small payments are still hard
If you use Patreon, a site that connects creators (writers, artists, musicians, cartoonists, anybody) with people who'd like to support their work, then you probably already know that they're about to start charging the patrons (funders) for the credit-card transaction fees. (So you signed up to pay somebody, say, $1/month, and you'll now be charged $1.38.) What you might not have noticed is that they're charging a little more than what the credit-card companies charge them, and they're charging for each individual transaction even though they charge your card once for all the creators you support each month. Uh huh. ![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
siderea did some money math on their current practices.
One of the complications in trying to do online financial match-making, whether that's Patreon or PayPal or others, is that actually holding money is messy, legally speaking. So creators who have income and support other creators don't get to pay from their income (which is just bookkeeping); each transaction has to start with a credit card and end with a deposit. Or so it sounds.
Back in 1995 when the web was still young, I went to work for a micro-payment research project at CMU, NetBill. The idea was that consumers used a credit card to load some small amount, like $20, into a NetBill wallet, and merchants could sell digital goods for a nickle or a dime or $1/month or however they wanted to structure things. There was a secure protocol with escrow so nobody got screwed, and nobody was paying transaction fees on ten-cent sales. Since this was a university research project it was never set loose in the wild, so nobody ever had to decide what NetBill's fees would be. What made me think back to that now is that I have no idea how the financial regulatory stuff was supposed to work; we were holding money, after all. What I do know is that the project had Visa and a major bank on-board from the start to make sure it would be legal. Now I wonder how they planned to do that. I assume the rules have changed since then anyway, but I now realize that this was a part of the business model that I had no real insight into.
(I joined the project in part because it sounded interesting and in part because it sounded like something that could launch a start-up and that sounded interesting. Instead, two years after I joined, CyberCash licensed the technology and that was the end of that.)
Making small payments was hard then and it hasn't gotten much easier since. If you want to publish through Amazon Kindle or iTunes you can still make some income that way (and of course the platform takes a large cut), but self-publishing for small amounts is still hard. And supporting people without going through the "make a sellable thing on Amazon or iTunes" is even harder.
Edited to add: Some donation-processing systems give donors the option to pay the transaction fees. For example, Jewcer, the site we used to raise funds for "Days of Awe - Mi Yodeya" a couple years ago, was like that, and most donors tacked on the fees. My congregation asks members to kick in the fees when we make credit-card payments and, again, it's optional. Sometimes I do, sometimes I don't -- depends on what the payment is for. But the key is that it's optional. If Patreon had offered patrons the choice instead of imposing the change, this might have gone over better -- but they couldn't do that, because they're using this to overcharge for those fees so people who know that won't go along with it.
no subject
1. Does this problem need a distributed ledger, or would a single entity controlling a database work?
2. Are the transactions slow and high-value?
3. Would replacing "blockchain" with "git" work?