Monica

online payments and credit cards: I have questions

2022-12-29T22:07:20Z

As I make the rounds doing year-end donations, I'm reminded of two things that have long puzzled me:

Some web sites auto-detect the type of credit card based on the number. Apparently all credit-card numbers that begin with "4" are Visa. (I don't know if the reverse is true: do all Visa numbers start with 4?) Being me, I've cycled through the other nine digits and nothing else produces a match based on a single digit. What are the patterns for other providers? And are all these sites using some standard library for this, or are programmers really coding that by hand?
Years ago, a three-digit code ("CCV") was added to cards to mitigate fraud. On a physical credit card, this number is stamped rather than embossed, so those old-style manual credit-card gadgets that took an imprint of your card (on actual paper, with a carbon!) couldn't record it. Um, that's fine I guess, but online, that number isn't any more secure than the card number itself. And someone who steals your physical card has the number; it's not a password. Does that number have another purpose?

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true but not helpful

2021-04-16T21:16:13Z

Oh, Credit Karma, who writes your copy (or programs your algorithms)?

Your hard work this year has really paid off, and we want to remind you how far you've come.

(Um, I have? Also, this sure sounds like "you were having trouble and you're better now, attagirl!. I feel patronized.)

About a year ago your TransUnion score was X.

Check in now to see your updated (and uplifted) score, and keep up the awesome work.

"X" sounds about right, actually. Curious, I took a look. Why yes, my score has gone up! It is now X+1.

Uh, thanks?

(Fluctuations of a few points are completely normal. I expect to take a slight ding this month because we paid for something substantial online with the joint credit card. It'll come back next month when we pay that bill. You can't always write a check, but any use of your credit card affects your score at least a little.)

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Trolling Wall Street

2021-01-29T02:19:56Z

This is oddly fascinating, even though I don't understand all of it. If I understand correctly:

A "short" is a bet that a stock price will fall: you promise to sell it on a certain date at a certain price, but you don't actually own the shares. On that day, the idea goes, you'll buy the shares at the lower price you expect and then turn around and fulfill your contract, pocketing the difference. I don't know if regular folks like you and me can do that, or if only investment funds and professional stock-market people can. There are some rules that are different for the big players and the little folks; I don't know if this is one of them.

So... some big Wall Street hedge funds (one often mentioned is Melvin Capital) placed vast quantities of shorts on a gaming-gear company that isn't doing well (GameStop). A bunch of people on Reddit observed this and said to Wall Street: hold my beer.

They bought the stock. Hundreds of thousands of people on Reddit bought the stock. At that scale, any individual participant doesn't have to buy a lot; you could play this game for $20 back when it started. And it's not like you can spend that $20 going out to a movie right now, so there was probably an untapped market of bored people looking for fun.

Did I mention that this subreddit bills itself as "like 4Chan for investers"? And did I mention that Elon Musk tweeted about it to his 42 million followers? That subreddit has way more than "hundreds of thousands" of subscribers now.

What happens when lots of shares of a stock start getting bought? The price goes up. The price for GameStop shot up from less than $20 to, at one point, $347. And I think it was higher; I was only able to find daily closing prices, and the hour-by-hour swings have reportedly been wild. There's some background information on CNet.

The stock price, of course, won't stay high. It's a ridiculous price for that company, and eventually the market will bring it back down. But in the meantime, those hedge funds holding shorts have lost billions of dollars -- remember, they still have to buy the stock on "short day", at whatever price is then current, and then sell it for $10 or whatever the bet was.

The Redditors and crew, meanwhile, have turned their sights to other stocks; Blackberry and AMC have been mentioned as other companies in trouble that investors have considered prime candidates for shorts. Stock exchanges and Robinhood have stopped trading at times or restricted purchases.

By the way, the people rallying against Wall Street have a song -- a sea shanty:

I don't know what a "tendieman" is (Google has been unhelpful), though I assume it has to do with tendering, in this case selling at the right time. Ryan Cohen is a major investor in GameStop who's recently been investing more and trying to change the company's business strategy, though I can't tell if he has an actual position there. (The song implies he's on the board.)

As far as I know, the people organizing on Reddit and wherever else aren't doing anything illegal. They're not insider traders with privileged information -- quite the opposite. They're just...massively trolling big investors who traditionally make a lot of money with these kinds of bets. Some of them seem to be in it for the laughs; some are trying to make money riding this (but a lot of them will probably lose money, including anybody who tries to join in now). The line between a movement and a mob can be fuzzy; I'm not sure which this is. I wonder what the other damages are going to be. They're pitching this as little people versus big investors, but will little people with modest retirement funds end up taking some of that damage in those funds too? Or are hedge funds more esoteric and not usually part of IRAs and suchlike?

Bizarre, fascinating, and unsettling.

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small payments are still hard

2017-12-11T04:32:46Z

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. 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.

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