1) Porn (crypto, gambling, etc.) transactions are significantly riskier than other transactions.
2) CC processing involves a long chain of intermediaries.
3) At every step of the chain there's strong pressure upstream for better rates, and strong pressure downstream to ensure the blended payment stream is safer.
So, eventually, someone in the chain gets told "sure, we can give you better rates, but only if you can improve the risk profile of your payment stream". And then they crunch the numbers, and decide it's worth it, knowing they'll lose some volume but hoping they can make it up with better margins. And then the people who churn find one of the remaining partners who hasn't adopted strict policies, and this repeats until all the "dodgy" payments are going through a high-fee chain that can't possibly afford to change their policies, and everyone else is going through a low-fee chain.
If you check CCBill, their "Blue" package that allows adult content runs 10.8% to 14.5%, with a $1,000 yearly "high risk registration fee". And even their normal plan (which doesn't allow adult content) seems to be 5.9% + $0.55 per transaction? Braintree is 2.9% + $0.30; Stripe is the same.
You can see why, eg, Stripe would be happy to leave CCBill to have a virtual monopily on adult transactions: There's not that many of them, they're so risky you'll need to charge absurdly high rates just to cover your costs, and just touching them at all will potentially taint your other transactions in the eyes of your upstream partners, driving up your rates. Conversely, you can see why CCBill will never kick the adult payments off their platform; it's the only thing they have to offer.
Disruptive startups work best when they can start with a niche and then grow from there, but the logic of the financial system makes that very difficult.
And the times my other half sees odd payments on my credit card, she's on the phone claiming chargebacks lickety-split because nobody she knows would pay for porn.
So I have no data to provide on this matter. None at all.
I'm not aware of concrete stats, but anecdotally the porn industry suffers from extremely low margins caused by, among other things, incredibly pervasive content theft, horrifically low conversion rates, high rates of fraud, high rates of chargebacks, a lot of amateur producers happy to give their content away for free, etc.
Porn consumption is pretty common, but "nobody pays for porn" is a punchline for a reason.
10% of users is unlikely high. Porn has one of the lowest conversion in the online world. It's less than 0,05%. I knew a guy once who ran one of the infamous thumbnails sites and he was struggling keeping afloat although the traffic his site was getting was big.
Cryptocurrencies "solve" the issue by not supporting chargeback. It's not like chargeback is intrinsically tied to Visa and friends, they just realized that overall it was beneficial if the buyer felt more comfortable buying things because they have the peace of mind of being able to chargeback later if they feel they've been scammed.
I often hear lack of chargeback being touted as a feature for cryptocurrencies but it's more like the lack of a feature. It's obviously beneficial if you're in the shoes of the seller but if it's so great then why does chargeback exist in the first place?
Put yourselves in the shoes of a porn buyer, would you really put your billing info on bigtitties.ru if you knew that if they steal your money you have no recourse whatsoever? Also there's now a transaction on an immutable public ledger that might trivially show anybody who cares to look for it that you're buying incest porn online?
I think chargebacks for credit cards are needed, because their model is based on trust. You give your credit card number to the seller und you have to trust that he pulls only the amount he promised he would pull.
For Cryptocurrencies on the other hand, you never give you private key to somebody. You always decide yourself which amount to transfer. No chargeback is needed for this model.
I have an EC-card and chargeback is only available for pull-transactions, not for push-transactions.
> I think chargebacks for credit cards are needed, because their model is based on trust. You give your credit card number to the seller und you have to trust that he pulls only the amount he promised he would pull.
I've initiated chargebacks before, but overwhelmingly it's not because I've been overcharged (that only happened once and, ironically, by a company that subsequently launched an ICO...): It's because I did not receive the product/service, or it wasn't as advertised.
And that is just as much of an issue with crypto.
Keep in mind, in many cases the standard advise to consumers is to use credit, NOT cash, purely to be able to obtain the protections of chargebacks, but cash already has all the advantages you list as meaning chargebacks aren't needed for crypto.
There are many other reasons for chargebacks: Perhaps the product isn't what was advertised or not what the buyer expected. Perhaps the seller doesn't provide the product, either due to fraud, incompetence, or a technical problem. Perhaps there's simply a misunderstanding.
EDIT: Apparently chargeback may be the major issue for porn payment processing:
How is bigtitties.ru going to steal your money if you only send them payment as you consume the content? Chargebacks are very useful for the shipment of physical goods, but not relevant here.
This is the problem with HN’s blind hatred for cryptocurrency. People make weird assumptions, not understanding how it works. There are many different micropayment schemes under development or already operational. With these, you can pay per second of content. See spankchain
> Crypto currencies is a solution to this problem and not just in porn.
By which you mean, the solution for the high rate of people initiating chargebacks is to just use a payment method which won't let them? I think the underlying problem is that people want to make chargebacks, not that Visa lets them. And if I'm right, then you'd expect to see customers refusing to switch, since from there point of view this isn't the solution to a problem, it's taking a solution away from them.
> We have still only a few customers using them though, so it's not a success yet.
Charge back in porn are not by honest people. Unless you have worked in the industry you would not have a good idea of the size of the scam phenomenon there. It's way higher than in the regular market.
Sites scaming customers has been solved mostly by communities organising and insta banning bad apples.
The reverse is insolved. And yes, removing a gun will make people mug less.
Why aren't debit card transactions handled separately and differently from credit card transactions? Since they come from a guaranteed fund source, I would think they would make possible a special "no chargebacks permitted" transaction type? I see no way to get people to stop doing chargebacks after they've come down off their sexual arousal inhibition lowering short of widespread social education of a sort nearly guaranteed not to happen, so it'll have to be some solution that simply makes it so people CAN'T unspend the money.
1) Porn (crypto, gambling, etc.) transactions are significantly riskier than other transactions.
2) CC processing involves a long chain of intermediaries.
3) At every step of the chain there's strong pressure upstream for better rates, and strong pressure downstream to ensure the blended payment stream is safer.
So, eventually, someone in the chain gets told "sure, we can give you better rates, but only if you can improve the risk profile of your payment stream". And then they crunch the numbers, and decide it's worth it, knowing they'll lose some volume but hoping they can make it up with better margins. And then the people who churn find one of the remaining partners who hasn't adopted strict policies, and this repeats until all the "dodgy" payments are going through a high-fee chain that can't possibly afford to change their policies, and everyone else is going through a low-fee chain.
If you check CCBill, their "Blue" package that allows adult content runs 10.8% to 14.5%, with a $1,000 yearly "high risk registration fee". And even their normal plan (which doesn't allow adult content) seems to be 5.9% + $0.55 per transaction? Braintree is 2.9% + $0.30; Stripe is the same.
You can see why, eg, Stripe would be happy to leave CCBill to have a virtual monopily on adult transactions: There's not that many of them, they're so risky you'll need to charge absurdly high rates just to cover your costs, and just touching them at all will potentially taint your other transactions in the eyes of your upstream partners, driving up your rates. Conversely, you can see why CCBill will never kick the adult payments off their platform; it's the only thing they have to offer.
Disruptive startups work best when they can start with a niche and then grow from there, but the logic of the financial system makes that very difficult.