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Ask HN: Why is transacting small sums of money (micropayments) so expensive?

9 points by iovrthoughtthis ↗ HN
Why is it so expensive to make transactions < $1?

Enabling people to exchange tiny sums of money would make a number of financing issues over the internet and in real life considerably easier.

Many have attempted to tackle this problem and no one has succeeded.

16 comments

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angersock
Why should it be cheap?
automoton1
To facilitate the exchange of goods between individuals. To make it so that people can donate small sums to whatever they want. To make less costly the transfer of funds.

Why shouldn't it be cheap?

kasey_junk
Because the people who would secure the micro transactions would br counter party to tons of risk & compliance costs.

If you are going to be take on tons of counterparty & compliance risk it’s easier to make money in other markets.

remyp
Like any business, financial firms have fixed costs. You can only reduce these costs so much, hence the large percentage on small transactions.
iovrthoughtthis
I understand that.

But why are the fixed costs of moving any amount of mo way so high?

It would be great to a detailed walk through of all of the mechanics the varying systems of exchange use.

UpgradeCarton
Well, the fixed costs could probably be reduced, but there currently isn't an incentive for the bank to pass that reduction on to you, the customer.
imhoguy
Compliance, integrations, archiving, reliability, staff, electricity, dividends -- banks and intermediaries are for-profit businesses. Somobody needs to pay for that.

Crypto transfer costs too -- miners do bankers job.

iovrthoughtthis
I want to understand deeper though. I get how their businesses work at a high level.

But why is all of that required to facilitate a transaction?

1ba9115454
It's not that it's expensive, there are plenty of crypto coins that can do this cheaply.

The main issue is that there doesn't appear to be much demand for this. No micropayment solution has gained mass adoption and there have been plenty of attempts.

iovrthoughtthis
In this instance I would argue that poor use ability is at fault.

Patreon is certainly evidence of this need.

rasz
Personal bank transfers are free in most of EU.
iovrthoughtthis
True, and the open banking api may allow this to occur!

Again though, right now the UX is basically unusable for frequent transactions.

Sevii
The overhead to transfer ten cents is the same as the overhead to transfer $1000, but your profit is going to be minuscule for facilitating the transaction.
rickdg
I'm also curious about this, specifically why such a big fixed fee. Couldn't we just have digital prepaid cards with only a percentage fee?
iovrthoughtthis
I think it's always going to be a fixed fee.

But why is that fee so high?

Hat are the actual, person to person, machine to machine mechanics that make it expensive?