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Ask YC: Becoming a Merchant Service Provider.

7 points by izak30 ↗ HN
We make a CMS. We're building a shopping cart, and we want to make money. It's my understanding that one of the best ways on this path would be to take a small % and/or per transaction fee.

There are mediaries such as Amazon FPS, but that requires buyers to be sent to an Amazon co-branded page, not ideal. Authorize.net is the processor that I'm looking at, but they have no way of helping me become an MSP to provide my customers with merchant accounts.

I'm wondering if anybody here has gone through this with their business (pg? Yahoo! stores?). I called Wachovia business development, and they said basically "I don't understand exactly what you want, but I don't think we do it"

Any help or direction would be appreciated

9 comments

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olefoo
You don't want to be an MSP unless you're doing enough aggregate transaction volume to manage the risk adequately.

You can become a reseller for authorize.net or join any of a number of affiliate programs for payment gateways but you should plan on having to walk your customers through the approval process themselves. If your customers aren't large enough ( > $2000 USD/month txvolume ) to get their own merchant accounts you are stuck with one of amazon, googlecheckout, paypal or possibly getting your own merchant account.

Be sure you understand the risk you are taking when you start handling other peoples money, you will be liable for non-delivery and fraud from your customers and your customers customers.

izak30
Yeah, that's part of what I'm asking. I'm aware of a possible chicken and egg problem, and what I'm wondering is if MSPs/ISOs are generally underwritten by the providing bank?

It's very difficult to get information on this.

snorkel
I've had few customers wanting online stores so I just charge an hourly fee to setup their merchant account for them. That way money from each sale goes directly to them, they deal with that, and I get paid and never have to deal with it again.

But it sounds like you want to allow your customers to set up an online store where you handle all of the payment transactions on their behalf so they don't need their own merchant account. If you did this with Authorize.Net (assuming they allow it after you explain this scenario to them, and good luck with that because it probably violates their terms of service) then all of the money for each captured transaction will go into your bank account, then from there you'll need to somehow send the money to your customers minus your fee. How will you do that? Automatically means you'd have to use an ACH/EFT provider to do wire transfers into your customers bank accounts. I hope you plan on having a lot of fraud insurance.

izak30
No, not quite what I want. I want to be a provider of merchant accounts, as a intermediary for a bank.
olefoo
You can charge per transaction fees without needing to be the recipient of record for the transaction. But if you want to get involved in the moneyflow at the bank level, you have to jump through the hoops for being a regulated financial services company.

In my experience, if you are a software developer, it's probably easier and more profitable to be a reseller/affiliate of a financial institution.

maxklein
I'm also interested in a similar scenario - I want to allow people sell stuff over my site and I charge them a small percentage. Anyone know an easy way to get this done?
izak30
An easy way is Amazon FlexPay at aws.amazon.com