Why some businesses aren't allowed on Stripe
stripe.com
stripe.com
I can see why stripe wouldn't want to support these businesses, especially those with higher chargeback rates, but don't tell us it's because of the credit card companies. If other merchant account providers can handle it, so can you. It would require more monitoring and possibly tiered fees to accommodate "high risk business," but you could do it if you wanted to.
Don't open the article with "we'd love to not be gatekeepers" and then talk about how you're doing exactly that.
By our nature, we are on the side of people building things. We have been through many of these kinds of struggles ourselves. (Stripe's first application for a corporate bank account was rejected!) So we wanted to make that clear and describe where we're falling short of our aspirations today.
I tried to speak to a manager who actually had a clue with business and was denied. In fact, I was pushed from pillar to post and spoke with 6 different people from the first tier support team.
It was at this point, I thought stripe was some fly by night operation, not garnering the level of praise that technical people here on hackernews were giving. Definitely not.
I think in future, should someone present you with a case that falls outside your remit. But is willing to do whatever it takes to work with you. You give them the benefit of the doubt and at least try to help them. In my case, you did not and that's not really great. In fact, you turned me into an enemy who went out to his community and turned a lot of people off you and onto your competitors.
Rants aside, Stripe has the best technical/developer support of any company I have every worked with. The constant presence of real technical resources in public IRC channels is phenomenal. I've been able to fire up irc, ask a question, and get an answer in under 5 minutes many times. Well done. I have not worked with support on production issues with charges though; I can't speak to that.
And thanks for the nice words about IRC! The folks in #stripe on freenode are always happy to chat.
But when looking at the terms of prohibited items in Stripe. Drop shipping is not allowed.
So what is the actual deal here? Shopify being a large entity can get away with it? But someone who has a business can't do it?
That's where the problem lies and good luck getting past the firewall of support.
Sorry, but I would have loved to have done business with Stripe. But until they actually actively start working with new clients. Good luck with that.
"I could not get past your first level support, who -- and I do mean this harshly -- sounded like they didn't pass first year business school."
They mentioned being a "case that falls outside [Stripe's] remit", and that Stripe didn't "give them the benefit of the doubt".
This statement is absurd, all businesses make these decisions whether they want to or not, and being the errand boy for The Powers That Be does not absolve you of these decisions. The continual framing going down that post is something of "We always do the right thing, except when we can't or we don't want to." Which isn't a great way to win people over.
If you were just explicit from the get go that as a financial services company you have to CYA first, and then try to do the right thing second nobody would blame you for that. Most reasonable people who will be doing actual business with Stripe have dealt with processors/merchants before and know what goes on with these deals, it's all about hedging risk.
But when you phrase it like you're trying to do the right thing and CYA is just an incidental inconvenience pressed on you by some big corp who's really the bad guy here... well, that's just disingenuous and people know it.
Beyond that people are aware that Stripe is growing, and growing fast. Large companies have inconsistencies with this sort of stuff, PayPal is a prime example. And while I've had amazing experiences as a lone developer with my own projects I've also had some not-so-great experiences with Stripe in my professional life (obviously I don't speak for my employer or any prior ones). Again, this makes sense, a lone developer is a lot less risky than someone who's already funneling funny looking money through your system, but trying to whitewash this clear fact as if you were in fact "doing the right thing" the whole time makes people frustrated and reduces people's ability to predict Stripe's actions. And nobody wants to deal with an unpredictable payment provider.
I realize that a decent amount of the article here talks about risk and how it's hedged, but you continually phrase things like the OMGYes case study as if your hands were tied in some non-moralistic decision, which again rings disingenuous. Same with the "Businesses that pose a brand risk" bullet point.
Last but not least, you guys squirreled away the most important piece of information in this article to a small paragraph. "Contact us first if you're at all worried" should be bolded in 60pt font at the very top. Asking people to do that and being very explicit and upfront about your CYA policy before trying to explain the nuances would go very far with how people interpret the message, even if there's nothing explicitly wrong with how it's done now.
This really is true. All companies will have to apply some criteria -- there are businesses that AWS or mail companies reject. In our case, we would like to avoid editorial and moral stances as much as we can. And as the post hopefully makes clear, we still have a ways to go.
> If you were just explicit from the get go that as a financial services company you have to CYA first, and then try to do the right thing second nobody would blame you for that.
We would actually like to be a bit more progressive than that -- rather than supinely CYAing all the time, we want to (and frequently do) take risks and push back on behalf of businesses we believe in. The latter half of the post was intended to lay out some examples of that. But the distinction you're drawing makes sense and I'll look at editing the post with it in mind. Thanks for the feedback.
Separately, I would be very interested to hear about your suboptimal experiences if you'd be willing to share them over email or the phone.
And look, I entirely get what you're saying, and I know you guys probably mean it, but again, you're missing the perspective of people who have a distinct impression of the financial services industry and who _know_ what happens when you go down this road with PayPal, Braintree, et. al. They don't necessarily care if you guys are making a best effort on a case by case basis if you're still hampered by contractual obligations to play by someone else's game. And when you try to make these moral stands but almost immediately point out where you were contractually obligated to compromise said stands it doesn't give people confidence in the moral stands and makes it look like grandstanding (holy run on batman). This is where the disconnect and (seeming) disingenuousness arises.
This is also why I emphasized that you guys should really just tell people to contact support first, because that clears all confusion and miscommunication without having to make moral pronouncements and before you guys are put in a position that forces you to compromise these bright lines.
Anyway, I really support what you guys are doing and don't want to seem overly critical but I wanted to communicate a disconnect that seemed to get lost in translation.
Personally, I think it was great that they articulated why they do what they have to do, and the measures they're taking to improve.
Although I agree with the statement about:
> "We want to avoid taking editorial or moral stances regarding the businesses built on Stripe."
The entire post, and John, basically indicated that they do want to take a more progressive moral stance. Their stance being that they want to fight for servicing certain businesses on Stripe.
Yes, we're going to remove the first sentence from the post -- you're right that it's, strictly speaking, inaccurate in the sense that we do want to take a stance in favor of certain kinds of businesses.
Stripe operates in the first world. They're not going to deal with clients that have 10%+ monthly chargeback rates.
Just a PR tip - it's probably best to solve those issues first, then publish a post about how you solved it. Apologizing for not solving the problem doesn't seem worth it unless you've made promise to fix it and then failed. In which case, a "Post Mortem" is perfectly defensible, IMHO
Not seem like gatekeepers when they're being gatekeepers. I guess it hurts their anti establishment affectations or something.
Is it really that simple? Personally, I have no idea, I don't work in finance. But it's worth a follow-up, preferably from someone at Stripe.
It's a self-fulfilling prophecy, in short. If the law or industry forces something underground, it will breed a dangerous culture. I'm happy to hear Stripe has a desire to be more open to these kinds of business...because the people working in them often suffer due to having to use unscrupulous providers for everything. Models having their payment accounts closed without warning and without receiving moneys owed, horrible rates (cam models often receive only about half of the money their customers send their way), etc.
But, it's also still very frustrating; when I've advised friends in the industry on technical matters I never have a good answer for payments. There just aren't any really good payment processors that will work with people in the adult industry. It's legal in all 50 states (at least in the case of pornography), there's just no reason for it to behave like a grey market, but it does.
The kind of agnosticism described in the first paragraph might mean, in a sane world, that a company like Stripe makes no assessment over whether a company's practices are legal or illegal, leaving this to the government to act upon alone.
The real message of this blog post is that Stripe's revealed and stated preferences are not aligned. Their stated preference is that they sell to literally anybody. The revealed preference is that they prioritize relationships that facilitate growth over that stated preference.
It's totally rational on their part. They're actively serving the big market, and writing a blog post about how sorry they are that they're ignoring the tiny market. That's the right division of effort, and it's smart too, because many members of the tiny market will (naively) believe Stripe's stated preferences; even though absolutely all evidence is that Stripe wants, more than anything, to build a big, legal, US-based business. And that's fine.
Consider that the spikes in bitcoin are often about scandals in the news with a concerted effort by the state regulated media over the past half decade to brand bitcoin as the tool of criminals and terrorists... and still I think pretty much everybody realizes that most bitcoin users are neither criminals nor terrorists.
No, Stripe's actions make clear that they care more about building a big, profitable, us-based company than they care about facilitating these niche "problem" customers. Which is fine.
They have correctly determined that these other lines of business are worth one pandering blog post in which they pretend that there was absolutely no way for them to serve these markets (an obvious lie), and they go about their business.
It's a smart play. I hope I'd make the same play, if I were in their shoes. Build profitable products for the big market, write a blog post for the tiny one. And maybe, someday, once the big market is sufficiently secure, add the incremental revenue from the tiny market.
Funny. Porn is far from being a small market online. And taking on porn related businesses doesn't mean they have to stop serving other types of businesses.
Are you sure about that? The source I’ve found [1] says it’s a ~$5B market, which is what FB makes in one quarter alone (and only one month for Google).
I wouldn't call a $5b market a "tiny, niche market" like the GP post stated.
Stripe's TOS expressedly forbids these, yet all they are is just a hunk of plastic not unlike those old tacky blackberry holsters that people used to have a few years back.
So yes, be in the "wrong business", you can't even sell a bit of plastic or leather because it's shaped wrong.
It seems like the opening paragraph directly contradicts their policy
There are quite a few stories about porn stars having their credit cards closed just because of how they make a living.
There is a portion in there that mentions Stripe sees this regulation as "overly moralistic" and that credit card companies have "old school morals".
The excuse given here for this instance (OMGYes) is directly from the POV of Stripe, not their mysterious shady partners holding them back.
From my POV, they may not have meant it that way, but in this day and age there's always tradeoffs to actions. They opted for the economical one (work with partners) at the expense of making an actionable statement ("we refuse to work with X because of Y"). Words are cheap and they are just cashing in on the modern doublespeak: speak for change in the "honest and open" way but keep your actions opaque so all people can really evaluate is the positive sentiment.
Nothing wrong with this, more positive discussions are needed. But I don't weigh them as heavily positive as others.
I frequently see ~30% of all transactions declined (customers in USA & Australian Stripe/Bank account) and it's a real pain for them having to constantly call their banks asking for transactions to be whitelisted, which often doesn't change anything.
This then leads to customers asking we don't just accept Paypal.
One change we're making is giving you better insight to which charges Stripe declines on your behalf (because they look fraudulent; you can override this behavior) and which charges are declined by the cardholder bank (you can't override this).
That would be great to see what the underlying cause or rational behind a declined transaction is.
I was especially surprised by how frequently payments were declined, especially after mandating that a name, address and CVC were required.
Or maybe the unique approach is not a factor here in these decisions.
It's easy to understand stored value/gift cards, but why cellphones and drop shipping?
Anyone care to elaborate?
Just how is it a fraud/money-laundering target?
Are you insinuating that they should be investigated by the IRS/FEDS now?
Laughable!
I know many who drop ship and are not money launders.
No one said that all drop shippers, or even the majority of drop shippers, are doing anything illegitimate.
Those who provide merchant accounts for credit card processing are the ones who assume the risk if one of their account holders is not able to cover chargebacks, and so from their point of view it doesn't matter that the vast majority of drop shippers are legitimate. What matters from their angle is how much they will be on the hook for because of the small fraction that are illegitimate. If that is too high, it can be better for them to just disallow the whole category.
Yes, but STRIPE are saying this. Because it's in their prohibitive items list and if you do it as part of your business, they will not do business with you. This is my whole point.
Other merchants will happily do business, so why not stripe? They have yet explained why...
I don't get the connection between drop shipping and money laundering either (As if money laundering was a crime as defined at the federal level- everyone is already guilty).
Nobody would use a credit card to launder money since it is tied to a bank, or in the case of a visa gift card, limited to such small denominations its impractical for money laundering.
A better way to phrase something like this is as a question. For example: "Wouldn't these criteria apply to Shopify? If Shopify is a legitimate business, how can other legitimate businesses overcome the same hurdle?" Putting it that way would abide by the HN guidelines, would be more likely to get a substantive response, and would take the thread in a direction where we all learn something.
It's hard, of course, to keep one's poise in a discussion about one's business being rejected for an arguable reason, but the alternative is for people to yell at each other, which helps no one and degrades this site.
Or maybe Shopify knows more about their clients or something like that. Regardless, the margins in Stripe's business are pretty thin, so they can't afford to either eat a lot of losses due to fraud or spend a lot of money on detection. It's totally possible that clients who drop-ship things are not profitable on average for Stripe, even if the vast majority of people drop-shipping things are totally legitimate.
Since Stripe is on the hook if customers don't get their goods or services, we need to be able to ensure that the businesses are legitimate. It's hard for us to reliably do so with drop-shippers. While dropshipping is not Shopify's primary business, they are more specialized in ecommerce, they have more business-specific data, and there are a handful of other properties which let them support these businesses more readily.
That's sweat! Where do I sign up? :D be right back
or are you asking for our website? That I'd rather not associate to "shady", and sadly we're blocked to operate in the USA [and most countries in the world] so that wouldn't help you anyway. Sorry.
Mind sharing what you do, and/or how you ended up there? :)
Let's say we operate an exchange (think: like a financial exchange except it's not).
also, visa reg's change by region, are you in multiple regions and following the rules of each? or are you operating entirely under the US region and forcing all of your clients to do so as well?
Is it just that they can accept more risk when the average ticket price is higher?
And then the last category is "Brand risk" including pornography.
I once worked for a startup that had an opportunity to boost its revenue by %100 by simply accepting the business of an online porn place (all we were was a recommendation engine). The startup turned them down because "ew porn, yucky!". If its legal, you shouldn't be passing arbitrary moral judgements.
That startup later failed.
And I won't be using stripe, even though I have no interest in doing anything related to porn.
There are too many moralizers (particularly the government "regulating" "money laundering" which is so broadly defined that they could prosecute any one of you successfully for this "crime" if they wanted to. EG: you take money from your checking account to pay a credit card, that's "money laundering" as the law is written.)
The government's bad enough, we don't need companies like Stripe preventing perfectly legal businesses for reasons of political correctness.
And this is a totally slippery slope. If my hosting company ends up accidentally hosting someone who takes advertisements from Torrent sites, is stripe going to cut me off? What if one of the sites I host is a blog that reviews porn sites? Am I now in the porn business?
Here they are signaling that they cannot be trusted.
And yet Stripe prohibits both pornography and firearms.
Not just Stripe, all the other major payment processors i.e. Paypal/Braintree, Square, Amazon Payments have similar prohibition clauses.
you are mistaking visa: the credit card, with visa: the payment network.
And I've never heard that firearms and their accessories including ammo being a fraction of financially risky like porn, e.g. no one dancing to the tune Operation Choke Point cites that sort of risk, vs. it being a purely political decision. Plus it's just plain more serious of an industry, e.g. no one needed a Federal background check to buy porn (!).
And there are many merchant banks that have affirmatively decided to provide credit card processing services to such companies at normal rates, for references to one offered in part as a enticement to join, see http://nssf.org/didyouknow/?iurl=payment-provider-offers-ser... from the nation's gun industry association (the NRA is the gun owner's one).
Only by processors like Stripe and of course merchant banks (but the latter is easily dealt with nowadays), politically right now we're very strong in most of the nation, and at the Federal legislative level, and by and large the only companies with political risk are those in our modern slave states ("A house divided against itself cannot stand. I believe this government cannot endure, permanently, half slave and half free." (Lincoln) and I believe there will be a resolution to this sooner or later, but that's not something companies like Stripe can make any plans or current polices about.)
Perhaps.... Team Obama are currently trying to land the first major blow they've come up with/dared to try, to shut down most of the nation's gun smiths (http://www.nssfblog.com/ddtc-says-guidance-is-not-new-but-cl...), so there's still clearly nationwide political risk.
But Stripe would be viewed very differently by, say, half the nation's population if they were willing to do business with those that do firearms and related stuff, as so many merchant banks are still quite willing to do, in states where that's politically safe, which is on the order of 40 with more than half the nation's population (which is not the same slice as the half I mentioned previously).
(And with regards to that above resolution, if it's in our favor, companies like Stripe that boycotted us will not be gently dealt with. So there's political risk in every direction, but I can't see how picking one side of a cultural currently cold civil war is a good long term strategy, and I seriously doubt its helping them in the short term, vs. staying out of the fray.)
I run a business where I regularly do between 50-100k a month. There are many other marketers that I know who are also doing the same.
I was not a good candidate and neither were they. Why? Because we act as middle-men between a product creator and the end user.
To someone like stripe, we are scammers. We supposedly put up sites which lie about products, we mark-up pricing and we take the money and not ship out the products. Yes, that is the brush that is tarred amongst all of us.
This could not be further from the truth, as it if was, then we'd be getting charge-backs up the wazzoo and our current merchant providers wouldnt be working with us.
I have yet to recieve a single charge back and I have many many repeat sales. So much so, that I an creating a brand by selling other manufacturers products under my own white-label brand. Which incidentally is against stripes terms and conditions.
What is laughable, is that stripe had no idea about my business model. In fact what they offered was stripe connect and having the manufacturer owning the stripe account. Which would actually confuse my clients even more.
Here is the deal. A lot of manufacturers don't know how to market. They don't know how to setup a sales funnel, market for clients, generate sales, make products go viral and generate 100k of sales. They have tried themselves spending $10k in marketing stacks and spending $1000s on facebook ads and getting nowhere.
But no, Stripe does not want to work with me or others like me. So guess what. We tell everyone one can, DO NOT DO BUSINESS WITH STRIPE.
I don't be doing business with them and I will be telling all my clients and be sure to tell everyone they know as well not to do business with Stripe either. I hope this has a knock on effect that 1000+ individuals who thought about using stripe, use someone else as well.
If only stripe had actual controls where they did reputation testing against IP, actually sided with the seller on charge backs instead of bending over and making the seller the bad guy, or do more fraud analysis.
I choose other vendors who do exactly this and I have had no problems so far.
Here's something. I'm not a scammer. I would rather lose a sale rather than trying to get that money and have someone have buyers remorse and do a charge back or demand refund.
Not all of us want to make a quick buck at all costs. There are other ways of doing this, believe me and STRIPE wouldn't be a way of doing it. That;s just laughable.
TL;DR. SCREW STRIPE.
It's not enough for you to be good. If an unreasonably large proportion of merchants in your segment are bad, then you can't be trusted to be good unless there are easily distinguishable factors that differentiate you, or the volumes are high enough to warrant the expense of doing a proper audit of your business, as the some examples Stripe describes.
The article explicitly gives multiple examples where they have accepted businesses from those risky categories after proper due diligence. However, it's quite likely that for Stripe it makes sense to do so only for businesses above a certain size or influence, not for everyone in the category who applies.
You can start for $100.
An opportunity to serve these markets exists
If you accept a merchant that has a lot of fraudulent transactions and after some months get a lot of chargebacks, then you're out of that money if you've paid that money to the merchant already and they (usually) go insolvent at that point instead of returning the funds. If a particular market segment has even a small portion (depending on how high your fees are) of merchants doing this, the whole segment will make a loss for you.
there is also rolling reserves to help prevent the processor from holding the bag for bad merchants.
but yes, these are risky markets to play in and a few people have been left burned... but those that figured out correctly, are rolling in cash... epoch and ccbill are good examples.
If you're focusing on the general market, then all your internal business is ill-suited for doing that, and if you target the "risky markets" then you'll be ill-suited for handling the normal markets because e.g. you'll not be able to get as cheap deals (or any deals) from various institutional partners. Your comment about load-balancing chargebacks below an arbitrary "threshold" is a prime example of behavior which (or suspicion of which) alone would make some institutions to not deal with you, because gaming that threshold is costing them real money that is comparable or in excess of the fees they can earn from you.
If you can get and maintain a better reputation, then it directly translates to lower rates you can get, so a larger profit margin and/or more competitive prices for your customers.
The more government and companies like stripe push those businesses out of credit cards, the more mainstream the use of bitcoin will become.
The only place where irreversible transactions (i.e. bitcoin without escrow) make sense are those services that have almost no risk of needing a chargeback.
There are many businesses that I trust to pay them with bitcoin, but if chargebacks are a problem for a particular type of business, if they're getting a significant amount of chargebacks then those are the exact businesses for which the protection that chargebacks give me is useful, those are the businesses whom I would pay only with a creditcard but not with bitcoin, because paying them with an irreversible instrument and no easy dispute resolution likely to end in my favor means I'm likely to be taken for a ride.
Competitive merchants with good reputation will accept credit cards (because for them chargebacks aren't as big a problem), and if a merchant is explicitly telling that they won't accept credit cards because they don't like chargebacks, then they're de facto admitting that they're likely to screw their customers, that their other customers are not satisfied and request chargebacks.
We, like much of the hosting industry, fight back by denying new accounts to certain high-risk countries -- like most of Eastern Europe. The fraud rate from some of those countries is probably 75% or more! But that sucks, too -- it's not fair to honest people in Latvia that they're banned from the services of many small online businesses. That's where Bitcoin comes in, and it's actually been a Godsend to us!
Many (most?) chargebacks on porn and gambling sites are fraudulent. The wife sees porn charges and the husband pretends his card was stolen or the gambler loses his bet and pretends his card was stolen, etc.
Then there are sites that sell things which are easily fencable, say gold coins or foreign cash. Most of the chargebacks there are not because the merchant is fraudulent, but because the cards were stolen. Without an irreversible payment method, this whole class of product cannot be sold online.
Go live outside of your SF/SV bubble and see how it works in the real world!
It's not legit for you to break the HN guidelines by yelling, calling names, hounding, and going on about downvoting. Those things aren't allowed on HN. They also aren't in your interest, since doing them reflects badly on your credibility. I know it's hard to resist the temptation to lash out at something you perceive as restricting you unfairly, but if you want to comment here, that's what we need you to do.
We detached this comment from https://news.ycombinator.com/item?id=12278660 and marked it off-topic.
Given the number of "support hell" horror stories that have been coming out about stripe in recent years, there really is not much point in you hanging out here spinning to try and put your company in a good light, you would be better off digging into why you are failing these people.
Insofar as "California political correctness" is a thing, and age is a protected class (and, unlike other "protected classes" its not a generally prohibited axis of discrimination, its only protected for age over 40), the former absolutely does not accept discrimination based on the latter, irrespective of other traits.