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Ask HN: do US banks allow access to their backend for me to automate payout?

6 points by rush-tea ↗ HN
I am new to payment services. I am currently using Stripe as my payment gateway to process buyer payment to my business bank account. I would then need to payout the seller from my business bank account using either ACH, wire transfer, or mailed check.

All of these payouts require human input to enter the amount and whom I make it to manually. So it's not efficient if my startup takes off. So as I explained it to the bankers what my startup is and what I intend to do, they told me that it's not possible to do this automatically with my software accessing the bank backend API.

What they told me instead is that use a Quicken or Quickbooks?

I am curious that either I explain it wrong or the bankers have no clue what I am talking about. Or really there is no way to do this?

Maybe there is a banking term that I am not aware of.

What do I need to do?

Thank you for the advise.

11 comments

[ 4.2 ms ] story [ 38.7 ms ] thread
ig1
Are you running some kind of marketplace matching buyers/sellers ? - if so you're probably breeching Stripe's Terms and Conditions. Because such solutions can essentially be used for money laundering, etc. and are high risk fraud targets you typically need to abide by various compliance standards and be insured for the additional risk.

One option would be to use a dedicated solution such as Paypal X or Balanced Payments, or alternatively make a custom agreement with a merchant account provider.

rush-tea
Yes, the startup I am working on is a marketplace matching buyers and sellers. buyer pays the seller service fees to my site, then the site holds the money until it's done, then site payout the seller minus the site commission. so it's similar to odesk or zaarly fee structure.

I can do it this way, or if not, have buyer pays the seller directly and then I charge seller the % monthly.

How do I payout using other alternative like wire transfer or mailed check if I use Balanced Payments?

how do I get insured to ensure I am covered for fraud or other risks? I am not familiar with these side of entrepreneurship, the legality of running an online marketplace.

Thank you for your help.

Trapick
Short answer: yes, but it'll cost you, figure out a better way.

First thing to know is, if you're talking to banks you're sort of talking to the wrong people. You need to be talking to Banking Host providers, or Core Banking System providers (they go by a few names). These are the companies that actually provide the back-end for the banks. So if you're talking to bankers, they won't have any clue because that's not something they do.

Second, read up on ISO 8583 - that's a common API that's used. You may need to implement it, although there are a few open versions around.

Third, it's going to cost you lots of time and money. If you're solo or small, figure out someone who has already done the hard work and pay them for this.

rush-tea
I see. Thank you for your input. Yes, currently I am starting it on my own and of course, I prefer to use an end to end solution rather than build it myself.

Can you recommend someone who has done the hard work? Is it Balance Payments as ig1 said?

Thanks.

callmeed
Look at BrainTree and Balanced Payments. We use BrainTree at http://nextproof.com to process payments and then ACH funds to our customers a few days later. It works great but you will need to contact them.

Also, be aware you are likely violating Stripe's terms of service (see section 12). You are doing what is called 3rd party payment aggregation. It has higher risks and usually requires special permission. Stripe would probably prefer you use Stripe Connect so payments go to your users' accounts (but you can still levy a fee so it may fit your needs).

rush-tea
Thank you for your response. What confused me is why one payment processor (Stripe) would not allow it while others (in your example, BrainTree) is OK with it.

My question is that if this 3rd party aggregation policy is just custom made for each payment gateway (means they make their own policy), or is it legally bound by the US law?

I want to make sure that I do not break any laws here.

Thank you for your input.

PS: also I notice some marketplaces like zaarly or airbnb has some kind of insurance for protection / safety while other marketplaces do not. If I want to offer insurance or some kind of protection, how should I start? I tried to find information on google, but probably due to my limited knowledge on this area, I do not find information that is relevant.

Thanks.

callmeed
Stripe is about simplicity (for developers) and being fairly standardized and automated. Payment aggregation has higher risks and Stripe probably doesn't want to deal with them at this point.

BrainTree, if you contact them directly, can work with various merchant accounts. We had to get special permission to do payment aggregation. Also, our underwriting merchant held a % of our funds in escrow for the first 12 months of our operation.

The main issue with payment aggregation is increased fraud. We had to deal with it and you will too if you get any sort of traction. What happens is people will make fake seller accounts and then make purchases through those accounts using stolen credit cards. Once you ACH those funds to them, guess who is on the hook for chargebacks? If you said "I am", you are correct. In 2011, we lost a good amount of money (five figures) in a 3-month span. Also, if your chargeback rate is too high (> 1%), you will likely get a warning from your merchant processor and possibly get booted.

FYI, there is a YC company helping people deal with some of these issues: https://siftscience.com

Using something like Sift Science or simply manually reviewing and approving accounts is the best way to go initially.

To answer your other question, I don't think there are US laws regulating payment aggregation (yes). I don't think the new money transmitter laws apply here, but I could be wrong.

amfeng
Hi there -- I work at Stripe.

First, "aggregation" (something many of the other commenters have brought up) is a pretty fuzzy term. A lot of it depends on customer expectations -- whether they expect to be paying you (and not the seller), whether you're handling customer support, refunds, disputes, and so on. I wouldn't immediately assume that you're in violation of our ToS if you're a marketplace; many that use Stripe (Lyft, Exec, Postmates) are not.

Second, we actually have an API feature that allows you to programmatically transfer funds via ACH to a bank account almost exactly for this use case -- it's in private beta right now. I'd be happy to give you access (and help figure out whether you're actually violating our ToS) if you want to drop me an email (amber@stripe.com).

jareau
Hey! I'm a co-founder of Balanced, a payments API that allows for just this type of functionality. We support next-day ACH deposits to bank accounts within the US for 25¢ a transaction.

Here's a sample CURL command (copy/paste to your terminal to test it out):

  curl https://api.balancedpayments.com/v1/credits \
        -u da3da6de7c9311e288c9026ba7f8ec28: \
        -d "amount=10000" \
        -d "bank_account[routing_number]=121000358" \
        -d "bank_account[type]=checking" \
        -d "bank_account[name]=Johann Bernoulli" \
        -d "bank_account[account_number]=9900000001"
Learn more: https://www.balancedpayments.com/#payouts