3 ms·

Why should there be a low barrier to entry when your entire business model is relying on moving money? If you screw up, you're going to screw a LOT more people

by cube13 15y ago

Why should there be a low barrier to entry when your entire business model is relying on moving money? If you screw up, you're going to screw a LOT more people than any standard startup. The potential for fraud is incredibly high here, which means that a high barrier to entry significantly reduces the potential loss. The entire point of bills like the California one is to reduce the public's responsibility for when these kinds of startups go belly up and cannot pay out what they owe to all their customers.

smokeyj 15y ago
I didn't say start-ups shouldn't comply with regulation, but that the cost shouldn't so high as to keep out new-comers. What exactly does minimizing competition do to keep customers safer? I would argue the contrary.
- cube13 15y ago
  Again, the high barrier is the entire point. With the current regulations, if the transfer company goes belly up, the state, who would be forced to cover any transfers that were not completed, is not 100% liable for the damages. Customers still get their money moved. The company goes under, but the state isn't left footing the entire bill(like they normally would if the company filed chapter 7). Let's do a thought experiment between the impact of circa 2005 Paypal versus Youtube(pre-Google) going under. Youtube goes down, people lose cat videos. It doesn't really effect anyone's checkbooks, except for the employees and investors of Youtube. Paypal goes under. Accounts that were in the process of getting credited suddenly are never going to get their money. Payments stop, which screws over basically every single user that should have been paid their money. Everyone involved with Paypal, from consumers to investors, is out money, and the states have to step in to make sure that all the accounts are closed out and finalized. There is a seriously high amount of risk for everyone involved. Having a high capital barrier helps to ensure that the risk to the consumer is much less, because they won't be completely screwed out of their money if the company goes under at the wrong time. Also, the taxpayers won't be left footing the bill. Also, I haven't even touched on fraud or money laundering cases. Having these kinds of barriers to entry helps stop most of these kinds of crimes, because it's just too much risk.
  - smokeyj 15y ago
    You're falsely assuming scammers cannot get access to capital to comply with regulation. Madoff is just a small time scammer as an example. It's a false sence of security and leads to anti-competitive practices.
    - hazov 15y ago
      Madoff did not operate a payment transaction company. It's not even in the same domain.

by cube13 15y ago

smokeyj 15y ago

I didn't say start-ups shouldn't comply with regulation, but that the cost shouldn't so high as to keep out new-comers. What exactly does minimizing competition do to keep customers safer? I would argue the contrary.

cube13 15y ago
Again, the high barrier is the entire point. With the current regulations, if the transfer company goes belly up, the state, who would be forced to cover any transfers that were not completed, is not 100% liable for the damages. Customers still get their money moved. The company goes under, but the state isn't left footing the entire bill(like they normally would if the company filed chapter 7). Let's do a thought experiment between the impact of circa 2005 Paypal versus Youtube(pre-Google) going under. Youtube goes down, people lose cat videos. It doesn't really effect anyone's checkbooks, except for the employees and investors of Youtube. Paypal goes under. Accounts that were in the process of getting credited suddenly are never going to get their money. Payments stop, which screws over basically every single user that should have been paid their money. Everyone involved with Paypal, from consumers to investors, is out money, and the states have to step in to make sure that all the accounts are closed out and finalized. There is a seriously high amount of risk for everyone involved. Having a high capital barrier helps to ensure that the risk to the consumer is much less, because they won't be completely screwed out of their money if the company goes under at the wrong time. Also, the taxpayers won't be left footing the bill. Also, I haven't even touched on fraud or money laundering cases. Having these kinds of barriers to entry helps stop most of these kinds of crimes, because it's just too much risk.
- smokeyj 15y ago
  You're falsely assuming scammers cannot get access to capital to comply with regulation. Madoff is just a small time scammer as an example. It's a false sence of security and leads to anti-competitive practices.
  - hazov 15y ago
    Madoff did not operate a payment transaction company. It's not even in the same domain.