I have heard for years people criticizing the payments industry as a low margin commodity biz. What has changed? Or they just got it wrong?
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“In the tech world, particularly after PayPal was sold to eBay, the dogma for many years was ‘Don't ever do payments, it's too hard and fraud will blow up and destroy you.’ And during the first internet wave, that was true. It was a challenge to get the type of data and information you needed to really deal with fraud at scale,” he says. “But fast forward to today and take a look at companies such as Stripe and Affirm. It seems that the fraud problems weren’t as bad as we thought and we’ve since developed systems, processes and data science tools that just didn’t exist back then. So if you’d applied first principles thinking five or 10 years ago, asking if those assumptions were still true and digging into whether it was still too hard, then maybe you would have come to a very different conclusion about starting a payments company and gotten ahead of the curve.”
http://firstround.com/review/future-founders-heres-how-to-sp...
Fraud is only as bad as we know. And it's very bad, payment providers just aren't going to go around telling you about it.
I worked for a payment provider and it's very very difficult to eat fraud because it wipes out low-margin profits quickly. It's a tough dance - there isn't a lot of wiggle room between being too harsh in rejecting payments and being too lenient in allowing payments. And criminals are very, very good at moving on to another attack vector once you figure out what they are doing.