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Google Pay - PayPal - Visa

edited 30 November -1 at 1:00AM in Credit Cards
6 replies 1.6K views
aroominyorkaroominyork Forumite
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edited 30 November -1 at 1:00AM in Credit Cards
I downloaded the Google Pay app on my phone the other day and linked it to my Visa card. It automatically added my PayPal account as alternate payment method. It got me to wondering how many people would take a cut for processing my payment: Google presumably, then PayPal, then Visa – and if there is anything left over the merchant might be allowed a small profit. How does this work? – is PayPal paid by Visa and Google paid by PayPal?

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  • edited 24 May 2019 at 9:32PM
    Terry_TowellingTerry_Towelling Forumite
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    edited 24 May 2019 at 9:32PM
    What follows is part guesswork and partly based on out of date knowledge, so anyone with more up to date information please shout if they spot something incorrect.

    The retailer in a standard card transaction (where said retailer contracts directly with an acquiring bank) will be paid the full value of every transaction they make. That retailer's acquirer will then send a monthly statement to the retailer in which there will be a charge for their services. That fee will cover the acquirer's costs plus the Interchange Fee that they have to pay away to the Card Issuer plus an element of profit (very small). To my knowledge Visa and MasterCard do not receive any direct income from any transactions (except possibly from inter-regional currency-conversion transactions) and their income will be derived largely from membership payments from member banks/institutions.

    Where a retailer uses an 'intermediary' to process payments, that intermediary will be the one to contract with the acquirer and they may be able to take advantage of 'bulk' deals if they are passing through large volumes of traffic from multiple retailers. That may mean the overall cost burden borne by the retailer is the same or better than if they contracted directly. If the cost were higher with an intermediary, there would be no point in using one and the retailer might just as well contract with an acquirer directly.
  • sausage_timesausage_time Forumite
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    I downloaded the Google Pay app on my phone the other day and linked it to my Visa card.
    That's interesting, and unexpected. My PayPal account is linked to my Amex card, and this did not happen when I added my Amex to Google Pay. In many respects, Google Pay and PayPal are competitors - so I'm quite surprised to see this happen.
  • yamsyams Forumite
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    I might be mistaken but I think you can only use PayPal with GPay on apps and the Play Store. As Google get a cut of those purchases anyway they might just waive the fee (or charge a smaller amount) as an incentive to get people to use Google Pay or spend more.
  • MigsterMigster Forumite
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    That retailer's acquirer will then send a monthly statement to the retailer in which there will be a charge for their services. That fee will cover the acquirer's costs plus the Interchange Fee that they have to pay away to the Card Issuer plus an element of profit (very small). To my knowledge Visa and MasterCard do not receive any direct income from any transactions,,,.

    Yes and no. There are three elements that make up the fee that the merchant pays for each card transaction, though the visibility of these elements will vary, depending on the pricing model that has been agreed. The three elements are interchange, the acquirer fee and the scheme fee. The scheme fee is paid to the scheme e.g. Visa or Mastercard, though it is often bundled with the acquirer fee into an overall Merchant Service Charge (MSC). As such, for many merchants it would appear that they just pay interchange + MSC, but a significant part of the MSC is then passed by the acquirer to the scheme.
  • 18cc18cc Forumite
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    Wow !,,, does anybody else ever feel that life is getting just a little bit too over complicated when you want to just pay for something...
  • Terry_TowellingTerry_Towelling Forumite
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    Migster wrote: »
    Yes and no. There are three elements that make up the fee that the merchant pays for each card transaction, though the visibility of these elements will vary, depending on the pricing model that has been agreed. The three elements are interchange, the acquirer fee and the scheme fee. The scheme fee is paid to the scheme e.g. Visa or Mastercard, though it is often bundled with the acquirer fee into an overall Merchant Service Charge (MSC). As such, for many merchants it would appear that they just pay interchange + MSC, but a significant part of the MSC is then passed by the acquirer to the scheme.

    Thanks for the heads-up.

    I wasn't sure quite how the scheme received their money from the Acquirer and sort of bundled that up as part of the Acquirer's costs and not a direct and transparent element of the overall MSC.

    Are you able to say whether there is still an inter-regional currency conversion fee added to forex transactions by either of the payment schemes?

    Do you also have a view on the ex-Ombudsman's court case against MasterCard that appears to be based around the Interchange Fee? I've always thought that the Interchange Fee passed from Acquirer to Issuer (purchases) and was not retained by MasterCard - although doubtless it contributes to the Issuer's scheme fees.

    If the overall MSC includes an element of Scheme Fees then surely that should be the basis of any court case - and why is Visa not being taken to court too?
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