It seems to me at this point that we've lost track of what a merchant account provider even does, and that your argument in some way depends on the fact that it's easier for large companies to bear losses than small ones, and so they should bear those losses regardless of who causes them. Why not just say Apple and Walmart should insure all new startups against personal losses at the same time? It's the same argument.
Really? I think there's a good argument that insurance is exactly the business they are in.
The fundamental difficulty here is that money you think you have as a merchant can be taken away again retrospectively, and the merchant account provider is on the hook for it if the merchant disappears. The merchant account provider accepts that risk, but takes steps such as retaining partial funds that will normally be sufficient to mitigate it. Every now and then they'll take a big hit when there's a spectacular failure and whatever guarantees the merchant account provider thought they had turn out not to be worth enough to cover the loss. Most of the time, however, things will go fine and the merchant account provider will make a tidy margin.
How is this not an insurance model?
If you're starting a business and worried that your own product failures are going to bankrupt you, pay for insurance.
I'm not worried about my product failures, I'm worried about fraud due to a combination of their insufficient security and their rather generous waiting periods for customer complaints, or simply due to a mistake on their part.
And why not? They could at least be obligated to obtain such insurance. Seriously, what else are they doing with that 3% of all those transactions?
Primarily because we accept the status quo because the merchant is in such a weak bargaining position. Let us not forget that merchants and consumers form the basis of our economy whereas payment and banking systems are just plumbing.
If the financial industry had more incentive to increase the security of payment systems, then maybe we wouldn't have the absurdly insecure systems that we have now. Inter-bank ACH is fundamentally an honor system. Credit/debit networks are basically a shared secret between you and everyone you've ever spent money with.
I'm not saying merchants should be immune from all chargebacks. I'm just saying that the lack of competition in payment systems is effectively disallowing the benefits of an LLC to the little guy.
Because I was joking; the cost to ensure businesses that risk thousands of chargebacks would be stratospheric.
What I'm suggesting is:
A. It makes the little sense for the personal savings of an entrepreneur to be the underwriter of last resort.
B. If the financial industry wasn't so easily able to push the risk off on others, we might find that they become interested in real security improvements that result in an overall decrease of fraud.
It's called Paypal.
But the merchant account issuer doesn't distinguish fraudulent merchants from losses due to stolen cards, fraudulent customer chargebacks, etc. So currently in the US, essentially all fraud costs tend to be passed on to the merchant (and for small entrepreneurs, their kids' college savings).
It's called Paypal.
Note that most of the criticisms people level against Paypal aren't against their policies and mechanisms that are a rational defense against risk. It's things like the destroyed antique violin, banning merchant accounts for "editorial" reasons, outright hostile customer relations, and (last but not least) a penchant for holding on to other people's money for as long as possible for completely unjustified reasons.
Hopefully we can agree that the root cause here is the prevalence of fraud itself. A more secure transaction system could make things nicer for everyone. The problem is that the payment networks are the only ones who can institute meaningful change and the current system (that enables them to pass the costs on to merchants) suits them just fine.