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This is a very good point and I definitely agree that this is primarily a go-to-market strategy problem.

My logic fundamentally was the incentive system compensating for switching cost:

(1) Customers gain an extra 1% cash back assuming they are already using a 2% cash back card. (2) Companies now discount all customers 3% which gets them an additional 1% from cash back.

The logic was to put a QR code at the POS system to signup and send users the Fab in a specific neighborhood to routine business (E.g. Cafe, Markets)

However, as I think about the motivating factor for people to carry it around and use it... This is probably the biggest issue I guess, is it's either all or none.




>Customers gain an extra 1% cash back assuming they are already using a 2% cash back card.

But how? Your new payment system still has to be paid-for. The 2% cashback credit cards rely on two things: a 2.5-5% merchant fee (that you "never see"), and an expectation you'll never fully pay-off your card (so even with 2% back, they're still getting 8-27% from you)

If you're going to hold folks payment in escrow (like a bank essentially does wrt debit cards), then you have to get folks to deposit money to you (even if it's "instantaneous" a la Paypal) before sending it on to the merchant

If you're not going to be holding payers' money in escrow, you're now loaning it to them, which means you need to establish payment systems to recover from your users the bills they rack-up (ie - you've become a credit card company)


Your analysis is exceptional. My belief is that the card would function like Venmo, a fee-less P2P payment system, but replicating the reward benefits to the user.

What you're presenting is definitively the catch 22 serving the bottleneck to payment processing, but the belief is that removal of intermediaries nets consumers and companies a profit.

Operating on a fixed monthly cost to merchants is then uniquely enabled because of the lack of high variable costs of existing payment methods, allowing me to have the 'cheapest product' so to speak in a commoditized industry.


>Companies now discount all customers 3% which gets them an additional 1% from cash back.

What's the incentive for a company to discount their prices? Why not just keep them where they are, and pocket the higher profits?


The logic would be companies are already paying 3% in processing fees that is expensed, and used by the consumer to spend those 'rewards' at other merchants.

However, by 'discounting' at the POS, consumers walk into the store prepared knowing they have a 3% off coupon and are more likely to spend more money. If the amount spent on average increases sales by even 3%, their fees net out.




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