The only correct solution is something like the Brasilian pix. No fee paid for by taxes and the central bank just like the management of cash.
A digital alternative to cash offered by the central banks which are the ones responsible to enable financial transactions. Since so many are moving to cashless it is important for the central bank to retain control of the currency alternative to cash.
We can not allow this explosion of middle men all taking a cut of something they should not be part off especially since they now have such power that they decide what you can and cannot buy instead of the laws of the land.
Yep. The EU has also enacted various regulations to enable cheap bank to bank transfers and online payments but pix seems even better - haven't use it though. 3% transaction fees are ridiculous and only possible because Visa/MC have successfully - until now - lobbied against any good alternative in the US.
Privatizing water supply is an awful deal for citizen - ask the UK - since the incentives are anti-consumer and public infrastructure is more often than not a monopoly by definition. I'd count transferring money online as public infrastructure and it should get the same treatment.
Switzerland has a huge conflict of interest with the banks and a similar P2P service (TWINT) that isn't free for merchants. This service is owned by the same banks that are supposed to by law implement instant IBAN to IBAN but of course those same banks have added fess to this.
Our popular QR payment system, known as MobilePay, is owned by banks that have a financial interest in letting payments continue to process via visa/mc cards underneath, as they get a big interchange fee from reusing the legacy payment system. (around 0,2% interchange on a typical danish visa transaction).
In the past, we had a popular nationally owned cheaper safeguard against foreign payment monopolies in the form of Dankort, a local visa/mc alternative, but the company operating Dankort (NETS) has been sold by our gov+danish banks to an american equity firm, further removing any incentive for danish banks to not just quietly force visa/mc on everyone, so Dankort is now slowly dying.
The rent seeking is made even more perverse by the EU PSD2 legislation from 2018 that makes it illegal to forward payment fees onto shoppers, which removes all the textbook consumer behavior (judging price vs quality) from the equation.
That law has created a situation where shoppers use whatever payment method their bank hands out to them and merchants are forced to blindly accept whatever shoppers use and pay up the fees which goes back to the same banks that decided what to give shoppers in the first place.
End result of this is that the banks best move is to push visa/mc, make everything seem hard to change & confuse politicians.
Systems like Pix give me hope but I don't believe the existing system can be saved, it needs to be replaced by a new actor, aggressively supported at EU or national level, probably both.
The UK has free and fast bank transfers for consumers but that is not quite reliably fast enough to be a payment mechanism for most purchases, nor can it be easily tied to transactions.
The problem with things like UK water is privatisation and bad regulation. UK rail privatisation has not been too bad (the numbers do not support the claims made about it making things worse) - successful enough that the EU seems heading towards emulating it.
I think it’s even possible without having the central bank manage the whole thing. In Canada we have Interac e-tranfer which is managed by a consortium of Canadian institutions.
It is far from perfect, but perfect is the enemy of good.
I hate the idea of paying for something online with e-transfer, though. It's like mailing cash. If you get stiffed, there isn't much you can do.
You can still process through the Interac network, but again you get get the same purchase insurance and also there is nothing stopping a group of people from pressuring interact not to process payments from a certain website as was the case with Itch.
Which is one of the better approaches: government sets the priority and tells industry as a collective "figure it out, or we'll do it for you".
It's ultimately the approach that got USB-C standardized for mobile device charging, but didn't mean subject matter experts at the firms building things were cut out of the process.
In 2018, Patreon almost got kicked off of Stripe because Mastercard objected to NSFW content (probably because of PACs and/or “moralizing busybodies”). Patreon booted most of the NSFW creators and OnlyFans scooped them up. OnlyFans is now significantly bigger than Patreon.
To be clear, Stripe is one of multiple payment processors OnlyFans uses. I don't know what the other ones are but they do have a processor that is more favorable for NSFW content, and all related payments go through that/those processors. Safer payments go through Stripe, at least last I checked.
Payment processors successfully got OnlyFans to ban sexually explicit content in 2021. The policy was just reversed before it ever went into effect - presumably the announcement generated some compelling data on how much less money everyone would make if the policy went through. (I don't know if this is also related to their transition away from Stripe for the NSFW-est content.)
American hate for wire transfers will never sound anything other than irrational to me. Why don't you have an equivalent of Europe's Instant Payments?
The author mentions the storefront pocketing the money, that seems implausible? If an unscrupulous storefront can pocket money that would be wired, it could also pocket money that would be paid by CC.
And then there's the weird thing about payment volumes...that's been a solved problem for half a century?
US banking has wire transfers, but they cost $15-$40 and can only be reversed with the cooperation of the receiving bank. We use them to transfer large sums of money and for transfers that need to be settled immediately; most often for house purchases where both apply.
We do have ACH (single nightly batch), same day ACH (four? batches throughout the day), and the new FedNow (immediate). But all of those involve providing account numbers and we don't like to provide those (both payers and receivers prefer not to give the other participant their ach numbers). Also, there's not a consistent way to link a payment/debit with an invoice, because memo fields don't necessarily show up with the payment.
Also, credit card purchases can be reversed without the cooperation of the merchant. Most issuers are generous with chargebacks (at least historically). You could take a merchant to court if you did a wire transfer, but that's expensive and time consuming.
> we don't like to provide those (both payers and receivers prefer not to give the other participant their ach numbers
This is because in the US, anyone can pull money out of your account with only the ACH numbers; which is an insane design[1]. In most other countries, the worst you can do is deposit money. The equivalent of ACH pulls requires significantly more paperwork and proof of consent by account owner.
1. Much like SSNs, which can be debilitating if not kept secret. US payments run in "true names" magic, and simultaneously expect you to register with your one true name at random places with questionable security practices, and it's your fault if there's a breach.
> This is because in the US, anyone can pull money out of your account with only the ACH numbers; which is an insane design
That’s the default for at least Germany and SWIFT, too. You can ask your bank to disable this, but that means losing the pull functionality completely; I think some banks have an interface to whitelist individually, but the majority doesn’t.
It can become a problem especially when you list your account number publicly somewhere for payments or donations: somebody will eventually use that account number to pay for random stuff. You’re contractually obliged to check your bank statements and ask for a (free) chargeback within a certain period of time (some weeks?).
At our projects, we solve this by having a separate “public“ bank account for incoming donations that blocks pulls, and a much less public one for pulls.
Apart from this use case, abuse seems to be rare enough that banks typically don’t expose the functionality to disable but only do it manually when asked specifically. I doubt most people even know they could.
> In most other countries, the worst you can do is deposit money.
So in the EU, anyone can indeed pull money with your account number (and with RTP that may change someday). But we can also revoke any such direct debit within a certain period of time.
I had to do it once, over my banking app, money was back the moment after I clicked.
The "anyone can pull money out of your account" piece is true but it also isn't.
Yes, if a financial institution allows you to originate a debit from another account without verification, you could take money from anyone's account. The max liability you should have given prompt reporting of fraud (less than 60 days) is $50, and if your institution doesn't give it all back then find a new one.
ACH is also technically reversible, whereas wires/other instant transfers are not.
FIs also do fraud checks on ACH, I believe it may be a regulatory requirement now (sometime in the past few years?) to have some form of fraud check before sending originations to the FED. Typically this is verification of the other party being a known entity/account, which would ideally burn fraudsters very quickly.
Most transaction facilitators don't play around with any of this though, and have some "account linking" step before they are willing to originate transactions. Micro-deposits that you would need to verify on the other account.
> This is because in the US, anyone can pull money out of your account with only the ACH numbers
Whoa, I don't blame people for not wanting to provide ACH numbers in that case. Is there any groundswell to provide a system where this doesn't happen?
FedNow is that system. It only sends money. Can request money but it needs to be approved.
However, I'm not sure if it uses different account numbers from ACH. It could be that sharing account numbers could be secure with FedNow and dangerous for ACH.
Account-number only pulls (eg ACH Debits) are insane. Where I'm from people, charities etc routinely publish their bank account numbers if they expect to receive money from strangers.
>American hate for wire transfers will never sound anything other than irrational to me.
I'm assuming "wire transfer" means something different to you than what it means in America. In the US, a wire transfer is when you call up your bank, give them a routing number and account number, tell them to wire however much money to it, agree to pay like $20 or something for the transfer, and then they tell you the transfer will happen tomorrow morning because it's 3:30 PM and the last batch gets handled at 3:00. They're not so much hated as pretty much entirely irrelevant to everyone. I've made one wire transfer in my life, and that was for buying a house.
We have “faster payments” in EU/UK. You enter a bank account number and sort code, confirm it, and it transfers instantly in 99% of situations. 0 fees, it’s faster than card payments and available to anyone with a bank account. If you want to go down the clearing route you can do CHAPS which is the same as a US wire.
Well, in Hungary had the "instant payment" for years, but last year the National Bank issued the spec. & requirement for the banks to facilitate the "qvik" payment method. Which is pretty much a QR code which you scan with your bank app and they will automatically parse & populate the fields for wire transfer. Then the payment provider will do a callback to the merchant which confirms that the payment was made
[1]: https://www.cib.hu/en/Maganszemelyek/digitalis_bank/mobilalk...
In Sweden, we use Swish, you enter the phone number, not bank account. Everyone has it and connect the app to their bank account, so payments are instantly in your bank account.
There are two problems with faster payments in the UK as an alternative to cards.
1. A lack of a mechanism for using it for things like online purchases.
2. What about the 1% of the time when it is not instant?
On top of that you are not allowed, by law, to charge customers more for a card purchase so customers have no incentive to switch from cards and the existing mobile phone payment systems.
Not sure how they do it in the UK, but in the EU, for online purchases they typically give you a unique code to enter in the note field. This is picked up by an automated system and matched to your order.
It does sometimes take two business days to clear, so it's not good if your service requires fast turnaround (e.g. pizza delivery). Of course, it's always good to have another option, and perhaps even for pizza delivery you could accept it on trust with customers you have a good relationship with.
(On the software side, unlike a credit card payment, this does require that you temporally decouple ordering and billing. Besides the processing delay, a lazy user might not send the payment immediately. Two weeks seems to be a typical length of time, and of course you don't ship anything until payment is received. Treat it a bit like a cash-by-mail payment.)
It is guaranteed to take no more than two hours in the uk, but still not fast enough for some purposes. Entering a code manually is also not convenient and is more error prone. its useful and widely used but not a replacement for card payments.
It's commonly a low volume - high value transaction, so they can charge that much. I have used them to buy houses and change banks. But not to buy a car - because car dealers are evil and there's no way to easily reverse one when the dealer stiffs you.
American retail banks are so heavily relationship based that there's zero competitive pressure on pricing, even for things that people use quite a bit more than wire transfers. For example, it's completely trivial to find savings accounts paying a 3.50% interest rate right now, but the largest banks offer more like 0.03%.
That's not the American way. Our services are both expensive and slow. You see, it's about freedom! We are the Most Free (lol, sorry) and therefore corporations are free to be bad in both ways simultaneously. :D
A more specific, but not commonly used, term is "giro transfer" (coming from an Italian word). That's a payment where the sender pushes money, as opposed to the receiver pulling it, as they do with a cheque or a card swipe. In the past you'd send a letter (which is why it was inconvenient), but nowadays you log into my online banking page, enter a destination account number, amount of money to send, and a note, and click "send", and the money is transferred somewhere between immediately and three working days depending on which system you're using. This capability is very obvious to non-Americans and I'm sure even to Americans, is an extremely obvious thing that any banking system should have...
The key difference here is that you communicate with your bank, giving them a direct instruction to send money to the recipient at their bank. With cheque or card, the recipient communicates with the recipient's bank, to forward an authorization written by you, which is sooner or later verified against your bank. Which is convenient for you, but involves more steps.
Because it would cost money to upgrade our financial infrastructure and processes.
Americans aren't opposed to it. Like so many problems with America, our institutions are simply opposed to anything other than maximal profit extraction at any and all costs.
Americans are, however opposed to the kind of national ID system you'd want for this kind of national banking scheme. For some reaon, they think it's more private or secure to use a 9-digit number assigned at birth.
I’m going to assume this is a good faith comment, but I encourage you to understand that Europe and the US are different places, with significantly different ecosystems.
I also encourage you to read about Chesterton’s Fence. Make sure you understand why something exists before you think about how to replace it, then maybe you won’t see Americans’ use of credit cards as “irrational,” but instead, reasonable under the circumstances that exist.
That said… the US did roll out FedNow (similar to SEPA) but because the US banking ecosystem is more fragmented, adoption takes a while.
Wire transfers here are expensive and don’t provide consumer benefits (cash back, credit options, consumer protections like fraud and chargeback, or merchant coupons). In your example, if an unscrupulous store pockets the credit card payment, the credit card / issuer will often reimburse your purchase. (This is a law in the US.)
> In your example, if an unscrupulous store pockets the credit card payment, the credit card / issuer will often reimburse your purchase.
This is true in the EU too. It’d also why you don’t tend to pay for goods and services via transfer unless it’s a very high value item and you have a contract to go alongside it.
>it could also pocket money that would be paid by CC.
No.
The card processor will return the customer's funds for various reasons. In many cases, "no reason" is sufficient for a chargeback, especially if you are dealing in intangibles, such as software licenses or digital media. In addition to returning the customer's funds, the merchant is typically penalized a "chargeback fee". This means as a merchant, if your chargeback fee is $25 and the product is $5, one chargeback can set you back 6 sales.
For these reasons, as well as other minimum rates, certain price levels are untenable. Consequently, many products are either not sold at all or sold at a much higher price.
The conditions make it more sensible for the merchant to sell high priced items to less troublesome customers. The percentage of the card processor's fees are relatively less. The probability of a chargeback is lower. As you have less customers, you can more easily provide support and contact them directly.
Was wondering what anyone's experience with chargebacks are in general. I could imagine that, in the worst case, if combined with 'card testing' as a merchant you could immediately get slammed with thousands in unavoidable charge back fees? Maybe i'm hyperventilating but thats huge, really. I hope theres some stop gap.
Yes, that can absolutely happen if you don't have the right controls in place. If you get too many chargebacks, the card networks will kick you from the system.
Card testing won't (usually) do it, because that doesn't (usually) generate chargebacks[0], but yes, you will absolutely get smacked with fees if it happens. It really sucks.
In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
Also: no-reason chargebacks are absolute BS. I worked on a PSP for a largeish adult entertainment business, and I remain convinced that most porn chargebacks are a case of "post nut clarity".
> In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
US wire transfers generally can't be reversed --- sometimes, if an error is noted immediately, and the destination bank cooperates, they'll send the money back; but the recipient can pull cash out immediately or wire the funds somewhere else immediately, and then your recourse is through the courts. ACH transactions are like checks; they can be reversed, but only if there was a mistake or they were unauthorized, not because of a service complaint; again, if you have a service problem, recourse is through the courts.
I'm not sure how that works on the continent for transfers, but with cards or PayPal the chargeback/dispute policies are usually pretty clear. Basically, the merchant is always wrong for even being in the neighborhood of a disputed transaction. If you don't have a signed delivery confirmation for your card-not-present transaction, you're out of luck.
Zelle is starting to be a thing and those transfers are pretty instant in my experience. No fees, no delays, no chargebacks, it's amazing. I use it to cover living expenses for a couple friends that don't have jobs or disability benefits.
Stopped using Zelle after a friend sent a small amount (~$60ish) and it just disappeared into the ether. His bank couldn’t find it, my bank never got it, Zelle kept telling us to speak to our banks.
> In short, just making your own payment processor is hilariously difficult and far beyond the means of Valve let alone Itch. Depending on what the speaker means by "Payment Processor", they may be suggesting making your own bank, or somehow convincing a bank to let Itch shove payments through them; who will eventually do the exact same thing as what happened here. There's no winning play there.
PCI-DSS compliance wasn't even mentioned and it is easily able to overwhelm organizations like Valve and Itch on its own. The hardest part of payment processing is the network. Connecting the acquirers to the issuers in such a way that everyone is happy with the arrangement. Just like the hardest part of the power grid is the transmission infrastructure. The endpoints are far more trivial to replace. If you want to use the existing network, you have to play by all of the rules. The only real way out of this system is to use a completely different kind of currency.
PCI-DSS can be tough but it is also very specifically scoped and so if done well you can keep it very limited. From the way the article describes Itch (1 person + some part time help - which isn't totally ideal for PCI either), it absolutely could overwhelm them, but Valve are certainly a big enough organisation to handle it just fine - assuming, of course, they they wanted to.
For shops like Valve only if they need SAQ-D in case they want to store the credit card numbers on their own, I'd say? SAQ-A til SAQ-C is doable for any e-commerce company.
It's likely they would need on-site visits from a QSA if they wanted to go all the way into this. Valve would fall into the Level 1 compliance category. Self-reporting won't work for that kind of transaction volume.
While I'm not the biggest fan of crypto overall this is definitely one instance where you could actually use it in a way that makes sense by offering people to pay with it instead. Only issue is converting it afterwards into fiat currency.
That's not actually the only issue, unfortunately. Steam did in fact accept Bitcoin for a while, but it was dropped in 2017, with Newell stating:
> “We had problems when we started accepting cryptocurrencies as a payment option. 50% of those transactions were fraudulent, which is a mind-boggling number. These were customers we didn’t want to have.” [1]
That's quite interesting, I wonder how they were fraudulent as bitcoin transactions dont have chargebacks etc. In the article they also mention that the price for the game would fluctuate which seems to indicate they actually priced the games in Bitcoin. Normally price would be Euro, USD etc and price conversion to Bitcoin would be done at check out. I guess these were the early days though =)
Seems like a catch-22. Crypto can’t be used like legitimate currency because it’s not used like legitimate currency, and fraud can’t be addressed because there’s no regulation and no mechanisms by which to make victims whole.
There are parts of me that can see some appeal in cryptocurrency but I can’t see any way around this, at least not without impacting what made it appealing in the first place.
While volatility indeed can be a problem (depending on how the whole thing is setup), I fail to come up with scenario of 50% fraudulent transactions... Does anyone have links to more details on what kind of fraud they meant?
Accepting bitcoin payments with 0 confirmations? It shows a complete lack of understanding of Bitcoin and cryptocurrency in general, especially in 2017 when PoW was the main driver and PoS chains weren't really mainstream.
It’s not a big deal in case of Steam – they can just pull the games from your library if the payment doesn’t go through. A bit trickier with in-game purchases (but in that case they could wait for the confirmations).
I think this is the biggest problem with crypto that it will never be able to solve. Every year there are millions of dollars lost in crypto due to scams (the "send me crypto and I'll give you money" kind). The instant you have a digital good people can actually buy with crypto and sell for real money, it becomes a money laundering machine.
Like you could get money from ransomware, buy a ton of games on steam, then sell the account to a third party.
This will probably be "solved" by legally exempting stablecoins from nemo dat. Basically stablecoins will be declared clean by law so recipients don't care.
Fraudlent is accoriding to the law. If I steal your bitcoin I spend them on Steam it is fraudlent. I know cryptobros think stealing bitcoins are OK and shouldnt count as fraud but law isnt written by cryptobros.
It’s not this. Steam accepted 0confirmations to ease the payment flow. Before the transaction would be mined into a block, the fraudster would submit a new higher priority transaction sending the payment to themselves.
I think you really need to make a card that isn’t a Visa or MasterCard or a QR payments system that’s wired to common banks. I don’t think anyone has suggested creating a payment processor without this, because the issue is with Visa/MasterCard, not with the middleman.
I think Valve could actually find a bank to work with to run a QR payments scheme for the gaming industry (SteamPay perhaps?) that’s “topped up” via ACH. Just ignore the whole card part, since it’s online you don’t even need it. Require biometrics and you can make the fraud burden easier.
Of course this would cost a lot of money, but it’s at least in the realm of possible versus a PayFac etc.
I highly doubt banks would choose some completely new payment processor (or card, etc.) over Visa or Mastercard: Visa and Mastercard can just put in their terms of service that you're not allowed to use that payment processor and that'll kill them real quick. Highly unlikely any existing bank would give up Visa or Mastercard just for that.
The solution to this issue is regulation, pure and simple. It doesn’t even have to be a complicated bill, either:
“Financial institutions and financial services providers are barred from blocking, interfering with, restricting, or refusing any consensual transaction that complies with laws regarding content, materials, goods, or services.”
Admittedly in the USA this tees up a 1A case over whether companies have freedom of speech (they shouldn’t), but in other jurisdictions it could be the game changer needed to unshackle commerce from the control of a handful of boardroom puritans and risk-adverse compliance departments. If porn has a high rate of chargebacks, then stop allowing them without a higher burden of proof on the person requesting them, for instance. There’s ample room to enforce accountability on consumers and processors without upending the proverbial produce cart.
Unfortunately the US has a history of doing the opposite, and using regulation of payment processors to prevent them from allowing some business to operate, when the Constitution doesn't allow the federal government to directly limit those businesses: https://en.wikipedia.org/wiki/Unlawful_Internet_Gambling_Enf...
There are two main reasons companies will block types of payments: material downside, like high chargeback risk, and reputational damage. It completely makes sense that certain things should be relegated to working with pmt processors who have structures designed to manage and be compensated for that risk. We shouldn’t socialize those costs onto the processors or, via higher fees, everyone who accepts credit cards. Instead, we should expect the companies who engage in those activities to shoulder their own burdens rather than pushing that risk off to others.
Instead of tailoring this to financial service providers, create conditions for essential service operators that must ensure service delivery neutrality. That way, the legislation applies to all kinds of infrastructural services, and you don’t even open up the can of worms that is freedom of speech, since the affected companies don’t get to have a say in who they want to do business with.
For the US specifically (I can’t speak to other countries), that could be an excellent use case for the USPS: digital money orders. Pay with cash or debit card at the post office, claim it back to a bank account. Other postal services could reciprocate/honor those orders in that specific currency (or offer conversion at a publicized daily rate). Since it’s cash only (no credit), it significantly reduces chargebacks - and because it’s through national postal services, it still allows checking/tracking by governments to keep tabs on illicit transactions.
Thing is, that would absolutely be blocked by current payment providers and their lobbyists. I fully agree with you, though.
EDIT: Hah, I’m late to this party. Physical international money orders have already been discontinued by the USPS as of last year and are dwindling globally thanks to FinTech. The lack of a digital equivalent is definitely frustrating, as their flat fees and discretion were rather appealing.
This is basically Western Union. They have a worldwide network of offices, but I haven't seen an integration for online billing and sales from them. It would be ideal for selling online products to the unbanked or underbanked.
I'm familiar with Western Union, as it's how my local neighborhood sends money back home in stacks of twenties and hundreds, one money order at a time. The problem is theirs (and Moneygram's) fees can be insanely steep due to a lack of competition or government equivalents; the author of the original article rightly points out that wire transfers in the US can be INSANELY expensive as a result (my bank charges $20 per transfer; a domestic money order from USPS, by comparison, tops out at $3.60 for $1,000; WU quotes ~$45-$60 depending on country and method, with another $25 for credit cards). Add in growing nationalism about penalizing sending money across borders via these methods (as migrants often do when sending money back home), and the costs add up shockingly quick for what's effectively a digital ledger transaction on the back end.
To WU and Moneygram's credit, however, they do offer more digital wallet integrations and direct bank transfers nowadays. Their product lines are growing, but their fees aren't decreasing as they effectively have a captured (impoverished) market. Still, since money orders can be as safe as cash, having them as a viable alternative to the private payment card industry is necessary for business to function and smaller vendors to thrive, particularly in niche industries.
Just to be noted, we are in this situation especially because there are a lot of terrible regulation in banking that force them to police every single use of your money or take very big risks.
And to note your note, we have those regulations specifically because of repeated bad actors finding ways to exploit consumers, businesses, or markets due to a lack of regulation.
Regulation is not a bad thing, but it has the potential to be a bad thing. Done right, it's meant to protect people from being exploited, fleeced, or harmed; done wrong, it does the exact opposite.
Most banking regulations, at least in my exposure to them (mainly through PCI-DSS and FDIC), are sensible regulations trying to combat known exploits or problems. Yes, it's inconvenient at times for legitimate use cases, but the solution there is making those legitimate cases easier or safer without weakening regulations stopping, slowing, or tracing bad ones.
I built and ran a site that allowed users to upload a stable diffusion model and generate images with them. I originally received money via stripe, and then promptly got kicked off after about 9 months. They threatened (via a clearly automated message), that the fines could be as high as 400k, ended up paying a 4k fine and getting off ASAP.
While we were on stripe though, the charge back rate was probably ~2-3%, which, I think is probably fine.
Moved over to Coinbase commerce and sales dropped from ~5k / month to 1k / month.
I've built a payfac before, and while I think this author is overstating the difficulty of doing so in 2025, I agree that it wouldn't help Valve to do so. We weren't the ones that decided it was too risky to deal with specific merchant categories; our processor did that for us. It wasn't even a discussion. (Nevermind such policies like "all of Puerto Rico is too risky to deal with.")
That was an interesting read. The core issue unfortunately appears to boil down to being a deeply complex of net of trust and risk distribution.
The issue being a "human"/societal problem, instead of technology, makes me wonder if this could be slowly changed over a few generations. The amount of momentum required would be quite high tough.
> If you're making your own PayFac, you're suddenly responsible for getting and securely storing that information and handing it up to your sponsoring Acquirer. You're also responsible for verifying it, ...
My understanding is that steam already has to do this? Like when I buy a game on steam it goes to steam, who then redistributes the funds to themselves, developer and tax man. Since they are holding the money, are they not defacto already a Payment Facilitator?
Most of the companies store tokens for CC numbers etc., apart from not beeing allowed to store the number itself, it doesnt bring any good to you since every hacker will be pleased to stop by; If someone is stealing the tokens, they can't use it for much.
afaik games are not considered money. and steam points are not considered money either. only withdrawable credits (casinos/online payment apps) are considered as money
Look at India, the UPI generates a billion+ transaction per day. Just amazing how to include mom and pop merchants into digital economy and not to suck up to Master/VISA networks.
I remember working on POS for a non-porn industry also shut out by payment processors, and the increasingly obtuse hoops and loopholes they had to navigate were wild to hear about after working in more traditional SaaS and eCom. Reverse ATMs, cash-to-crypto, cash-to-barter, all different state-to-state and between nations. This shit is hard when you're arbitrarily frozen out of access. Really made me rethink how I pay for things, especially at in-person retail.
There's an avalanche of money waiting for more competition to Nvidia too....
The problem is, many folks have absolutely no comprehension of how difficult it is to build a payment processor that can serve lots of customers they don't personally know. The fraud is just insane. The regulation is insane. The card network rules are insane.
They worked at it for a long time before launch, started with a very narrow product and only had customers they actually knew (reduces fraud a lot), worked like crazy, operated in a market where the competition was abysmal.
Cryptocurrencies are many different things to different people. Putting aside the speculative mania, the payment processor problem is one of the main problems private cryptocurrencies solve.
Stablecoins are not without issues, but they've largely solved the problem of price volatility. Objections around issuance and backing might be raised, but this is more interesting for trading and less relevant for merchant transactions.
Yes, there are no chargebacks with cryptocurrencies. This is an advantage for the merchant. Before anyone goes off the deep end here, let's recall the context of the discussion: one time payments to reputable merchants for trivial amounts. Game purchases do not require life changing amounts of currency to change hands. Steam and Itch are well known brands.
So what is left to object to? My impression is that there is excessive cultural and political baggage.
From the article:
>Capitalism sucks. The economic ecosystem sucks. People unrelated to transactions in any way except "They have the tech to facilitate them" deciding that entire industries don't get to make money and feed their staff because "It's risky to handle these payments" suck. That these entities can also be attacked by PACs and shamed into being the morality police sucks.
...
>But I still hate crypto.
Note that even though the author correctly observes the high regulatory overhead and political, non-market forces, they still manage to blame "Capitalism".
Problem with accepting crypto is the on-ramp/off-ramp to fiat
Everybody, except for the few that are holding crypto and expect it to irrationally keep rising forever, are looking to convert it into ironically fiat money which they swear is the enemy.
This means other than bordering purely illegal or prohibited businesses that payment processors cannot handle (remember there are adult processors too), crypto will never become mainstream replacement for fiat.
Right now liquidity is there to absorb the ramping process but long term observers will note how fragile and quickly this can go away. Already, the number of new wallets being created on Bitcoin is plummeting. Search terms for bitcoin has tapered off. There is almost no real interest in it being a replacement for fiat or gold.
I wish gold could become more accepted but we all know the history of e-gold and many of us know its connection to Bitcoin and its curious proximity of origin.
It's just not a good look for companies selling mainstream products to suddenly accept a medium which is clearly being used for pump and dump and laundering of money for transnational crime and no amount of gaslighting or pushing crypto will change it, in fact it achieves the opposite of their goals.
We might at some point see a digital currency but this would be completely different from the crypto in existence today and all stablecoins that isn't issued by the government runs the risk of reporting what is different than what is there in the vaults as if governments haven't been caught doing this in the past. ex) Tether's reserves unaudited unverified mystery
Seems possible that on/off-ramps are leveled up in the next few years as Stripe and other large financial institutions all try to launch and dominate stablecoins.
The actual experience of actually selling or buying actual things with crypto is nearly untenable, and doesn't actually free you from all the legal requirements that make payfac hard
The only correct solution is something like the Brasilian pix. No fee paid for by taxes and the central bank just like the management of cash.
A digital alternative to cash offered by the central banks which are the ones responsible to enable financial transactions. Since so many are moving to cashless it is important for the central bank to retain control of the currency alternative to cash.
We can not allow this explosion of middle men all taking a cut of something they should not be part off especially since they now have such power that they decide what you can and cannot buy instead of the laws of the land.
Yep. The EU has also enacted various regulations to enable cheap bank to bank transfers and online payments but pix seems even better - haven't use it though. 3% transaction fees are ridiculous and only possible because Visa/MC have successfully - until now - lobbied against any good alternative in the US.
Privatizing water supply is an awful deal for citizen - ask the UK - since the incentives are anti-consumer and public infrastructure is more often than not a monopoly by definition. I'd count transferring money online as public infrastructure and it should get the same treatment.
Switzerland has a huge conflict of interest with the banks and a similar P2P service (TWINT) that isn't free for merchants. This service is owned by the same banks that are supposed to by law implement instant IBAN to IBAN but of course those same banks have added fess to this.
Same problem in Denmark with our banks.
Our popular QR payment system, known as MobilePay, is owned by banks that have a financial interest in letting payments continue to process via visa/mc cards underneath, as they get a big interchange fee from reusing the legacy payment system. (around 0,2% interchange on a typical danish visa transaction).
In the past, we had a popular nationally owned cheaper safeguard against foreign payment monopolies in the form of Dankort, a local visa/mc alternative, but the company operating Dankort (NETS) has been sold by our gov+danish banks to an american equity firm, further removing any incentive for danish banks to not just quietly force visa/mc on everyone, so Dankort is now slowly dying.
The rent seeking is made even more perverse by the EU PSD2 legislation from 2018 that makes it illegal to forward payment fees onto shoppers, which removes all the textbook consumer behavior (judging price vs quality) from the equation. That law has created a situation where shoppers use whatever payment method their bank hands out to them and merchants are forced to blindly accept whatever shoppers use and pay up the fees which goes back to the same banks that decided what to give shoppers in the first place.
End result of this is that the banks best move is to push visa/mc, make everything seem hard to change & confuse politicians. Systems like Pix give me hope but I don't believe the existing system can be saved, it needs to be replaced by a new actor, aggressively supported at EU or national level, probably both.
Ran by Private companies are't always bad for public infrastructure as long as the proper requirements and frameworks are put in place.
The problem, at the end of the day still comes down to quality of Government.
you are barking at the wrong tree. Banks are the real culprits here. Visa/MC are perhaps the front face.
The UK has free and fast bank transfers for consumers but that is not quite reliably fast enough to be a payment mechanism for most purchases, nor can it be easily tied to transactions.
The problem with things like UK water is privatisation and bad regulation. UK rail privatisation has not been too bad (the numbers do not support the claims made about it making things worse) - successful enough that the EU seems heading towards emulating it.
I think it’s even possible without having the central bank manage the whole thing. In Canada we have Interac e-tranfer which is managed by a consortium of Canadian institutions.
It is far from perfect, but perfect is the enemy of good.
I hate the idea of paying for something online with e-transfer, though. It's like mailing cash. If you get stiffed, there isn't much you can do.
You can still process through the Interac network, but again you get get the same purchase insurance and also there is nothing stopping a group of people from pressuring interact not to process payments from a certain website as was the case with Itch.
Which is one of the better approaches: government sets the priority and tells industry as a collective "figure it out, or we'll do it for you".
It's ultimately the approach that got USB-C standardized for mobile device charging, but didn't mean subject matter experts at the firms building things were cut out of the process.
Employees of the bank of England used to be allowed an account there, as recently as 20 years ago perhaps.
In 2018, Patreon almost got kicked off of Stripe because Mastercard objected to NSFW content (probably because of PACs and/or “moralizing busybodies”). Patreon booted most of the NSFW creators and OnlyFans scooped them up. OnlyFans is now significantly bigger than Patreon.
Just to add to this. OnlyFans also uses Stripe as their payment processor.
To be clear, Stripe is one of multiple payment processors OnlyFans uses. I don't know what the other ones are but they do have a processor that is more favorable for NSFW content, and all related payments go through that/those processors. Safer payments go through Stripe, at least last I checked.
OnlyFans also support Pix as far I know.
What is the explanation for this? Does it all come down to politics, connections and random chance like iOS app store review differences?
Bit dated, but from my experience, yes.
https://news.ycombinator.com/item?id=24291790
Payment processors successfully got OnlyFans to ban sexually explicit content in 2021. The policy was just reversed before it ever went into effect - presumably the announcement generated some compelling data on how much less money everyone would make if the policy went through. (I don't know if this is also related to their transition away from Stripe for the NSFW-est content.)
And how come the card companies aren't objecting to OnlyFans?
They grew too fast too quickly. Now the gravy train is too yummy to object to from within.
Gravy train might not be the best choice of words, here
The crazies online say it's because OnlyFans owner is Jewish.
American hate for wire transfers will never sound anything other than irrational to me. Why don't you have an equivalent of Europe's Instant Payments?
The author mentions the storefront pocketing the money, that seems implausible? If an unscrupulous storefront can pocket money that would be wired, it could also pocket money that would be paid by CC.
And then there's the weird thing about payment volumes...that's been a solved problem for half a century?
US banking has wire transfers, but they cost $15-$40 and can only be reversed with the cooperation of the receiving bank. We use them to transfer large sums of money and for transfers that need to be settled immediately; most often for house purchases where both apply.
We do have ACH (single nightly batch), same day ACH (four? batches throughout the day), and the new FedNow (immediate). But all of those involve providing account numbers and we don't like to provide those (both payers and receivers prefer not to give the other participant their ach numbers). Also, there's not a consistent way to link a payment/debit with an invoice, because memo fields don't necessarily show up with the payment.
Also, credit card purchases can be reversed without the cooperation of the merchant. Most issuers are generous with chargebacks (at least historically). You could take a merchant to court if you did a wire transfer, but that's expensive and time consuming.
> we don't like to provide those (both payers and receivers prefer not to give the other participant their ach numbers
This is because in the US, anyone can pull money out of your account with only the ACH numbers; which is an insane design[1]. In most other countries, the worst you can do is deposit money. The equivalent of ACH pulls requires significantly more paperwork and proof of consent by account owner.
1. Much like SSNs, which can be debilitating if not kept secret. US payments run in "true names" magic, and simultaneously expect you to register with your one true name at random places with questionable security practices, and it's your fault if there's a breach.
> This is because in the US, anyone can pull money out of your account with only the ACH numbers; which is an insane design
That’s the default for at least Germany and SWIFT, too. You can ask your bank to disable this, but that means losing the pull functionality completely; I think some banks have an interface to whitelist individually, but the majority doesn’t.
It can become a problem especially when you list your account number publicly somewhere for payments or donations: somebody will eventually use that account number to pay for random stuff. You’re contractually obliged to check your bank statements and ask for a (free) chargeback within a certain period of time (some weeks?).
At our projects, we solve this by having a separate “public“ bank account for incoming donations that blocks pulls, and a much less public one for pulls.
Apart from this use case, abuse seems to be rare enough that banks typically don’t expose the functionality to disable but only do it manually when asked specifically. I doubt most people even know they could.
> and ask for a (free) chargeback within a certain period of time (some weeks?)
13 months!
Within six (?) weeks, you can simply charge back and the money will be back in your account very quickly.
After that, it's a much more formal process where your bank has to get in contact with the other bank and it can take weeks.
> In most other countries, the worst you can do is deposit money.
So in the EU, anyone can indeed pull money with your account number (and with RTP that may change someday). But we can also revoke any such direct debit within a certain period of time.
I had to do it once, over my banking app, money was back the moment after I clicked.
The "anyone can pull money out of your account" piece is true but it also isn't.
Yes, if a financial institution allows you to originate a debit from another account without verification, you could take money from anyone's account. The max liability you should have given prompt reporting of fraud (less than 60 days) is $50, and if your institution doesn't give it all back then find a new one.
ACH is also technically reversible, whereas wires/other instant transfers are not.
FIs also do fraud checks on ACH, I believe it may be a regulatory requirement now (sometime in the past few years?) to have some form of fraud check before sending originations to the FED. Typically this is verification of the other party being a known entity/account, which would ideally burn fraudsters very quickly.
Most transaction facilitators don't play around with any of this though, and have some "account linking" step before they are willing to originate transactions. Micro-deposits that you would need to verify on the other account.
> This is because in the US, anyone can pull money out of your account with only the ACH numbers
Whoa, I don't blame people for not wanting to provide ACH numbers in that case. Is there any groundswell to provide a system where this doesn't happen?
FedNow is that system. It only sends money. Can request money but it needs to be approved.
However, I'm not sure if it uses different account numbers from ACH. It could be that sharing account numbers could be secure with FedNow and dangerous for ACH.
Account-number only pulls (eg ACH Debits) are insane. Where I'm from people, charities etc routinely publish their bank account numbers if they expect to receive money from strangers.
I mean, checks are insane, but they power the economy, so ...
>American hate for wire transfers will never sound anything other than irrational to me.
I'm assuming "wire transfer" means something different to you than what it means in America. In the US, a wire transfer is when you call up your bank, give them a routing number and account number, tell them to wire however much money to it, agree to pay like $20 or something for the transfer, and then they tell you the transfer will happen tomorrow morning because it's 3:30 PM and the last batch gets handled at 3:00. They're not so much hated as pretty much entirely irrelevant to everyone. I've made one wire transfer in my life, and that was for buying a house.
We have “faster payments” in EU/UK. You enter a bank account number and sort code, confirm it, and it transfers instantly in 99% of situations. 0 fees, it’s faster than card payments and available to anyone with a bank account. If you want to go down the clearing route you can do CHAPS which is the same as a US wire.
Well, in Hungary had the "instant payment" for years, but last year the National Bank issued the spec. & requirement for the banks to facilitate the "qvik" payment method. Which is pretty much a QR code which you scan with your bank app and they will automatically parse & populate the fields for wire transfer. Then the payment provider will do a callback to the merchant which confirms that the payment was made [1]: https://www.cib.hu/en/Maganszemelyek/digitalis_bank/mobilalk...
In Sweden, we use Swish, you enter the phone number, not bank account. Everyone has it and connect the app to their bank account, so payments are instantly in your bank account.
There are two problems with faster payments in the UK as an alternative to cards.
1. A lack of a mechanism for using it for things like online purchases. 2. What about the 1% of the time when it is not instant?
On top of that you are not allowed, by law, to charge customers more for a card purchase so customers have no incentive to switch from cards and the existing mobile phone payment systems.
Not sure how they do it in the UK, but in the EU, for online purchases they typically give you a unique code to enter in the note field. This is picked up by an automated system and matched to your order.
It does sometimes take two business days to clear, so it's not good if your service requires fast turnaround (e.g. pizza delivery). Of course, it's always good to have another option, and perhaps even for pizza delivery you could accept it on trust with customers you have a good relationship with.
(On the software side, unlike a credit card payment, this does require that you temporally decouple ordering and billing. Besides the processing delay, a lazy user might not send the payment immediately. Two weeks seems to be a typical length of time, and of course you don't ship anything until payment is received. Treat it a bit like a cash-by-mail payment.)
It is guaranteed to take no more than two hours in the uk, but still not fast enough for some purposes. Entering a code manually is also not convenient and is more error prone. its useful and widely used but not a replacement for card payments.
Funnily enough, the company that runs UK Faster Payments (Vocalink) is a Mastercard subsidiary.
Wow. I was assuming Americans pay that much for wire transfers (vs ACH) because they are fast?
It's commonly a low volume - high value transaction, so they can charge that much. I have used them to buy houses and change banks. But not to buy a car - because car dealers are evil and there's no way to easily reverse one when the dealer stiffs you.
American retail banks are so heavily relationship based that there's zero competitive pressure on pricing, even for things that people use quite a bit more than wire transfers. For example, it's completely trivial to find savings accounts paying a 3.50% interest rate right now, but the largest banks offer more like 0.03%.
Ah you poor naive soul.
That's not the American way. Our services are both expensive and slow. You see, it's about freedom! We are the Most Free (lol, sorry) and therefore corporations are free to be bad in both ways simultaneously. :D
A more specific, but not commonly used, term is "giro transfer" (coming from an Italian word). That's a payment where the sender pushes money, as opposed to the receiver pulling it, as they do with a cheque or a card swipe. In the past you'd send a letter (which is why it was inconvenient), but nowadays you log into my online banking page, enter a destination account number, amount of money to send, and a note, and click "send", and the money is transferred somewhere between immediately and three working days depending on which system you're using. This capability is very obvious to non-Americans and I'm sure even to Americans, is an extremely obvious thing that any banking system should have...
The key difference here is that you communicate with your bank, giving them a direct instruction to send money to the recipient at their bank. With cheque or card, the recipient communicates with the recipient's bank, to forward an authorization written by you, which is sooner or later verified against your bank. Which is convenient for you, but involves more steps.
Because it would cost money to upgrade our financial infrastructure and processes.
Americans aren't opposed to it. Like so many problems with America, our institutions are simply opposed to anything other than maximal profit extraction at any and all costs.
Americans are, however opposed to the kind of national ID system you'd want for this kind of national banking scheme. For some reaon, they think it's more private or secure to use a 9-digit number assigned at birth.
I’m going to assume this is a good faith comment, but I encourage you to understand that Europe and the US are different places, with significantly different ecosystems.
I also encourage you to read about Chesterton’s Fence. Make sure you understand why something exists before you think about how to replace it, then maybe you won’t see Americans’ use of credit cards as “irrational,” but instead, reasonable under the circumstances that exist.
That said… the US did roll out FedNow (similar to SEPA) but because the US banking ecosystem is more fragmented, adoption takes a while.
Wire transfers here are expensive and don’t provide consumer benefits (cash back, credit options, consumer protections like fraud and chargeback, or merchant coupons). In your example, if an unscrupulous store pockets the credit card payment, the credit card / issuer will often reimburse your purchase. (This is a law in the US.)
> In your example, if an unscrupulous store pockets the credit card payment, the credit card / issuer will often reimburse your purchase.
This is true in the EU too. It’d also why you don’t tend to pay for goods and services via transfer unless it’s a very high value item and you have a contract to go alongside it.
>it could also pocket money that would be paid by CC.
No.
The card processor will return the customer's funds for various reasons. In many cases, "no reason" is sufficient for a chargeback, especially if you are dealing in intangibles, such as software licenses or digital media. In addition to returning the customer's funds, the merchant is typically penalized a "chargeback fee". This means as a merchant, if your chargeback fee is $25 and the product is $5, one chargeback can set you back 6 sales.
For these reasons, as well as other minimum rates, certain price levels are untenable. Consequently, many products are either not sold at all or sold at a much higher price.
The conditions make it more sensible for the merchant to sell high priced items to less troublesome customers. The percentage of the card processor's fees are relatively less. The probability of a chargeback is lower. As you have less customers, you can more easily provide support and contact them directly.
Just learning this now, terrifying as a merchant.
Was wondering what anyone's experience with chargebacks are in general. I could imagine that, in the worst case, if combined with 'card testing' as a merchant you could immediately get slammed with thousands in unavoidable charge back fees? Maybe i'm hyperventilating but thats huge, really. I hope theres some stop gap.
Yes, that can absolutely happen if you don't have the right controls in place. If you get too many chargebacks, the card networks will kick you from the system.
Card testing won't (usually) do it, because that doesn't (usually) generate chargebacks[0], but yes, you will absolutely get smacked with fees if it happens. It really sucks.
https://stripe.com/resources/more/chargebacks-101
--
[0] it totally can, but card testers usually try to fly under the radar somewhat
In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
Also: no-reason chargebacks are absolute BS. I worked on a PSP for a largeish adult entertainment business, and I remain convinced that most porn chargebacks are a case of "post nut clarity".
> In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
US wire transfers generally can't be reversed --- sometimes, if an error is noted immediately, and the destination bank cooperates, they'll send the money back; but the recipient can pull cash out immediately or wire the funds somewhere else immediately, and then your recourse is through the courts. ACH transactions are like checks; they can be reversed, but only if there was a mistake or they were unauthorized, not because of a service complaint; again, if you have a service problem, recourse is through the courts.
> I worked on a PSP for a largeish adult entertainment business, and I remain convinced that most porn chargebacks are a case of "post nut clarity".
Being ashamed of an impulse purchase certainly counts as a reason to regret-- and potentially request a chargeback for-- such a purchase.
I'm not sure how that works on the continent for transfers, but with cards or PayPal the chargeback/dispute policies are usually pretty clear. Basically, the merchant is always wrong for even being in the neighborhood of a disputed transaction. If you don't have a signed delivery confirmation for your card-not-present transaction, you're out of luck.
Banks in US take 30-60 days to review a complaint and maybe reverse a transfer. This means that you don't get your money back for months at a time.
Zelle is starting to be a thing and those transfers are pretty instant in my experience. No fees, no delays, no chargebacks, it's amazing. I use it to cover living expenses for a couple friends that don't have jobs or disability benefits.
Stopped using Zelle after a friend sent a small amount (~$60ish) and it just disappeared into the ether. His bank couldn’t find it, my bank never got it, Zelle kept telling us to speak to our banks.
Still haven’t gotten it a year or two later.
> In short, just making your own payment processor is hilariously difficult and far beyond the means of Valve let alone Itch. Depending on what the speaker means by "Payment Processor", they may be suggesting making your own bank, or somehow convincing a bank to let Itch shove payments through them; who will eventually do the exact same thing as what happened here. There's no winning play there.
PCI-DSS compliance wasn't even mentioned and it is easily able to overwhelm organizations like Valve and Itch on its own. The hardest part of payment processing is the network. Connecting the acquirers to the issuers in such a way that everyone is happy with the arrangement. Just like the hardest part of the power grid is the transmission infrastructure. The endpoints are far more trivial to replace. If you want to use the existing network, you have to play by all of the rules. The only real way out of this system is to use a completely different kind of currency.
PCI-DSS can be tough but it is also very specifically scoped and so if done well you can keep it very limited. From the way the article describes Itch (1 person + some part time help - which isn't totally ideal for PCI either), it absolutely could overwhelm them, but Valve are certainly a big enough organisation to handle it just fine - assuming, of course, they they wanted to.
For shops like Valve only if they need SAQ-D in case they want to store the credit card numbers on their own, I'd say? SAQ-A til SAQ-C is doable for any e-commerce company.
It's likely they would need on-site visits from a QSA if they wanted to go all the way into this. Valve would fall into the Level 1 compliance category. Self-reporting won't work for that kind of transaction volume.
Yeah, but assuming they want to build everything from scratch it would get way harder very quickly.
While I'm not the biggest fan of crypto overall this is definitely one instance where you could actually use it in a way that makes sense by offering people to pay with it instead. Only issue is converting it afterwards into fiat currency.
That's not actually the only issue, unfortunately. Steam did in fact accept Bitcoin for a while, but it was dropped in 2017, with Newell stating:
> “We had problems when we started accepting cryptocurrencies as a payment option. 50% of those transactions were fraudulent, which is a mind-boggling number. These were customers we didn’t want to have.” [1]
[1] https://finance.yahoo.com/news/steam-co-founder-reveals-why-...
That's quite interesting, I wonder how they were fraudulent as bitcoin transactions dont have chargebacks etc. In the article they also mention that the price for the game would fluctuate which seems to indicate they actually priced the games in Bitcoin. Normally price would be Euro, USD etc and price conversion to Bitcoin would be done at check out. I guess these were the early days though =)
2017 was definitely not early. Bitcoin gained a lot of traction since 2014
It is relative to 2025. And nowadays bitcoin has instant, cheap, private Lightning payments too.
Seems like a catch-22. Crypto can’t be used like legitimate currency because it’s not used like legitimate currency, and fraud can’t be addressed because there’s no regulation and no mechanisms by which to make victims whole.
There are parts of me that can see some appeal in cryptocurrency but I can’t see any way around this, at least not without impacting what made it appealing in the first place.
While volatility indeed can be a problem (depending on how the whole thing is setup), I fail to come up with scenario of 50% fraudulent transactions... Does anyone have links to more details on what kind of fraud they meant?
Double spend. https://news.ycombinator.com/item?id=30478262
Accepting bitcoin payments with 0 confirmations? It shows a complete lack of understanding of Bitcoin and cryptocurrency in general, especially in 2017 when PoW was the main driver and PoS chains weren't really mainstream.
It’s not a big deal in case of Steam – they can just pull the games from your library if the payment doesn’t go through. A bit trickier with in-game purchases (but in that case they could wait for the confirmations).
The thread from 2022 does discuss this in detail.
I think this is the biggest problem with crypto that it will never be able to solve. Every year there are millions of dollars lost in crypto due to scams (the "send me crypto and I'll give you money" kind). The instant you have a digital good people can actually buy with crypto and sell for real money, it becomes a money laundering machine.
Like you could get money from ransomware, buy a ton of games on steam, then sell the account to a third party.
This will probably be "solved" by legally exempting stablecoins from nemo dat. Basically stablecoins will be declared clean by law so recipients don't care.
That's a lie. How can you even make a fraudulent bitcoin transaction?
By spending your coins twice. https://news.ycombinator.com/item?id=30478262
Who in their right mind would not wait for at least 2-3 confirmations before approving the transaction? It sounds like a skill issue
I, as Steam user, want to pay for and play my game right now, not in 30-60 minutes.
well don't pay with bitcoin that has a 10 minute block time, use something near the top of this https://www.cryptosettlementtime.com
That's a solved problem in 2025. There are chains with confirmation times of around 1 second now.
Money laundering, for one. You release some dumb asset flip and then "buy" it with your dirty crypto and Valve turns it into nice clean fiat money.
And yes, that is on Valve to prevent.
Fraudlent is accoriding to the law. If I steal your bitcoin I spend them on Steam it is fraudlent. I know cryptobros think stealing bitcoins are OK and shouldnt count as fraud but law isnt written by cryptobros.
how were they able to conclude the coins were stolen?
It’s not this. Steam accepted 0confirmations to ease the payment flow. Before the transaction would be mined into a block, the fraudster would submit a new higher priority transaction sending the payment to themselves.
If you like fake money, we have that already: Steam wallet cards
I think you really need to make a card that isn’t a Visa or MasterCard or a QR payments system that’s wired to common banks. I don’t think anyone has suggested creating a payment processor without this, because the issue is with Visa/MasterCard, not with the middleman.
I think Valve could actually find a bank to work with to run a QR payments scheme for the gaming industry (SteamPay perhaps?) that’s “topped up” via ACH. Just ignore the whole card part, since it’s online you don’t even need it. Require biometrics and you can make the fraud burden easier.
Of course this would cost a lot of money, but it’s at least in the realm of possible versus a PayFac etc.
About a month ago this topic came up and I commented this about “just” creating a new Visa: https://news.ycombinator.com/item?id=44611807
> wired to common banks
I highly doubt banks would choose some completely new payment processor (or card, etc.) over Visa or Mastercard: Visa and Mastercard can just put in their terms of service that you're not allowed to use that payment processor and that'll kill them real quick. Highly unlikely any existing bank would give up Visa or Mastercard just for that.
The solution to this issue is regulation, pure and simple. It doesn’t even have to be a complicated bill, either:
“Financial institutions and financial services providers are barred from blocking, interfering with, restricting, or refusing any consensual transaction that complies with laws regarding content, materials, goods, or services.”
Admittedly in the USA this tees up a 1A case over whether companies have freedom of speech (they shouldn’t), but in other jurisdictions it could be the game changer needed to unshackle commerce from the control of a handful of boardroom puritans and risk-adverse compliance departments. If porn has a high rate of chargebacks, then stop allowing them without a higher burden of proof on the person requesting them, for instance. There’s ample room to enforce accountability on consumers and processors without upending the proverbial produce cart.
Unfortunately the US has a history of doing the opposite, and using regulation of payment processors to prevent them from allowing some business to operate, when the Constitution doesn't allow the federal government to directly limit those businesses: https://en.wikipedia.org/wiki/Unlawful_Internet_Gambling_Enf...
There are two main reasons companies will block types of payments: material downside, like high chargeback risk, and reputational damage. It completely makes sense that certain things should be relegated to working with pmt processors who have structures designed to manage and be compensated for that risk. We shouldn’t socialize those costs onto the processors or, via higher fees, everyone who accepts credit cards. Instead, we should expect the companies who engage in those activities to shoulder their own burdens rather than pushing that risk off to others.
Instead of tailoring this to financial service providers, create conditions for essential service operators that must ensure service delivery neutrality. That way, the legislation applies to all kinds of infrastructural services, and you don’t even open up the can of worms that is freedom of speech, since the affected companies don’t get to have a say in who they want to do business with.
For the US specifically (I can’t speak to other countries), that could be an excellent use case for the USPS: digital money orders. Pay with cash or debit card at the post office, claim it back to a bank account. Other postal services could reciprocate/honor those orders in that specific currency (or offer conversion at a publicized daily rate). Since it’s cash only (no credit), it significantly reduces chargebacks - and because it’s through national postal services, it still allows checking/tracking by governments to keep tabs on illicit transactions.
Thing is, that would absolutely be blocked by current payment providers and their lobbyists. I fully agree with you, though.
EDIT: Hah, I’m late to this party. Physical international money orders have already been discontinued by the USPS as of last year and are dwindling globally thanks to FinTech. The lack of a digital equivalent is definitely frustrating, as their flat fees and discretion were rather appealing.
This is basically Western Union. They have a worldwide network of offices, but I haven't seen an integration for online billing and sales from them. It would be ideal for selling online products to the unbanked or underbanked.
I'm familiar with Western Union, as it's how my local neighborhood sends money back home in stacks of twenties and hundreds, one money order at a time. The problem is theirs (and Moneygram's) fees can be insanely steep due to a lack of competition or government equivalents; the author of the original article rightly points out that wire transfers in the US can be INSANELY expensive as a result (my bank charges $20 per transfer; a domestic money order from USPS, by comparison, tops out at $3.60 for $1,000; WU quotes ~$45-$60 depending on country and method, with another $25 for credit cards). Add in growing nationalism about penalizing sending money across borders via these methods (as migrants often do when sending money back home), and the costs add up shockingly quick for what's effectively a digital ledger transaction on the back end.
To WU and Moneygram's credit, however, they do offer more digital wallet integrations and direct bank transfers nowadays. Their product lines are growing, but their fees aren't decreasing as they effectively have a captured (impoverished) market. Still, since money orders can be as safe as cash, having them as a viable alternative to the private payment card industry is necessary for business to function and smaller vendors to thrive, particularly in niche industries.
Just to be noted, we are in this situation especially because there are a lot of terrible regulation in banking that force them to police every single use of your money or take very big risks.
And to note your note, we have those regulations specifically because of repeated bad actors finding ways to exploit consumers, businesses, or markets due to a lack of regulation.
Regulation is not a bad thing, but it has the potential to be a bad thing. Done right, it's meant to protect people from being exploited, fleeced, or harmed; done wrong, it does the exact opposite.
Most banking regulations, at least in my exposure to them (mainly through PCI-DSS and FDIC), are sensible regulations trying to combat known exploits or problems. Yes, it's inconvenient at times for legitimate use cases, but the solution there is making those legitimate cases easier or safer without weakening regulations stopping, slowing, or tracing bad ones.
Just a personal story:
I built and ran a site that allowed users to upload a stable diffusion model and generate images with them. I originally received money via stripe, and then promptly got kicked off after about 9 months. They threatened (via a clearly automated message), that the fines could be as high as 400k, ended up paying a 4k fine and getting off ASAP.
While we were on stripe though, the charge back rate was probably ~2-3%, which, I think is probably fine.
Moved over to Coinbase commerce and sales dropped from ~5k / month to 1k / month.
Could you share this automated message (anonymized if need be) ? Very curious to hear what ground and verbiage was used to close your account.
Were your users generating CSAM images?
I've built a payfac before, and while I think this author is overstating the difficulty of doing so in 2025, I agree that it wouldn't help Valve to do so. We weren't the ones that decided it was too risky to deal with specific merchant categories; our processor did that for us. It wasn't even a discussion. (Nevermind such policies like "all of Puerto Rico is too risky to deal with.")
That was an interesting read. The core issue unfortunately appears to boil down to being a deeply complex of net of trust and risk distribution.
The issue being a "human"/societal problem, instead of technology, makes me wonder if this could be slowly changed over a few generations. The amount of momentum required would be quite high tough.
> If you're making your own PayFac, you're suddenly responsible for getting and securely storing that information and handing it up to your sponsoring Acquirer. You're also responsible for verifying it, ...
My understanding is that steam already has to do this? Like when I buy a game on steam it goes to steam, who then redistributes the funds to themselves, developer and tax man. Since they are holding the money, are they not defacto already a Payment Facilitator?
Most of the companies store tokens for CC numbers etc., apart from not beeing allowed to store the number itself, it doesnt bring any good to you since every hacker will be pleased to stop by; If someone is stealing the tokens, they can't use it for much.
afaik games are not considered money. and steam points are not considered money either. only withdrawable credits (casinos/online payment apps) are considered as money
Steam pays developers their cut from sales, which is probably what they’re referring to.
Yes, steam isn't holding the customers money, but the developers money.
Look at India, the UPI generates a billion+ transaction per day. Just amazing how to include mom and pop merchants into digital economy and not to suck up to Master/VISA networks.
Misses the point of the article. UPI relies on the same moralizing acquirers (banks) and facilitators (like RazorPay) as the card networks.
I tried to build a SaaS for niche fetish content creators to connect with fans
Got as far as several emails to vendors who all replied they wouldn't facilitate the payments, and saying "Good luck" trying to find one that would
Absolutely stupid system if you ask me.
There are "dediacated P0rn billing" companies, reach out to them.
I remember working on POS for a non-porn industry also shut out by payment processors, and the increasingly obtuse hoops and loopholes they had to navigate were wild to hear about after working in more traditional SaaS and eCom. Reverse ATMs, cash-to-crypto, cash-to-barter, all different state-to-state and between nations. This shit is hard when you're arbitrarily frozen out of access. Really made me rethink how I pay for things, especially at in-person retail.
there's an avalanche of money waiting for more competition to Stripe
i've seen too many businesses destroyed by sudden "your account is closed" with no human contact
There's an avalanche of money waiting for more competition to Nvidia too....
The problem is, many folks have absolutely no comprehension of how difficult it is to build a payment processor that can serve lots of customers they don't personally know. The fraud is just insane. The regulation is insane. The card network rules are insane.
If it's as difficult as they say it is, how did Stripe do it?
They worked at it for a long time before launch, started with a very narrow product and only had customers they actually knew (reduces fraud a lot), worked like crazy, operated in a market where the competition was abysmal.
Cryptocurrencies are many different things to different people. Putting aside the speculative mania, the payment processor problem is one of the main problems private cryptocurrencies solve.
Stablecoins are not without issues, but they've largely solved the problem of price volatility. Objections around issuance and backing might be raised, but this is more interesting for trading and less relevant for merchant transactions.
Yes, there are no chargebacks with cryptocurrencies. This is an advantage for the merchant. Before anyone goes off the deep end here, let's recall the context of the discussion: one time payments to reputable merchants for trivial amounts. Game purchases do not require life changing amounts of currency to change hands. Steam and Itch are well known brands.
So what is left to object to? My impression is that there is excessive cultural and political baggage.
From the article:
>Capitalism sucks. The economic ecosystem sucks. People unrelated to transactions in any way except "They have the tech to facilitate them" deciding that entire industries don't get to make money and feed their staff because "It's risky to handle these payments" suck. That these entities can also be attacked by PACs and shamed into being the morality police sucks.
...
>But I still hate crypto.
Note that even though the author correctly observes the high regulatory overhead and political, non-market forces, they still manage to blame "Capitalism".
Would you like to collaborate on this endeavor? I can contribute $36M in annual processing if that helps in bringing additional volume to get setup.
Problem with accepting crypto is the on-ramp/off-ramp to fiat
Everybody, except for the few that are holding crypto and expect it to irrationally keep rising forever, are looking to convert it into ironically fiat money which they swear is the enemy.
This means other than bordering purely illegal or prohibited businesses that payment processors cannot handle (remember there are adult processors too), crypto will never become mainstream replacement for fiat.
Right now liquidity is there to absorb the ramping process but long term observers will note how fragile and quickly this can go away. Already, the number of new wallets being created on Bitcoin is plummeting. Search terms for bitcoin has tapered off. There is almost no real interest in it being a replacement for fiat or gold.
I wish gold could become more accepted but we all know the history of e-gold and many of us know its connection to Bitcoin and its curious proximity of origin.
It's just not a good look for companies selling mainstream products to suddenly accept a medium which is clearly being used for pump and dump and laundering of money for transnational crime and no amount of gaslighting or pushing crypto will change it, in fact it achieves the opposite of their goals.
We might at some point see a digital currency but this would be completely different from the crypto in existence today and all stablecoins that isn't issued by the government runs the risk of reporting what is different than what is there in the vaults as if governments haven't been caught doing this in the past. ex) Tether's reserves unaudited unverified mystery
Seems possible that on/off-ramps are leveled up in the next few years as Stripe and other large financial institutions all try to launch and dominate stablecoins.
So Valve buys Itch cheap in a year or two?
> Crypto: lmao
What is that supposed to even mean? There is no central authority. You are your own bank. Grow up, POW is necessary to keep the network secure
> POW is necessary to keep the network secure
It's certainly a way to keep the network secure. At best it's marginally better than POS. At worst, it's a ticking time bomb security budget cliff.
The actual experience of actually selling or buying actual things with crypto is nearly untenable, and doesn't actually free you from all the legal requirements that make payfac hard
Stripechain is going to fix the UX but you're right that it won't fix "reputational risk".