find a payments partner

[chadwhitacre]

Gittip Gratipay is technically a "third-party payment aggregator," which means it is a third party collecting money on behalf of someone else. Credit card companies are down on this:

There are a few reasons why TPPA's are considered higher risk in the credit card processing industry: 1) The merchant has reduced control over the quality and delivery of the product being sold, and 2) The merchant is being trusted to pay the third party for the money they've collected on their behalf. 3) The business that owns the merchant account is responsible for all transactions charged by that account even though a majority percentage is passed onto a third party

But of course TPPA's exist: PayPal, Etsy, Kickstarter, Flattr, etc. Somehow there has to be a way to "get it right." The above link concludes: "That is not to say that merchant accounts cannot get approved for TPP processing, it is just more difficult and the underwriting conditions will more likely include a reserve and other similar safeguards. " Do you have experience with this?

Here's Stripe's position:

Stripe can only transfer to one bank account; we don't support transferring to many different users or splitting transaction proceeds among different people. Marketplaces on Stripe work in one of two ways:

One option is to have the marketplace's users (so the merchants on top of the marketplace) each set up their own Stripe account. This can be done entirely online. Then you, as the marketplace owner, will need to collect the users' API keys and make transactions on their behalf with their API keys. Stripe will then transfer directly to these users' bank accounts. If you want to collect a fee on the transactions, you can charge your users with your API key using Stripe.

The other way marketplaces use Stripe is by simply collecting all their users' payments. In this scenario, Stripe will transfer to the marketplace owner's bank account. You will then need to transfer to your users using programmatic ACH transfers (most business bank accounts allow you to set this up). The caveat in this scenario is that it needs to be very clear to any consumers that they are paying you, the marketplace, when making the transaction. Additionally, in this scenario, you will be liable for any chargebacks or disputes.

Option one is Stripe Platform, and it doesn't work for us because of the high per-transaction cost of moving 8 cents at a time over the credit card network (see #58). Dwolla is basically Stripe Platform without the credit card network middleman, so adding Dwolla support (#65) would definitely mitigate the risk that we're kaiboshed by (Stripe because of) the credit card companies.

Option two sounds like what we're trying to do, so the low-hanging fruit here is to make it "very clear to any consumers that they are paying you, the marketplace, when making the transaction."

[chadwhitacre]

Okay, this is materializing quicker than expected.

Just got off the phone with Stripe. They're (apologetically, professionally) letting me know that Gittip falls outside of what Stripe can support. I asked about option 2 above, and they're going to get back to me. But it doesn't look hopeful.

So! Plan C. Let's get that merchant account going with Braintree. At least this time we should be able to pull off a migration of user data.

[chadwhitacre]

Okay, so this isn't an emergency like with FeeFighters (#58). We've got a little breathing room to migrate away from Stripe, but we need to do so before we start seeing significant volume (p.s., they're going to update their marketplaces FAQ to be clearer).

Options!

• Continue to support funding via credit card. Switch to Braintree (get merchant account going with braintree #77). Be really up front that we're running a marketplace, and make sure they are okay with that and are going to support us in that effort.
• Ditch credit cards entirely. Even if they want us, it's an exorbitant tax--33% at $1, 9% at $5, 6% at $10 (w/ Stripe pricing). Switch entirely to Dwolla (payin with dwolla #65) and/or PoundPay (pay with Balanced Payments #78) ... others?

I think we need to keep trying to support credit card payments, since that's so well-established. By off-loading the tax onto users we have the incentive in the right place to move to Dwolla, etc., just like gas stations of yore. :-)

[steveklabnik]

I had a merchant account with Braintree for CloudFab, which was a marketplace. Expect like 3 months of paperwork.

[chadwhitacre]

@steveklabnik Can you operate while filling out the paperwork?

[steveklabnik]

Nope.

The process is largely held back by the banks, not BrainTree. They're real skittish about marketplaces and such...

[chadwhitacre]

I estimate that in the best-case scenario, we've got three to six months before we outgrow Stripe.

Proposal

• Continue using Stripe for the immediate future. If we don't keep up our momentum by making progress on other fronts (support explicit disavowal of association with Gittip #61, implement a history page #43, etc.), then this whole discussion becomes moot. :-)
• Start the paperwork to become a marketplace. Work with Braintree. I'm hearing 3 to 6 months for this, which is a nice coincidence with our Stripe runway. :-)
• Consider migrating from Stripe to WePay (look into WePay #69) and/or Balanced Payments (no micro-transactions; pay with Balanced Payments #78) in the medium-term.
• Implement Dwolla (payin with dwolla #65) in the medium-term.

[akoumjian]

Your other options is Amazon Flexible Payment. They have a whole section dedicated to market place style transactions. You would set up your app as a marketplace and just take nothing off the top.

The only issue is that the recipients have to create an account for themselves in order to accept payment and it is limited to U.S. participants.

This is exactly the kind of problem I was running into when I was developing BitGifter.

[chadwhitacre]

Will look into Amazon, @akoumjian. Thanks (also @jacobian).

Also on the table: PayPal. I guess they have a micro-transaction offering now.

[chadwhitacre]

Had a phone conversation with our Braintree sales rep. FirstData doesn't underwrite marketplace accounts, period. So we're looking at a new account. His advice was to narrow the focus, i.e., explicitly target open source developers for the first phase of buildout. If and when that is proven stable we can adjust our account to expand further. Small transaction size doesn't really help. The big risk is chargebacks: Alice gives money to Bob, and then is confused when three weeks later a charge appears on her statement from GITTIP.COM GRATIPAY.COM. She complains, and we get hit with a $15 chargeback immediately, even if we work it out later: risk. I guess what they do is levy a "5% rolling reserve" for six months. I.e., you charge $1000, and (besides fees) they take $50 and put it into an escrow account, which they use in case you can't meet your chargeback obligations. After six months you start getting it back. After twelve months you're generally free and clear of that, I gather.

That said, Braintree handles some big, new marketplaces: Airbnb, Uber, and another one I don't remember. I've got the pre-screening questions (95% of the time "yes" to the pre-screening means you get the account) and it seems like it's worth a shot. I can't pretend my world-view is the same as a banker's, but it really seems that, in our model, it's clear that you're giving your money to GITTIP.COM GRATIPAY.COM. We shall see, I serpose.

[chadwhitacre]

It seems to me that becoming a legitimate, first-class marketplace would provide the best user experience. Paying with a credit card on a website is familiar, well-trodden, and friendly outside the US. Requiring an Amazon or a Dwolla account is an additional step. In the Dwolla case it's worth it for the cost savings. I guess Kickstarter gets away with requiring Amazon. It may even be that we get more people paying if they can use PayPal or Amazon, because of trust issues, though as @akoumjian mentions, Amazon (at least) is US-centric.

[dekkers]

Another option that's not listed yet is google wallet/checkout. It's supported in a lot of countries and everybody who has bought an android app already has it.

[chadwhitacre]

Google Checkout ticketed as #187.

[chadwhitacre]

Closing this in view of our strong relationship with Balanced.

[chadwhitacre]

Reopening in view of Balanced shutting down. :-(

[chadwhitacre]

Talking with Stripe is #3245.

Talking with Braintree is #3287.

[chadwhitacre]

Another option is to partner directly with a bank. We don't get the nice APIs of Stripe or Braintree, but it may be the only way to find someone who will work with our use case. I've started building a relationship with Citizens here in town, and that's where I'd start: #3288.

[chadwhitacre]

Whichever route we go on this, I have to imagine that cleaning up our act is a prerequisite. Cleaning up our act means:

• tightening up our identity requirements (implement a customer identification program (CIP) #3289)
• properly reimplementing Teams as Payroll (rebrand Teams feature as Payroll #2569)
• cleaning up the site (About pages, and discuss roadmap based on information architecture #3220) so it's more obvious what we're doing

[techtonik]

I really don't get how Gratipay is connected to banks. Is there a diagram of the structure somewhere?

I'd like to explore an integration with Dwolla - https://www.dwolla.com/about

[chadwhitacre]

Zipmark is getting mired in complication around AML (gratipay/inside.gratipay.com#119, #2449).

[chadwhitacre]

Proposal: We drop U.S. bank payouts. PayPal is the only way to get money out of Gratipay. Thoughts?

[chadwhitacre]

The Case for PayPal

Gratipay already uses PayPal. We were running roughly 50% PayPal before the Gratipocalypse, and today we made 20 PayPal payouts, and 6 bank payouts. PayPal's fee is not actually that bad: 2%, capped at $1 for U.S., and $20 for non-U.S. It's simple and ubiquitous. Compared to the red nightmare that #3491 is turning into, MassPay doesn't seem that bad.

Since we already have PayPal implemented, it'd be only a little extra work on our part (just ripping out bank accounts and notifying people, basically), and it would get us out of a lot of AML work. We could work on gratipay/inside.gratipay.com#119 over the next year or so, and then maybe reapproach Transpay (#417; they seem the best-suited to help with global bank payouts). We can take our time and do this right. Not rush, and not cut corners. We've learned a lot this time around. Now we know what "right" means.

[chadwhitacre]

MassPay goes up to 5,000 payouts. Transpay, et al. want to see more scale from us anyway. I got blatantly laughed at by one vendor (gratipay/inside.gratipay.com#259 (comment)). We've got a lot of product problems to solve and community-building to do, PayPal for payouts would not be our bottleneck. We could grow for a year and then revisit the idea of being "a true payments company."

[tshepang]

where is the laughed at part in that link

[chadwhitacre]

@tshepang Added to gratipay/inside.gratipay.com#259 (comment) (and link updated in above comment).

[webmaven]

@whit537:

PayPal for payouts would not be our bottleneck.

It would be a dealbreaker for me. I refuse to do business with them (observed too many others with spurious 'frozen funds' issues and PP refusing to deal with problems of their own making until sufficient internet rage is directed at them), and do not have an account.

I really do not want my accumulated balance to be refunded to donors simply because I refuse to accept funds through PP.

[chadwhitacre]

@webmaven How about Dwolla?

[webmaven]

@whit537, never tried them.

[chadwhitacre]

@webmaven Dwolla would be sort of a cross between what we've been offering so far with ACH and PayPal: they're U.S.-only like ACH, but they require signing up for an account like PayPal. There is no per-transaction cost (Gratipay would pay a flat monthly fee for features such as next-day transfers).

Mind looking into them? Technically speaking, they're quite parallel to PayPal, so implementation would be fairly straightforward. I think Dwolla could complement PayPal nicely for us.

[webmaven]

I'll look into them. As long as they don't have stories like these floating around, I'll likely be OK with them:

• https://www.google.com/?#q=paypal%20smashed%20violin
• https://www.google.com/?#q=paypal+frozen+crowdfunding

[rohitpaulk]

^^ I don't see how those cases are wrong.

In the first case,

"While we cannot talk about this particular case due to PayPal's privacy policy, we carefully review each case, and in general we may ask a buyer to destroy counterfeit goods if they supply signed evidence from a knowledgeable third party that the goods are indeed counterfeit. The reason why we reserve the option to ask the buyer to destroy the goods is that in many countries, including the US, it is a criminal offense to mail counterfeit goods back to a seller."

In the second case,

We are now in the midst of overhauling our policies in this space. We're talking to the major crowdfunding players that we work with to put in place a permanent solution that avoids unnecessary account limitations. But making this work for all stakeholders—contributors, entrepreneurs, crowdfunding sites and us—is pretty complicated. As soon as I have more to share, I promise to update everyone.
In the meantime, we will ensure that each crowdfunding campaign is reviewed by a senior member of my team before any action is taken. It’s a small, but important step.

[chadwhitacre]

Sources I'm finding for @rohitpaulk's quotes:

http://gizmodo.com/5872958/paypal-smashed-some-ladys-antique-violin-and-can-smash-yours-too

https://www.paypal-community.com/t5/PayPal-Forward/PayPal-and-Crowdfunding/ba-p/782560

(P.S. I wish Google ranked original sources higher than derivative content from ad companies ... but I guess they themselves are an ad company. :-/)

[webmaven]

Yeah, that September 2013 blog post from PayPal (though I'll admit that figuring out what year it is from is non-obvious) is really reassuring re: crowdfunding. Oh, wait, not really, they are still doing this to people:
http://garethhayes.net/paypal-warning/

[webmaven]

OK, it looks like Dwolla passes the smell test. At least, I can't find any horror stories regarding them. So far as I can tell, they only freeze funds when they are told to by law enforcement.

@whit537, can you get statements from them regarding their policies in this area? Do they ever proactively freeze accounts or reverse transactions that 'seem' suspicious to them?

[chadwhitacre]

OK, it looks like Dwolla passes the smell test.

@webmaven Cool.

[C]an you get statements from them regarding their policies in this area? Do they ever proactively freeze accounts or reverse transactions that 'seem' suspicious to them?

I'll let you pursue that if you like, perhaps on #726.

[chadwhitacre]

Okay! We have new payment partners: Braintree for payins, New Alliance for escrow, and PayPal for payouts. We have survived the Balanced shutdown! With that, may this ticket pass once again into the quietude of history, whenceforth it was called in our hour of need. It has served us well, now may it enjoy a hero's rest.

🐴 🎏 🍂

[mattbk]

Inquiry from support: https://gratipay.freshdesk.com/helpdesk/tickets/2766