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What is the best credit card merchant for small transactions?

9 points by snickmy ↗ HN
Hi everyone, given a business model similar to app store, and expected transactions of small value (~1.5$). What's the best credit card merchant to use? From a quick search there are a lot of 30cents+2.9% per transaction. I found a bit of overkill to drop 30cents every 1.5$.

I'm sure there is a lot of business out there that run through the same situation. Any suggestion ?

10 comments

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patio11
Paypal Micropayments is 5% and 5 cents.

That said, strongly consider anything you can do which pushes your average transaction value up above ~$20 or so. This is partly due to decreasing the bite of transaction fees but mostly because building a business on $1.50 transactions is really, really, really, really hard when Steve Jobs has not already arranged a captive audience with credit cards on file.

One of the traditional solutions in e.g. social games is selling a virtual currency in $10, $20, $50, etc increments and then using the virtual currency to effect small-value payments. For example, $10 gets you 7 dragon eggs, $20 gets you 15 (one bonus egg!) The thing you were thinking of selling for $1.50 now costs 1 dragon egg. This both helps you get your average purchase up, saves your processing costs, and also increases transaction volume by not having people feel like they're being asked for $1.50 on a frequent basis. (The fact that $10 doesn't divide evenly by 7 is not accidental.)

taprun
As an added bonus, you also get money sooner (pulling purchases forward).
snickmy
This is indeed a good strategy, with big volume you may actually get some extra $ on interest. The problem is this system works on games bit less on app/music stores (i don't think many people actually use ItunesCard, GooglePlay Card and Steam Card), they just do a one shot payment every time they buy something
yellow_and_gray
I'm disappointed in Stripe on this one. There should be better rates for micropayments.
snickmy
I agree, Stripe is one of the most advanced, easy to plugin platform with just a completely wrong old school, bank-a-like business model.
MalcolmDiggs
It's surprising right? I like pretty much everything else about them.

To the OP's question: for apps that facilitate micro-transactions I ended up using Stripe, but I forced the user to add a balance to their account first. So, rather than charge their credit card for every micro transaction, they'd add $20.00 to their account in the beginning, and every transaction would just draw-down from that account. Antiquated, but seemed to work alright.

johnm89
what kind of monthly volume are you expecting? are these cardless transactions? if they're cardless i dont really see a scenario where you can have $1.50 transactions and make any money. too high risk for the processor.

EDIT: if you don't have a couple months of volume to show a processor it makes it harder to get a good rate. brand new company with online transactions are pretty much highest risk category for a processor, therefore highest rate. fees the processor has to pay visa would be close to $0.50 probably

snickmy
I agree about the negotiation provided the interesting volume. My curiosity is.. thinking of apps store and music store. They do indeed process 1 time transactions of a low value. If is true that the visa fee is 0.5$ I can't see any revenue stream from a 0.99$ app.

There must be a completely different deal that opens up once you have that volume

snickmy
Just for the record PayPal does a 5% + 5p (Uk gbp) per transaction on micropayment (<10£).

I let you do the math :)