Ask HN: Who Has Solved the Third Party Payment Aggregator (TPPA) Problem?
I've been beating my head against the wall on this one for some time. I've talked with Braintree (Payment gateway which many people say great things about) and a host of payment processors to no avail, yet.
We've raised a seed round (Low six figs), are in a business incubator funded by the Federal Government of Canada, and have established a board of advisors to help us through problems like these and mitigate much of the risk associated with a startup.
Recently both Yardsellr and AirBnB have been approved for the exact payment flow we're looking to provide (Albeit in a very different market). Does the HN community have any insight on who I should be talking to, to solve this problem?
A little info on us can be found here, if you're interested:
www.twenty12.ca www.styckyd.com
Any info or leads would be greatly appreciated, I've been working at this problem for about six months and feel I'm missing something key here.
*EDIT: To clarify the above issue, we're having trouble finding an Acquiring Bank that will approve a TPPA model. There are other startups who have found some and we're wondering who those banks are as we have come up empty handed so far.
13 comments
[ 3.2 ms ] story [ 38.1 ms ] threadI deal with this on the IPSP side. TPPA really isn't difficult from your merchant bank's standpoint, the risk factor is what they are trying to prevent. Being the intermediary between purchase and sale carries a greater risk if you aren't shipping the item yourself with confirmation tracking. Since you don't know if your vendor has drop shipped the item, or the quality of the item that was shipped, or if it was even the right part, the onus is on you when you do TPPA.
Address that risk and how you plan to fix that with your merchant bank. Your bank will generally require a larger reserve, financial guarantees, or perhaps a longer hold on your funds until you've established trust/a low chargeback percentage. You will pay a higher discount rate.
Braintree offers this service, did they tell you why they won't offer it to you?
Our model is designed to cover a lot of that risk. We can determine when the package arrives as we've built in the shipping system to our model. The model would be:
- We receive payment - The seller prints out the shipping label - Carrier picks up the package - Package is delivered - When the buyer approves or 48 hours after delivery has passed we then release payment to the seller
If there's a problem with the shipment we can then enter a claims process to solve the issue. This is designed to mitigate as much risk as possible.
I suppose to clarify it is the merchant bank that is the problem, we're unable to find one that will take on the business. It would have been easier had I stated that in my original post, I'll edit it.
Braintree is trying to help, but we're unable to get underwritten by their Acquiring Bank. That particular bank wants to see $50MM in net worth, which we cannot claim at the moment.
Also, I would make sure that your terms & conditions on the site clearly outline every detail and protect you from liability.
From the US side I have never seen banks out right refuse as long as your personal/business credit is good and you would qualify for a merchant account under normal circumstances. Most here simply require a greater reserve and/or charge a higher percentage. I do know that Visa has some special requirements such as filing an application direct with them, paying a premium application fee, and then an annual fee on top, but I am not sure about the other cards.
You may want to talk to your bank directly. Go in with all the details, a flow-chart of how the process works, have the website ready to go, and all the details for your company/founders. It is sometimes easier to talk to a person face-to-face and have them understand clearly what you are trying to do. It may simply be that you are not explaining it clear enough for them to understand your business process.
We've got the Ts & Cs fairly well covered, that's an evolving document though, I think.
Perhaps this is a Canadian bank issue, I'm really not sure yet. Our experience has been that every processor we've talked to (And thereby their Acquiring Bank) has told us they couldn't get the model approved before we had gone through the application process.
If you're saying that it doesn't seem to be a problem then I'm going to have to go back to the drawing board and scratch my head a bit. There are companies like AirBnB and Yardsellr that have been approved recently.
I am not saying it isn't a problem, just that you should expect to have to make concessions in the form of higher reserves and/or fees. Many companies do similar, if not the same, scenarios so it is definitely not impossible or something that is so difficult to accomplish that it is avoided at all costs.
From the sound of your response, you have not gone through the application process as of yet, you have just been talking with processors. If this is the case I would suggest going through the application process. They, like you, are trying to reduce risk and are most likely not going to tell you upfront that they can get it approved or not.
Try http://globalpaymentsinc.com I had a customer who used them in the past and was very pleased with their service (although they were selling directly). They offer service in Canada as well.
Two suggestions. Change your business model. Obviously you have some credit with your sellers. Talk with UPS Logistics, integrate a shipping platform so that your sellers ship to you, and you reforward. At this point, you don't need TPPA processing. You get the business off the ground, processing orders, proving the viability of your concept while continuing to pursue TPPA.
Two, YOU or your cofounder get on the phone with the acquiring banks. Only you know the business, only you know how you're going to address fraud and risk, and only you have the passion to sell the idea to the banker. My guess is you're talking to a broker that is doing the dealing behind the scenes that isn't talking to the person that can actually make the decisions. Leverage your Board - they surely have connections.
It is a longshot, but, email me and I'll give you two contacts that MIGHT be able to help. Poorly disguised email address in my profile.
E-mail coming your way. :)