<i>shrug</i> As someone who's done Kickstarters for comic books, it's still a hell of a lot less expensive than printing a ton of books on spec and getting them into the bookstore/comic shop distribution system. You'll lose like 50-75% of your cover price to all the middlemen involved in that.<p>When you plan your campaign, you look at the cuts taken by your crowdfunding site and its payment processor, and you work out all your numbers with that taken into account. I just go with a flat 10% of the take going to Kickstarter and Amazon. And if you're shipping stuff, build a lot of slack into the budget for that too. It keeps creeping up.<p>If 2% of the final number either way matters to you, then good luck finding a way to take payments without them. I mean, yeah, it'd be nice to live in a world without payment fees, sure. You'd have to battle the huge amounts of money banks have available to pour int politics. Have fun tilting at that windmill, Hackeress.
The overblown rhetoric used makes this piece hard to read.<p>For example, charging a rate that the market will bear for a product like payment processing is simply the free market, not some kind of 'evil' practice.
Given the business model of credit cards, where the banks eat losses due to fraud, there is some justification for a percentage of the transaction since the liability involved in a $1000 fraud transaction is much greater than that of a $10 fraud transaction.<p>In some other business model that might not be the case, but on that kind of platform you might have much stronger technical and procedural protections against fraud so it might be like PayPal where if you do anything that is even slightly sketchy (i.e. a crowdfunding campaign) you get kicked.
We're living in a world where anyone, anywhere in the world can raise money from complete strangers, with essentially no oversight into whether the money actually is effectively directed towards what they claim it's going to be, and some financial intermediary takes single digit fees for doing so[1]. Sounds rather <i>low</i> compared with the cost of sending out emissaries to persuade people to part with money by hand, or dealing with the rich people and financial institutions that traditionally sponsor such programmes and their expectations...<p>[1]not to mention the crowdfunding platform, which often takes a larger chunk of fees for providing a pretty interface to the payments infrastructure, some eyeballs and some t&cs but apparently isn't subject to the same criticism?
This isn't about crowd funding at all its about payment processing. Makes the title pretty misleading. As somebody who spends virtually all my time running a company combatting online payment fees I love anything that seeks to shed light on the horrific online payment processing fees but this title seems completely mismatched to the content.
"For the record, MOST online payment processors have been treating debit card transactions like credit card transactions, and therefore charge the higher interchange -- even when they have no legal right to do so."<p>Erm, you are aware that lower interchange fees for debit cards used at point-of-sale is because users have to type in a PIN on a (nominally) secure terminal? That reduces fraud risk, so the rate is lower.<p>Most payment UIs don't prompt for PIN, so they don't get the rate. Tighten down your tinfoil hat before typing next time.<p>(full disclosure: I'm a developer at a payment processor)
Here's a breakdown of who gets what fees during payment processing:<p>1. Credit Card issuer. They get the bulk of the fees because they assume all cardholder risks. Besides fraud risk, they also care about the riskiness of the loan to the cardholder.<p>2. Gateway / Third Party Processor. The gateway helps a merchant process some part of the fees(e.g. tokenization, authorizations, settlements, etc.). Generally, they get a smallest percentage of the transaction. Authorize.net or Stripe would be examples of these.<p>3. Merchant's bank. They basically buy a merchant's credit/debit sales. They get a percentage of the transaction. If your transaction volume is high enough, you can probably convince your bank to lower your rate.<p>4. Visa/MC. Technically, they don't get anything. However, banks are required to pay dues in order to offer or process MC or Visa cards.<p>Some other things to note:<p>Online sites often use a Gateway directly and don't have a merchant bank. In those cases, the Gateway is acting as both a gateway and a merchant's bank.<p>Issuing banks (the bank that gives customers a credit card) charge higher fees for reward cards so that they can provide customers with rewards. Rewards cards are annoying for merchants because one can't always tell if a card is a reward card or a regular credit card. Additionally, fees for different rewards are different. These fees can be found in the voluminous fine print in your credit card agreements.
For the last eight months I have been working on an app called Lighthouse. It's nearly ready for public (beta) release, probably in the next couple of weeks.<p>Lighthouse is an all-or-nothing crowdfunding app that uses the smart contracts feature of the Bitcoin protocol. You do not need to deposit money with a third party site. Anyone can create a project, or pledge money to someone elses project and revoke that pledge before the project is claimed if they want the money back.<p>Unlike Kickstarter, there are no fees and it works in any country, although you do have to use Bitcoin so you are exposed to volatility and exchange fees (if your costs are in some other currency which is quite likely).<p>Over time I expect and hope that volatility will slowly decrease, and there are lots of ways to optimise currency exchange fees. So whilst this is somewhat exploratory today, I hope it can grow into a real competitor over the long run (5-10 years).<p><a href="http://blog.vinumeris.com/2014/09/12/lighthouse-alpha-now-open-source/" rel="nofollow">http://blog.vinumeris.com/2014/09/12/lighthouse-alpha-now-op...</a>
I have no love for the payments industry, but this article overstates things a bit. I dropped out when it started ranting about charging credit-card-level fees for debit cards. There is a reason why those cards are run as credit from an online site - there's no alternative. Have you ever typed a PIN number into a web site? The whole infrastructure is set up to make it impossible (in theory) to capture and store the PIN number; it's supposed to be proof that the card holder was present. That property is not present for arbitrary web sites, so they have to run the cards as credit.
The merchant complaint is legitimate: Many credit cards have variable rates depending on the type of credit card. Many premium cards have higher transaction rates and a merchant is forced to accept all cards of that brand or none. So no, a credit card is not just a credit card and a debit card is not just a debit card. That simplification can happen at the 2.9% + $0.30 level, but many of the discounted rates get much more complicated with tiers for various cards -> You are extremely unlikely to get a 1% rate at high volume on a 1.25% cashback card for example.
I think the title is a bit misleading. The article only talks about payment processing fees. The situation for crowdfunding is even worse. Crowdfunding platforms like kickstarter take an <i>additional</i> 5% fee...<p>But of course, there is a way around some of the fees charged by paypal or stripe. You can open your own merchant account and handle card payments yourself; then you might get lower per-transaction fees. But then you need to do a lot of bureaucratic nonsense that will probably end up costing you more...
I hope we will see more crowdfunding websites adopt Bitcoin. It allows projects to get a lot more money because basically all of the money could go to them.
Crowdfunding is by far not the worst offender in all of these fees.<p>What about event tickets? Even <a href="http://www.dnalounge.com/" rel="nofollow">http://www.dnalounge.com/</a> charges outrageous "service" fees when buying tickets online. For NYE, the ticket price is 50$, service fee is another 10$ -- that's some 20% commission! (And not at all unique to NYE, either.)
If card processing fees bother her so much, then why doesn't she take checks/cheques?<p>I'd hazard a guess that after a few weeks of doing that, the overhead of card processing looks pretty good.