they attract the next wave of new competitors. That's the normal, health cycle. On average, long term, the owners of capital in that market must be making enough return to justify the investment - which may meet your definition of "minimal", for all I know.
Re:Credit card fees (Score:5, Insightful)
Because there's no particular reason for them to lower the fee?
VISA's not in the business of saying "well gee we have too much money today, lets cut the fees!"
Re:Credit card fees (Score:4, Interesting)
Well, I guess we're seeing market failure.
Basically, an oligopoly between Visa and Mastercard.
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Re:Credit card fees (Score:4, Insightful)
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Yeah, from the perspective of many corporations, lack of oligopoly is market failure.
Re:Credit card fees (Score:4, Insightful)
If it's the case that the costs associated with offering the product are far less than the fees, then there is market failure because in a well operating market, charging too much invites competition who will undercut your prices.
Are Visa and Mastercard charging so much that there's room to be undercut? I don't know. Ask Discover.
Re:Credit card fees (Score:5, Informative)
So yes, it does get more expensive the more money you send, and Visa is practically running a charity by only charging 2%.
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I take it you share my frustration. Somebody mod this up.
(Oh, and before posting a rant about CC fees, I guess I should have remembered that the electrons for higher dollar amounts weigh more, hence it costs more money to ship them through the tubes of the Internet [wikipedia.org].)
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Perhaps someday you will learn about supply and demand, and how the price of a good or service is only very loosely tied to the cost to create/perform that good or service.
If you don't like the fees, don't pay for the service.
Re:Credit card fees (Score:5, Interesting)
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the risk the transaction is fraudulent.
Hahahahaha.
The credit card company has 0 risk in that regard. They simply yank the money back from the merchant and leave them without the money or the product. I used to work for a company that made POS systems and we had several customers driven out of business by that bullshit and the credit card company's disinterest in taking security and fraud seriously.
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Any merchant that does a significant amount of credit card sales needs insurance. Anyone will tell you that - even the police.
If the company didn't make that clear to someone setting up a POS system they did the guy a serious disservice.
Credit card fraud is just a fact of life like rain. Sometimes you get wet and as a merchant you need to have your umbrella.
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The bank issuing the card is the only one liable for the money, VISA/Mastercard don't pay a dime if the money is charged in a fraudulent way.
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convenience.
no matter who issues your visa, they're all on the same "network" so you can use it anywhere - visa is that network.
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Visa offer a service. They have to make money, from for example, off debit cards.
2%, still cheaper than handling physical money.
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Why? Because Visa wants hilarious profit margins and how many competitors are going to exist?
Square is about the only one I can think of that is mainstream.
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MasterCard?
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That's because there is no such thing as Net Neutrality for credit cards.
The old way of thinking was imposed and Greed was satisfied.
Re:Greed (Score:2)
Greed is never satisfied.
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So why are credit card fees still anywhere from 2% on up (borne by sellers)?
Isn't most of that basically insurance? The percentage varies with the risk of the merchant (online shops are higher, grocery stores can get lower rates). My card has bit hit with fraud a couple of times over the last decade. Both times I called Visa and they made the charges disappear.
While they probably didn't eat most of those fees (chargebacks or whatever back to the merchant) they probably did have a fair amount of overhead for
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Well that and it is 2% for Visa, but for American Express it is 3-4%. However American Express also doesn't normally collect interest on the monthly payments(yes there are exceptions).
Visa and Mastercard really make their money on the fact that so many people have continuos rolling debt every month that builds interest.
Re:Credit card fees (Score:4, Informative)
Visa and Mastercard really make their money on the fact that so many people have continuos rolling debt every month that builds interest.
Really? I had always thought it was the issuing bank that kept the interest.
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Re:Credit card fees (Score:5, Informative)
It's especially hilarious because WU will actually ask you if you are sending money to make a purchase, because that is not allowed. You have to make up a story that you are sending money to your old roommate, for bills you never paid (even though you are actually buying some Japanese cell phone that turns into a small dog with laser eyes).
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So why are credit card fees still anywhere from 2% on up (borne by sellers)?
You aren't factoring in the real costs of the service which is when the credit card companies don't get paid what is owed to them, where they end up selling the debt at a large discount to a collection agency.
Nearly 1.3 million bankruptcies were closed in 2009 alone, with only ~40,000 of them being by businesses. You can imagine that these weren't by people that owed an average of only $100. Its more like an average of $10,000+. Billion of dollars don't get paid back to credit card companies each year.
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This is actually a good point, and different from the fraudulent card use issue.
On the other hand, it should only apply to payments on credit, and not debit cards.
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AFAIK, interest is supposed to cover that, and not all Visa cards are credit cards. Mine is debit for instance, I would never put my small purchases like a coffee on credit, that just seems insane. (I also have a Mastercard credit card, used only in exceptional circumstances)
The only reason for that 2% is to earn the banks billions and billions in profit..
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Banks are starting to change but until recently no bank offered any security on debit cards. If your number gets copied at the coffee shop (very likely), you would then be liable for 100% of the charges until your account ran dry.
Some banks are now offering protection against debit card fraud. But still, it may take days before the money gets back into your account. Weeks sometimes I am sure. If you have so much in your checking account that you can handle that, great.
I wouldn't use a debit card for any
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I guess it depends on local laws, but at least here in Sweden, the bank is required to pay back fraudulent transfers and the burden of proof is on the bank. I lost my debit card once (my fault, I accidentally left the card on a bar counter after a few beers) and someone did steal it and apparently had a good time at a few bars before the money ran out. I got all of the money back after filing a police report and filing a report with the bank.
I keep most of my money (what little I have, I'm a student) out of
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You aren't factoring in the real costs of the service which is when the credit card companies don't get paid what is owed to them, where they end up selling the debt at a large discount to a collection agency.
Nearly 1.3 million bankruptcies were closed in 2009 alone, with only ~40,000 of them being by businesses. You can imagine that these weren't by people that owed an average of only $100. Its more like an average of $10,000+. Billion of dollars don't get paid back to credit card companies each year.
God forbid they don't extend credit to people unlikely to be able to repay it. That would be, like, like selling mortgages to people who can't afford them. That is what America is founded on !
Certainly there will be unforeseeable bankruptcies. The vast majority of them is foreseeable, however.
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$100 on credit card costs VISA more then $10 (Score:2)
You'd think with the enormous increase in processing power [wikipedia.org] experienced over the past 4 decades, the amount of money required for operating the credit card networks would have plummeted. So why are credit card fees still anywhere from 2% on up (borne by sellers)?
That increase of processing power is accompanied by increased use of credit and debit cards. Also there may be some requirements of locality, that a transaction processor must be inside some jurisdiction. Quality of service may also dictate locality. So its not clear that they can use consolidation and other techniques to reduce their costs.
And is it (much) more expensive to send $100 vs. $10?
Think of other credit card benefits like automatic extension of your warranty. I had a TV go bad 13 months into a 12 month warranty. The manufacturer's warranty did not
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Well, not as a buyer, but as a seller. These days, a lot of professionals and small businesses are taking payment by credit card.
Yeah, I know, the fee pays for the convenience of cc billing, and there has to be a fee. What we're talking about is why, with the huge decrease in operating costs plus massive increase in volumes (everybody uses a CC these days), they're still charging the same rates.
Re:Credit card fees (Score:5, Insightful)
Would you go to your employer and say "Hey, I've figured out how to save money on my bills at home, could you cut down my salary by 10% to compensate for that please?"
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Usually they just tell us they're not increasing salaries, because they need to invest in X, Y, and Z, inflation be damned. (:
Reverse Analogy (Score:2)
Maybe not, but if your employer found out there's someone who's willing to do you job just as well as you for 10% less than you make, guess what happens?
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Re:Credit card fees (Score:4, Insightful)
Merchants pay for insurance against fraud because the credit card companies push it back onto them.
As a consumer, there is really nothing you can do about fraud. You hand your card to a waiter in a restaurant and he takes the number down. With 99 others he can get maybe $50 for his efforts. If you only used your card once that month and could remember the waiter you might be able to make enough noise with the restaurant manager to get the guy fired. Maybe. Maybe the restaurant thinks you are a nut and ignores you completely. The police won't do anything - you didn't lose anything, did you? The restaurant didn't lose anything. The credit card company didn't lose anything either. Nobody is complaining, so no charges can be brought.
Magnify this by 330 million people in the US with at least that many credit cards. Probably more of them that people because the people that have one often have four others to keep them company.
Credit card fraud is pretty much an equal-opportunity sort of thing. You get card grabbers that get maybe $0.50 for a valid number. This is an obvious way to get some more money in the service business where wages are low. Then you have the buyers that go out and buy stuff with the stolen numbers. They get a cut (or they wouldn't do it) and this is all the employment there is for a lot of people. They can use the numbers online or get real-looking cards made up that can even be signed and everything. Did you really think anyone wanted to steal your card with your name on it and try to forge your signature? Why? Making a nice clean fresh card costs maybe $1 if you have the right equipment. And there are places turning out 1000s of cards a day for this purpose.
From the buyers you get all sorts of people turning the goods into more cash. Ebay - unregulated. Pawn shops - regulated but loosely. Street corner vendors. Whatever it takes. So you think you got a good deal on some electronics? No, it wasn't "hot" but it did come from a credit card buyer.
We aren't talking about a lot of organization but it is at the grass-roots level. People make enough money off doing this to survive, and nobody is really getting hurt all that badly. So credit card fraud is going to continue and some people are making out very well with running the operation.
Next time, try to find someone in law enforcement that is interested in doing something about it. You could be holding the guy with your credit card number by the collar and the police will tell you to let him go. No charges. Nothing. In this environment do you really think there will be an end to this?
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Re:Credit card fees (Score:5, Interesting)
4% back on gas (that's about 0.15 per gallon, lately)
2% back on restaurants
3% back on some class of merchants I can't remember
and 1% back on just about everything else.
We get a $100ish check for every $9000 or so that we spend through the card.
Rewards cards are part of the landscape now... get used to it, or (as an industry, collectively) grow a pair and do something about it. What the "market failure" whiners fail to account for is the massive investment Visa and Mastercard made across the last 40 years to roll out their system worldwide. Of course they're entrenched, they would have been irresponsible stewards of their investors' capital if they didn't entrench themselves along the way.
As a consumer, I view cash as a "premium" payment option. If I value the anonymity that comes with cash, then I'm willing to go through the trouble to get it, the ATM fees, and the lack of rebate from my credit card. If you're a merchant who accepts credit cards, I assume you've already built in a 5% margin to cover that - if you're a small time place (like a hair salon or locally owned restaurant), I might pay cash as a sort of extra tip, both dodging the credit card fees and making income reporting potentially optional. But, most of the time, credit cards are just a built in cost, a tax paid to the money handlers, and I choose to deal with a bank that slides a little of it back my way.
Life has never been simple, when you were a child, you thought it was and you might have been taught it was, or should be, but those teachers were liars. Paybacks, graft and corruption are not just in the Mafia's domain - they have been a part of "respectable" business since long before the Magna Carta.
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Rewards cards are part of the landscape now... get used to it, or (as an industry, collectively) grow a pair and do something about it. What the "market failure" whiners fail to account for is the massive investment Visa and Mastercard made across the last 40 years to roll out their system worldwide. Of course they're entrenched, they would have been irresponsible stewards of their investors' capital if they didn't entrench themselves along the way.
So, just suck it up and take it? Forget all that blather about competitive markets promoting meritocracy and efficiency because those CEO's have "worked hard" to stifle innovation form gentleman's agreements about pricing?
It's one thing to recognize that corruption exists and will never go away. It's entirely another to condone it and tell those "whiners" to shut up because things will never get better. Large and difficult goals are achievable over time time if enough people work towards them. The amazin
what about privacy? (Score:2)
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What about it? How is this any different to using PayPal?
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Oh I know. That's why I prefer my PTP transactions to be me handing over (or accepting) banknotes. Unfortunately this is hard to do if you're in Michigan and you want give your pal in Ontario $12 USDs. Not a big deal really but who wants the "imperial entanglements" that go with converting USDs to CDs and paying the conversion fees, showing ID (which will be recorded), and etc.? And of course if what you're buying or selling is pr0n or something else you'd rather not disclose (or be able to be discovered) what's the alternative? Not PayPal that's for sure.
This is by design. The effective untraceability of cash has long been a "problem" for police states such as the US and most European countries. They will make sure no other form of monetary transfer developed from hereon our will ever have that same design flaw. All you need is a boogeyman (for most people, money laundering mafiosi type stories will be sufficient, for the rest use terrorists and child molesters) and suddenly you get access to a vast database of who exchanges money with whom for what when an
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...like a duck on june bug.
Do ducks dive on june bugs a lot?
Finally... (Score:2)
Something that makes absolute sense, business and personal.
I like VISA better now...but will this be also for canada?
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I was more surprised this wasn't available before in the US. Now I can better understand why anybody would ever use PayPal. I never understood what they offered that wasn't already available for free with any major bank.
Just how many things that the rest of the world takes for granted is unavailable in US?
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But why? Paper checks cost the banks money to process and the banks can't wait to get rid of them (and cut down on personal...). Well, couldn't wait to get rid of them of them, they are practically non-existing and only used when doing business with US partners.
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But why? Paper checks cost the banks money to process and the banks can't wait to get rid of them (and cut down on personal...). Well, couldn't wait to get rid of them of them, they are practically non-existing and only used when doing business with US partners.
Greed. Sure they don't want to support paper checks anymore. But they want to offer "new" services for less money even less. Banks operate on the principle that nickle and diming their customers is the best foot forward, and any services offered for "free" are just to get them in the door or offer a competitive advantage they'd rather do away with were it not for the pesky morons a decade or two ago who thought free cheque processing should be something to compete on.
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But why? Paper checks cost the banks money to process and the banks can't wait to get rid of them (and cut down on personal...). Well, couldn't wait to get rid of them of them, they are practically non-existing and only used when doing business with US partners.
Legacy. Inertia.
People here expect checks to be free, so they are. Even though they cost the bank much more money to deal with.
To give you an idea of how ridiculous it is, one of my banks, Bank of America, gives me free Cashier's Checks (i.e. certified funds). These cost the bank a ton of money because an actual teller has to issue them (and a manager has to approve it if the amount is large enough). On the other hand, they charge $3 for ACH transfers (electronic) and $25 for wire transfers, neither of whic
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I was more surprised this wasn't available before in the US. Now I can better understand why anybody would ever use PayPal. I never understood what they offered that wasn't already available for free with any major bank.
Just how many things that the rest of the world takes for granted is unavailable in US?
This is one of the areas where the US is woefully behind. Stay tuned, though. There are some services popping up that will fill this need (popmoney, etc.)
My bank (State Farm Bank) actually offers a person-to-person payments service that is free, but it's pretty rare still.
PayPal advantage? (Score:5, Insightful)
For example. Since we're not regulated like a bank or real credit merchant, we can do things like freeze or disable your account simply because we feel like it or someone complained about you, or whatever. Don't worry though, customer support will explain everything and get you sorted out in a jiffy.
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paypal will answer for their transgressions.
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Paypal is a bank. A European bank.
Re:PayPal advantage? (Score:4, Informative)
Well... perhaps in Luxembourg. From PayPal Bank Status [wikipedia.org]:
So *that* clears things up. :-)
Good Grief (Score:2)
PayPal's "bad behavior" is a non-issue if you manage your account with even a grain of intelligence.
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To be fair, my very long-time account (since 2001) was once frozen, and I only had to call once and be on the phone for about two minutes to get it unfrozen. That said, I probably do trust Visa a smidge more than PayPal.
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I don't see how Visa will fix things up, either.
Credit card processors are pretty slimey, so much so that even Paypal looks good. It's just like cellphone carriers - they're all pretty horrible, adding competition just results in the new guy ending up as bad as the incumbents.
Honestly, it won't be long until we start hearing of the same things that Paypal does, except it's being done vy Visa instead. The only thing possibly keeping sellers honest is that payers get the seller's Visa number.
Why did it take so long? (Score:5, Insightful)
Paypal mapped it out years ago. The fact that Visa (and AmEx, Discover, etc) haven't been all over this idea by now makes me wonder if they're even paying attention.
I, for one, welcome competition amongst our financial overlords
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Probably too high up there on their tower of money.
Seriously.. it must get to a point where you make such obscene profit that it's not even worth your time to look into making more.
Probably Wasn't Enough Money In It (Score:2)
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Then use cash.. preferably unmarked bills
Um... those would be counterfeit.
Real bills have serial numbers - which can be read by machines these days, and probably are in some cash counting machines.
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Is the post so corrupt in your country... (Score:2, Interesting)
Is the postal system so corrupt in your country that simply sending CASH to someone is dangerous? In 50+ years of sending and receiving gobs of cash in birthday cards and christmas cards, I've never had any problems.... and we're talking thousands of dollars here...
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1. Although it is a federal offense, it is often easy to steal people's mail and thus the money simply by taking mail out of the mail box on either end.
2. Cash isn't traceable, you can't go to court and claim you payed your bills in cash unless you did it in person and got a receipt.
3. Cash needs to be processed manually, if you send cash to a business, someone has to open the mail, count the bills, store the bills, and make a note that the payment was re
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Actually it typically resolves #3 as well. All of the information is on the check for the computer to automatically record and process it. The MOST a person would have to do is manually enter the value if the hand writing is particularly poor.
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That may be fin for birthday gifts, but it obviously doesn't work for payments; systems like Visa or Paypal provide you with a proof of payment.
Ripe for abuse (Score:2)
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That would be a startling bad way to implement this. Any CC number should only ever be entered into Visa's website, much like any Paypal authorization is done at Paypal's web site. Of couse, everyhting is vulnerable to phishing.
If you enjoy having all your purchases tracked... (Score:2)
Check out Hawala for a better alternative (Score:4, Interesting)
Switching from Paypal to Visa... (Score:2)
...is like working for Mussolini instead of Hitler (GODWIN TIME!)
Why not just use bank transfers? (Score:3)
In every country I've lived in (Australia, the UK, Germany) bank transfers are completely free and easy to do over online banking. If I book holidays with my friends and we don't settle who owes what to who in cash during the trip we can simply transfer the difference over to them once back home.
In Germany it's particularly pervasive - you pay for everything with bank transfers, it's even the preferred method to pay on ebay (preferred by users not paypal/ebay obviously).
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In every country I've lived in (Australia, the UK, Germany) bank transfers are completely free and easy to do over online banking. If I book holidays with my friends and we don't settle who owes what to who in cash during the trip we can simply transfer the difference over to them once back home.
I know it's hard to believe, but we don't really have that here in the US. Some banks offer a similar service, but it's difficult to use. It sucks, but it's how it is right now.
There are some services popping up that are going to get us pretty close to where we should be (popmoney, this visa thingy from the article, etc.) But these are really in their infancy. Paper checks (yes, paper checks) are still king over here. Drives me nuts, but it's true.
Astroturf? (Score:2)
I'm pretty sure I transferred money via on-line banking to my sister five years ago. WTF is wrong with VISA?!? A little slow to the party?
Everything I read about markets, "Banksters", the financial sector, and all their regulators just reminds me of that "Scream!" painting that was so easily stolen a few years ago. It's like they think they're in a safe, cocooned environment where nothing can affect them. Meanwhile crackers hammer on their doors, taking down one of them after another, ...
How the hell do
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A Visa (or Mastercard) debit card.
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Shitty as banking looks down there (I'm Canadian) .. I have to imagine US banks are a hell of a lot more regulated than paypal, which can pretty much do whatever the hell it wants and answer to no one.