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Ask HN: How do the growing number of marketplaces handle outgoing payments?
There seems to be an increase in startups that have two sided payment processing needs. That is to say they collect money from one party and pay it out to another. Just a few examples include Groupon, AirBNB, Etsy, Freelancer, Tippr, TaskRabbit, Uber and oDesk. All affiliate networks, advertising networks and other crowdsourcing marketplaces would fit this description as well.
Getting a merchant account is a hassle in itself (just to accept incoming payments). Dealing with outgoing payments via bank transfer, cheque, PayPal, Moneybookers, Amazon and others only adds to the complexity. Let alone on an international scale.
Are there any startups out there offering a service layer that makes the integration of all of these options as simple as a few lines of code? The upside of this would be that the provider only deals with one central point of contact, their users can choose the most convenient method for payout, that they'd gain instant global reach and have access to an extra level of fraud prevention (screening of users, cross-site analysis, etc.)
What startups are currently in a phase that could benefit from this? I'd imagine this would be startups in a stage of relatively fast growth and users all around the world.
[Note: a relevant article from Nathan at AirBNB http://nerds.airbnb.com/do-it-yourself-ach-direct-deposit]
- glimcat 15y agoProblematically, with many lawyer and accountant hours, and generally while buffering outgoing payments until the incoming payment is fully secured. Paypal and ACH seem to be common transfer protocols.
- chexton 15y agoIndeed. Any startup handling incoming vs. outgoing payments is going to have special issues to deal with. Always walking a fine line.
- kappaknight 15y agoSince there are fees involved, wouldn't it make sense to collect the money, sit it on it for a month (or some period of time) to earn interest, and just send the other party a check?
- chexton 15y agoDefinitely it would. Sending a check seems clunky to me, just curious what other options exist. It seems the answer is none (essentially).
- lemma 15y agoYou want to be very careful with this, as you can end up classified a money transmitter and have to comply with a whole bunch of painful regulations. Just search for PayPal chained payments or Amazon's equivalent, it will do exactly what you need.
- rosstamicah 15y agoAgreed, my startup has a two sided payment process and was flagged by Paypal very early on for violating their Acceptable Use Policy. This was for the mere fact that the business model made my business a third party handler, which violates that agreement. Some companies fly under the radar on this, I wasn't one of those. So, the realistic options left imho are ACH using something like AmazonPayments and sending out checks, which has its issues. Unfortunately there simply aren't as many options for paying money out as there is taking it in. Btw my startup is Sponsorist.com, currently taking $ in through Stripe and sending out as checks. For now. :)
- chexton 15y agoGreat answer. This is essentially what most startups do, it's how Groupon handled things for a long time too (from what I understand). Checks are fine but as a foreigner they seem really clunky and don't work once the company has a greater reach. Shame PayPal flagged you so early on. I wonder how many other startups are in your position.
- chexton 15y agoAbsolutely agree. One of the prime reasons I asked this question was that although PayPal's chained payments would work it does require you to accept incoming money via PayPal. This isn't ideal in many cases, especially once startups start to see a little scale. Food for thought.