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authorStefan Kügel <skuegel@web.de>2021-01-08 19:20:09 +0100
committerStefan Kügel <skuegel@web.de>2021-01-08 19:20:09 +0100
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Refined text on fee schedule, now ready to review.
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--- a/design-documents/012-fee-schedule-metrics.rst
+++ b/design-documents/012-fee-schedule-metrics.rst
@@ -1,5 +1,5 @@
Fees schedule and fee metrics
-######################################
+#############################
.. warning::
@@ -10,8 +10,8 @@ Summary
This chapter discusses considerations for fees from different points of view (Exchange operators, customer/users, and sellers/merchants.
-Introduction
-============
+Motivation
+==========
Fees are necessary for covering costs that Exchange operators bear for offering their services established in-house or outsourced in a data center: Variable costs (e.g. electricity and wire fees for every wired transaction to bank accounts) and expenses of constant height for hardware, company assets, marketing and staff, and so forth. They will allocate these costs to customers. The Taler protocol therefore offers different types of fees for each type of transaction that may appear in the transaction cycle. There are six fee types available which can be chosen by the Exchange operator, defining their specific value within the limits given by the protocol.
@@ -19,17 +19,19 @@ Any coin that has been generated or that is used (deposited) or refreshed can be
Fee types and their underlying metrics are not only due to cover real costs in the long run, but also to reward users for their economic behaviour, to prevent misuse, and to allow Exchange operators to gain certain income and most probably profits. Exchange operators are thus determining the combination of fee types and the height of each fee for every denomination of coins. Any chosen denomination (constant nominal value of coins preset by the operator by means of the Denomination key) will subsequently come along with a variety of fee types and their individually specified height.
+Proposed Solution
+=================
-1 Fee schedule
+Fee schedule
==============
Whereas the Taler protocol determines types of fees, Exchange operators determine the upper and lower limits of fees using parameters. Once they have set the fee height per denomination, the algorithm of the Taler payment system will allocate costs automatically to every generated coin respectively to a wired amount.
The fee structure and its underlying metrics are also bound to rules and expectations of financial regulatory authorities like the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht BaFin). Changes to the fee structure are therefore eligible only when they are in accordance with national or international laws and directives.
-Fees chosen by Exchange operators have to be explained to the users by means of comprehensive Terms and conditions of services that rule out the different and heights of fees and how they are calculated. Costs for wired amounts within the banking system (IBAN transfers to the Exchange's escrow account for the withdrawal transaction) have to be covered by users, so additionally Terms and conditions of their banks may be effective, too. These Terms of banking services are not part of the Taler payment system, nevertheless Exchange operators should make users aware of this fact, that each wired transactions may cause costs on their expense.
+Fees chosen by Exchange operators have to be explained to the users by means of comprehensive Terms and conditions of services that rule out the different and heights of fees and how they are calculated. Costs for wired amounts within the banking system (IBAN transfers to the Exchange's escrow account for the withdrawal transaction; IBAN: International Banking Account Number) have to be covered by users, so additionally Terms and conditions of their banks may be effective, too. These Terms of banking services are not part of the Taler payment system, nevertheless Exchange operators should make users aware of this fact, that each wired transactions may cause costs on their expense.
-1.1 Obligations of Exchange operators
+1. Obligations of Exchange operators
---------------------------------------
Exchange operators have to adhere to the fee schedule. Otherwise they can lose their interface access, have their certification revoked and, moreover, even become liable for damages. For each transaction type there is one specific fee type. Exchange operators set the height of fees. If a fee type is set to a value of 0, this fee type will not contribute to the operator's income from fees.
@@ -48,7 +50,7 @@ Terms and conditions of every Exchange must also clearly indicate to the user th
A private bank that hosts an Exchange and normally charges its customers for IBAN transfers has the option of waiving the applying fees for their customers when they are withdrawing from their own checking accounts into Taler wallets.
-1.2 Buyer's obligations
+2. Buyer's obligations
-----------------------
Prior to making a first withdrawal from an Exchange users are required to read and confirm the Terms and conditions of the relevant Exchange. This step is mandatory when changes to Terms and conditions take place. Users accept Terms and conditions by confirming them in the mobile application or on the web. Terms and conditions also require users to accept possible losses of funds in wallets through 'Refresh' fees, which can be eventually charged by Exchange operators.
@@ -59,7 +61,7 @@ In accordance with the Terms and conditions, the users agree not to make any cla
Furthermore, according to the Terms and conditions, users must accept that the IBAN transfer from the users' personal checking account to the Exchange's escrow account may incur costs depending on the contract with their banks. These costs are not related to the Taler payment system and cannot be influenced by it.
-1.3 Obligations of merchants/sellers
+3. Obligations of merchants/sellers
------------------------------------
Normally, a plurality of buyers' spending transactions is summed up to one aggregated amount of revenue and wired to the receiving checking account of the merchant. Merchants can set the frequency by which these aggregated amounts are wired. Every wire transfer imposes costs on the Exchange operator collected by the operator's bank for having the amount wired. Therefore, the Exchange operator will tend to charge the 'Wire fee' to the sellers for this transaction type, as the sellers are the ones causing the aggregated transfer and not the buyers. If from a seller's point of view an Exchange operator has set the 'Wire fee' too high, the seller can make use of the Taler Merchant software and determine the so-called amortization factor to add all or part of the 'Wire fee' to the amount payable by customers who deposit coins from their wallets funded via this Exchange.
@@ -68,7 +70,7 @@ During the withdrawal process, the wallet shows to the buyer the complete fee sc
Given the case that sellers enter incorrect account data for their own checking account, they are solely liable for any resulting damage and not the Exchange operator. Sellers bear the risk of a loss of value or even a total loss of their revenue if they enter a wrong IBAN for the transfer of their revenue, although syntactically correct. Similarly, the sellers alone bear charges due to an incorrect receiving account number or other posting errors that they cause and for which manual routing becomes necessary (e.g. in the case of lapsed accounts).
-1.4 Technical framework conditions for the collection of fees
+4. Technical framework conditions for the collection of fees
-------------------------------------------------------------
Fees are charged per coin or per wire transfer. The number of coins at withdrawal usually increases logarithmically with the amount represented. Fees can be applied to both flow quantities (e.g. coins moved at withdrawal and deposit transactions) and static quantities (e.g. coins stored in wallets). The fees on coins may differ depending on the time of issuance of a coin and depending on the value of a coin. They are fixed for each coin with its time of issuance, so they cannot be changed subsequently during their validity by the Exchange operator.
@@ -78,7 +80,7 @@ During the entire period of validity, all Denomination keys and the selected fee
The refresh transaction is automatically triggered by the wallet software 3 months before the end of the validity of a coin. Especially if Exchange operators charge refresh fees, they have to point out this automatic feature to the users in their Terms and conditions.
-2 Fee types
+Fee types
===========
The Taler protocol offers the following fee types:
@@ -91,18 +93,18 @@ The Taler protocol offers the following fee types:
c. Abort of transactions due to network failure
d. Refund
4. 'Refund': For refunds or in case of contract cancellation by seller, per coin
-5. 'Wire fee': For aggregated amounts wired by the Exchange to the merchant's checking account, per wired transfer
-6. 'Closing': In case that a withdrawal process could not be accomplished (the users' wallet did not withdraw the value from the reserve), per wired transfer from the Exchange's escrow account to the account of origin
+5. 'Wire fee': For aggregated amounts wired by the Exchange to the merchant's checking account, per wire transfer
+6. 'Closing': In case that a withdrawal process could not be accomplished (the users' wallet did not withdraw the value from the reserve), per wire transfer from the Exchange's escrow account to the account of origin
-2.1 Effects of fee types on Exchange operators, buyers and sellers
+Effects of fee types on Exchange operators, buyers and sellers
------------------------------------------------------------------
Each of the above fee types is now considered viewed from the perspective of the buyer, the exchange operator, and the seller:
* 'Withdrawal' from the buyer's point of view:
-Anyone who wants to load Taler wallets with coins must initiate a wired transfer from the own checking account to the Exchange operator's escrow account to let the Exchange fund a reserve which can be subsequently withdrawn by the wallet. Costs for the wired transfer may be incurred according to the user's contract with the bank. In addition to these potentially incurred costs, the withdrawal fee could be charged for each coin withdrawn into the wallet. Even though many bank customers are already accustomed to wire transfer charges, the withdrawal fee acts like a loss of purchasing power even before intended transactions take place. Buyers are made aware this loss when being shown all types of fees at withdrawal. Once buyers become aware that they will have to pay the cost for each coin generated, they might prefer to have as few high-denomination coins as possible withdrawn into their wallets.
+Anyone who wants to load Taler wallets with coins must initiate a wire transfer from the own checking account to the Exchange operator's escrow account to let the Exchange fund a reserve which can be subsequently withdrawn by the wallet. Costs for the wire transfer may be incurred according to the user's contract with the bank. In addition to these potentially incurred costs, the withdrawal fee could be charged for each coin withdrawn into the wallet. Even though many bank customers are already accustomed to wire transfer charges, the withdrawal fee acts like a loss of purchasing power even before intended transactions take place. Buyers are made aware this loss when being shown all types of fees at withdrawal. Once buyers become aware that they will have to pay the cost for each coin generated, they might prefer to have as few high-denomination coins as possible withdrawn into their wallets.
* 'Withdrawal' from the Exchange operator's point of view:
@@ -158,24 +160,34 @@ As of today's implementation, in the event of a withdrawal from the purchase agr
* 'Wire fee' from the buyer's point of view:
-This fee only directly affects buyers in the following case: the protocol allows sellers to partially pass on the cost of the fee to buyers if the exchange operator that signed buyers' coins set the wire fee fee above the value that each seller can (but is not required to) enter in its merchant backend with the max_wire_fee variable. The cost of the wire fee is factored into the sellers' prices. Sellers could pass on the relative cost benefits of the Taler payment system to their customers in the form of lower retail prices, but they are not forced to do so.
+This fee is to be paid by the sellers (i.e. merchants or generally all recipients of coins). The wire fee directly affects buyers only in the following case: The protocol allows sellers to partially pass on the cost of the wire fee to buyers if the Exchange operator that signed buyers' coins sets the wire fee above the value that each seller can define in the merchant backend via max_wire_fee. It is no secret, though, that all the costs and the fees are included in retail price tags. At the end of the day, it is always the customers to pay for. Nevertheless, sellers could pass on the relative cost advantages of the Taler payment system to their customers by offering lower retail prices, but they are not forced to do so.
* 'Wire fee' from the Exchange operator's point of view:
-The wire fee passes on the cost of SEPA postings from the escrow account to the seller accounts - from the exchange operator to the sellers. Buyers are only shown the wire fee if the seller does not pay it. Otherwise, customers don't realize what fee is being withheld from their spent coins at the exchange. For exchange operators, opting out of the wire fee would be tantamount to giving sellers carte blanche to trigger a collective booking of their sales revenue as often as possible. If, on the other hand, the exchange operator requires the wire fee to be remitted to the seller accounts, this fee will cause the sellers to adjust the frequency of the omnibus entry as they need it for their business and want to afford the fee for it. As the frequency of this type of posting increases, so does the absolute cost to sellers. Buyers learn about the wire fee charge only in the event that an Exchange operator sets it higher than the value that a seller has entered in the max_wire_fee variable.
+Exchange operators may charge wire fees in order to cover their expenses for wiring the value of coins to the beneficiaries. The wire fee passes on the cost of wire transfers from the Exchange's escrow account to the receiving banking accounts, and for this usually banks charge handling fees. Buyers are only shown the wire fee if the seller does not bear them to the full extent. For Exchange operators, opting out of the wire fee would be tantamount to giving sellers carte blanche to trigger an aggregated booking of their sales revenue as often as possible. If, on the other hand, the Exchange operator charges the wire fee, this will cause the sellers to adjust the frequency of the aggregated wire transfer as they need it for their business and want to afford the fee for it. As the frequency increases, so does the absolute cost due to wire fees to sellers. Buyers learn about the wire fee charge only in the event that an Exchange operator sets it higher than the value that a seller had defined with max_wire_fee.
* 'Wire fee' from the seller's point of view:
-Sellers want to recognize their sales as quickly and often as possible. Timely revenue recognition improves their liquidity and generates interest income if sales revenues are received earlier than payments to suppliers. They are therefore forced to weigh whether they would rather bear higher absolute costs due to the wire fee or forego liquidity. For some vendors, on the other hand, the volume of bookings determines the frequency of the collective booking so as not to overload the accounting and billing departments. In any case, the costs of the wire fee are included in the end-user prices.
+Sellers want to register their sales as quickly and often as possible. Timely revenue recognition improves their liquidity and generates interest income if sales revenues are received earlier than payments to suppliers. They are therefore forced to argue whether they would rather bear higher absolute costs due to the wire fee or forego liquidity. For some merchants, on the other hand, the volume of purchases determines the frequency of the aggregated wire transfer so as not to overload the accounting and billing departments. In any case, the costs of the wire fee are included in the end-user prices.
* 'Closing' from the buyer's point of view:
-The closing charge is triggered by users of the payment system if, after a successful SEPA transfer to an Exchange's escrow account, they do not have the reserve withdrawn to their personal wallet because they do not have the wallet connected to the Taler exchange within 14 days. Since they are the originators and incur costs to the Exchange for the re-transfer, they also have to pay the closing fee. This is done by remitting the original remitted top-up amount minus the cost of SEPA transfers and possibly manual routing. The fee is easy to enforce and meets with understanding from most users, because as a rule they will not be affected by this type of fee and can also quickly understand the GTC passage that the originators must bear the costs for self-inflicted non-withdrawal.
+The closing charge is triggered by users of the payment system if, after a successful wire transfer to an Exchange's escrow account, they do not have the reserve withdraw to their personal wallet. This could be the case when for example the wallet did not connect to the Taler exchange within 14 days. Costs incur to the Exchange for the wire transfer back to the originating account. This is done by remitting the original amount minus the cost of wire transfers and possibly manual routing. The closing fee is easy to enforce and meets with understanding from most users. Commonly they will not be affected by this type of fee and can also quickly understand the Terms and conditions that they must bear the costs for self-inflicted issues at withdrawal.
* 'Closing' from the Exchange operator's point of view:
-Costs for the closing of a reserve are incurred by the Exchange operator due to irregular user behavior. However, it must not be left to bear these costs, but must charge them to the user who caused them. The closing fee is indispensable for exchange operators in order to prevent abuse through cost driving. Charging and retaining the fee always works smoothly because the exchange's escrow account has been booked with a bank transfer - and not with a SEPA direct debit, which could be cancelled by the user with malicious intent.
+Costs for the closing of a reserve are incurred by the Exchange operator due to irregular user behavior. However, Exchange operators may charge a fee for covering these costs to the user who caused them. The closing fee is indispensable for Exchange operators in order to prevent abuse through cost driving by malicious parties. Charging the fee by retaining it always works smoothly because the Exchange's escrow account is already in possession of users' funds through their wire transfers.
* 'Closing' from the seller's point of view:
The closing transaction does not affect sellers in any way.
+
+
+Alternatives
+============
+
+Drawbacks
+=========
+
+Discussion / Q&A
+================