Ask HN: How to create a service similar to Patreon?

Take a look at Stripe Connect

There was an alternative named Hatron that used Visa until Visa pulled services because they funded conservatives. Libertarians, and white nationals.

So contact the credit card companies and watch who you fund.

This is a really hard problem. You do not want to have to register as a bank or hire an expensive compliance team. Use Stripe.

There is absolutely no shortcut in this things. As soon as you are paying users there will be all sort of legal requirements/side effects which you need to be aware of. Starting with money laundering, taxes (yours and from your users even!), pleasing your payout provider that your content is not illegal, beeing able to payout in US&Europe or even global and ending with costs (you will probably never be able to compete with 5% from patreon). The thing is that all this risks apply mostly to your payout provider (this is why it is a hard problem, it's not only your risk alone). Good luck in finding a good partner. I'm betting that sites like Patreon have developed this things from scratch and in-house.

there is an uncensored version using Bitcoin at bitpatreon

In Europe you would need to set yourself up as a payment services provider (PSP). I believe the US has a similar regime. https://paymentscompliance.com/us-money-transmitters You'll need a reasonable amount of capital behind you. Next step would be to find a law firm specialising in payments and go and get some advice.

My advice would be to join Patreon/Stripe/some other payment services company, and realize that it isn't something a single engineer, no matter how skilled, can throw together in a week, a month, a year, or a decade.

Here's a post about a story that made the rounds back when Patreon made some changes a while back: https://geoffkratz.wordpress.com/2017/12/10/is-patreon-about... It should give you a few pointers on things not to do in order to steer clear of violating financial regulations. It's probably far from a complete list, but should give you some starting points of things you'll need to be aware of.

Don't want to discourage you but money health and law are the three worst thing to work with in IT

First of all you can't neither "term-of-service-away" nor delegate diligence, second because the regulatory frameworks around them updates almost yearly if not more often.

Self research these three topics doesn't seem a good idea. Budget for or partner up with an expert in the field, because even using a third party service doesn't fully absolve you from responsibilities.

Hire someone that knows the answer, ideally someone that's worked on exactly this type of system before. Don't make any decisions about something this delicate based on the advice of random people on the internet.

I built a patreon competitor using stripe connect. It wasn’t super successful, had a handful of creators making $20-$100/month, but it’s definitely doable without a ton of legal work. Stripe makes it pretty easy. You can set it up so payments go directly from supporter to creator’s stripe account, with a percent going to you. If you want to batch payments or have more control over funds then you actually need to collect funds and do the payouts, which makes things a bit more complex. Feel free to email me if you want to chat.

Honestly, dealing with payments is nothing compared to the amount of hand holding required to help creators set up a nice profile, pick good rewards, do a good job promoting their page, actually fulfill their rewards so they don’t lose backers, etc. It often took months of back and forth with creators to finally get their page launched. I’d avoid building a patreon competitor unless you personally know some very big creators (500k+ followers) or have a very specific niche in mind.

From a short cut perspective, you could do the following:

Require each of your customers (creators) to sign up for a Stripe account and have them input into your system their processing keys. Whenever somebody wants to pay them, use their keys to process the payment and it goes directly into their Stripe account. This would offload all legal liabilities (Stripe would determine whether their business is okay to operate from a processing standpoint) and tax responsibilities fall completely on them.

Here are the drawbacks:

1) You wouldn’t be able to automatically take a percent of a creator’s billings but rather would have to calculate it and invoice them / charge their card

2) Patrons wouldn’t be able to save a credit card and use it across multiple creators

3) Your fees would be on top of the 2.9% that Stripe charges a creator which would be limited to 2.1% if you want to compete with Patreon at 5%

Partner up with someone knowledgeable, perhaps a paralegal who has worked in finance. They will know when to call in the big guns.

May I ask what is pushing you to want to create a competitor?

I bet it is because you strongly disagree with their stance on free speech (they ban creators based on all type of nonsense backed with the typical "Hate speech" excuse). This is actually a very difficult problem, as you will now depends on Stripe, and behind that Visa and Mastercard. Those companies will happily ban you if you support any creator that isn't Politically correct based on the consensus at that time.

I'm myself considering jumping into that space, but the financial world is held together by a couple of Titans, and it is unfortunately extremely difficult to go against the general "mobbing" that happens on the usual platforms.

If I were to withhold 3% of everyone’s total to cover credit card fees plus $0.10 per every transaction because the bank fees range from 1%-3% per card and it’s difficult to sort them, would it be legally acceptable? Any insights?

Start with a legal team. Seriously.

That said, I feel like this is a bit of a weird post for HN. You are asking the hardest questions of “How do I build a successful competitor to an already successful competitor?” - isn’t that the essence of founding a company?

Like i don’t want to discourage thoughtful discussions on this site and I’m not saying any rules are being broken, but it feels a bit disingenuous to be asking these questions in the sense that people that have real answers to this are probably charging REAL fees, if not already doing the whole thing themselves.

Related: How to create Stripe or Paypal? Again, from the finance and I guess soft-skill perspective. Do I need to negotiate with particular banks, countries, etc...?

I was pondering doing a stellar based platform for this a few weeks ago. It wouldn't be that hard to do technically but there are many legal and practical hurdles.

Using something like stellar would sidestep some of the financial headaches around trying to do this through the existing financial system at the cost of being less user friendly. IMHO particularly recurring payments would be a big headache (like monthly donations). On the flipside, any fiat interactions, and the associated tax consequences would be offloaded to exchanges and users.

One cool thing that you could do with stellar is use so-called federated accounts to represent content owners and users. This simply means you have a database with accounts that you map incoming payments (from stellar) to based on a memo that is attached to the transaction. So, this allows us to have lots of accounts represented by a single stellar wallet. More importantly, it allows most of the users/owners to sidestep the issue of wallet and key management until they have to care. And finally it allows us to do micro payments. Imagine distributing 5$ worth of XLM or whatever token on stellar across hundreds of content owners based on likes or preferences of the user.

Another thing you could do is represent content owners preemptively (i.e. before they've even heard of you) with their own little federated wallet. The way that could work is that users reward whatever they think is worth rewarding and those rewards go to a dedicated account for the content owner. When owners register, they claim their rewards by proving ownership, doing KYC, and whatever else we need them to. Unclaimed rewards simply get redistributed periodically to selected good causes related to open content (e.g. wikimedia).

Building this technically is not that hard. But the organizational challenges around this are big. You need legal staffing and IMHO this only makes sense when run as a foundation and not as a VC funded walled garden/money grab for investors & shareholders. The foundation itself could run off donations via its own platform plus maybe some kind of base fee of e.g. 2-3%. When restricted to R&D and operational cost, it should not need a lot of resources and IMHO incentives for profit contradict the overall goal of the site which is to allow users to reward content producers.

I’ve worked in the fintech space for 6 years this month. I’ve been a ceo/founder, vp of product, and managing partner. there’s no way to shortcut this, you’re going to need a chief compliance officer and to adhere to the right financial regulations, likely money transmission but possibly others as well. you need to contact a lawyer and get started BEFORE you process your first payment.

i will warn you, starting down this path can be lucrative in extreme cases, but in all situations will lead to massive frustration, headache, and stress coupled with minimum 5 year reporting and record keeping requirements.

this is a hard life for a solo entrepreneur and i do not recommend it wothout having raised a minimum of $2-5 million usd and 5-10 years of experience in regulated industries. this is not the industry where you get to move fast and break things. if you want more information or help hashing things out, you’re welcome to reach out directly. i think my email is in my profile or its my username.

There are a lot of sites doing similar things, which aren’t as well known as Patreon. Patreon is popular, but it does have some drawbacks, such as only taking USD.

Some alternatives include:

Sther - A site all about inclusivity, aimed at the LGBTQ and POC communities. Steady - Designed more as a way for freelancers to fund their work. Podia - Recently launched membership crowdfunding, building on their short course and digital download platform. Ko-Fi - It is a freemium model that requires paid membership to receive monthly payments from fans, instead of one offs. Drip - A recently opened membership funding site which is owned by Kickstarter. Liberapay - A site for repeat donations. Open Collective - for transparent ongoing funding of groups. Backerpass - Another membership funding alternative, based on reaching goals. SubscribeStar - For subscribing to Social Media influencers and helping them with payment subscriptions. Collide - Yet another alternative which has recently been launched. Ratafire - Another small creator membership site. Minds - A Cryptocurrency option for subscriptions. Kind of. I’m sure there’ll be many more sites like these in future, as fan funding is certainly something that’s catching on!

Heya, I built something similar for a startup usig stripe connect:

https://stripe.com/connect

I'd start with their docs.

We pushed all tax concerns to the client (we used standard accounts for our sellers, which might not be an option for you) and made it clear it was their responsibility.

The downside was the price. Not a lot of alternatives at the time (Braintree, PayPal) but that may have changed.

Oh boy. You are in a world of hurt here.

The issue here is on the banking regulations than the technical side. The technical side here is a breeze, an absolute breeze that any technically competent developer can knock out a Patreon clone in about a week.

I've gone through most of the answers already and not surprised by the lack of knowledge. I've been looking at banking for the l8 months - almost 2 years. My next step is to approach someone competent and with a track record in the industry to start up a fintech company and approach a bank to start the long process of becoming a bank.

But I digress :)

To do this yourself. Let me explain the following steps you'll need to fulfil.

1) The ability to on-board individuals and perform KYC.

2) Taking and validating the individuals bank account for payments.

3) Processing credit card payments and splitting them up between the % for you and the rest for the creator.

4) Dealing with fraud when taking the credit card payments.

5) Sending the payment to the creator and doing FX spot transactions where necessary.

6) Performing AML on each payment.

There's so much more, but I want to keep this post succinct.

As others have said. Stripe is the quickest shortcut to this. They have already built it all out and you just need to connect your platform to their API.

The downside is that whether rightly or wrongly. Patreon is their preferred partner in this space. Let's say "Sargon of Akkad" joined your platform and Stripe is processing your payments. You would be shut down when word got out.

If you don't understand what I mean. Please do some googling. I won't go into it with this post.

Now if you definitely want to do this yourself, here are some of the problems you'll face.

The first thing you need to realise, that by not actually running right now. No credit card processor is going to touch you. I've been knocked back by many processors because I have no volume. It's a chicken and egg problem. How can I start if I have no credit card processor? They don't care.

If you do find a credit card processor, there are still some issues. Can the processor split the incoming payment? Many can't. If that is the case you'll have to become the merchant of record which means you'll be responsible for all the chargebacks/refunds/etc instead of the creator. But then also means you'll need banking licenses for all the geo-locations of the individuals that on-board on the platform. The reason being that you are holding client's monies.

The next thing is that KYC and AML checks are very expensive. Although the credit card processor will do the checks themselves, you'll have to do it as well when monies flow into your account. You'll have to KYC the individual on-board and then AML whenever a payment is sent out. I haven't yet found an all you can eat. They want you to purchase packs ahead of time and also they run out. Also KYC and AML are separate companies as well. So that's double the cost.

The next thing is that you'll need to find a company to help you sending ACH payments and then either SWIFT or XRP for international payment as well.

Finally, there is another way. If you do find a credit card processor that can on-board individuals and hold them accountable for the payments instead of you and can then split the payments and put the funds in their home bank account or an intermediary for moving on later. Subscribe Star does something similar to this. You can achieve that.

However, you are back to square one. You are not current processing and thus service providers won't work with you.

You have a long road ahead. I suggest going with Stripe. Build out your platform, get some processing and when you want to cut the cord with Stripe. The other financial service providers will be willing to work with you. Because you'll have volume.

Oh and ensure you have well over 100k a month of transac...

My friend does it, he operates a company (In NYC) which accepts the payments and he then wires the creators after holding back X% in reserve fee less the service fee

He's been doing it for a while (4 years) now averaging 500K per month in payments.

All his customers are people from third world or second world countries like Russia, India etc...where accepting international credit cards is bit difficult and probably has more fees.

He raises invoices in his own company name then the creators are written off as independent contractors.

So creators will need to do their own taxes.

He's using Braintree and Stripe and load balancing between these two.

He's one man show and knows nothing about law/accounting.

He also got one accountant who is helping him calculate and make financial reports

It can be done I guess