Ask HN: Payment processors and "escrow" | Hacker News Reader

Ask HN: Payment processors and "escrow"

10 pointspeteforde6 comments

My girlfriend is an aspiring entrepreneur that is currently trying to bravely navigate the painful world of online payment gateways. Specifically, she's been having a series of conversations with Paypal regarding their ability and interest to process significant volume. She'll be putting $500k/month through it to start.

Where we've hit a wall is that Paypal doesn't want to do business with her because they suggest her business - collecting money from the parents of students who want to pay for lunch online - is in fact an escrow. That is, she'll take in a large sum and pay out to a large number of vendors.

And that's apparently against the rules!

If anyone can point me/us towards: - plain english explanations of the gotchas/best practices in this space - payment processors that aren't so stupid - progressive banks that would work with us - other sources of good advice

I figure that Etsy, 99designs and hundreds of other small companies are all "escrow" by Paypal standards. Different industry, but similar financial model.

I should also mention that we're based in Toronto, Canada in case that's a factor.

I'm pretty sure this type of business is considered a "payment aggregator" by merchant account providers and acquiring banks. It's usually difficult for a young startup to get an acquiring bank to underwrite such an account.

You can find some more information on payment aggregators here: http://www.braintreepaymentsolutions.com/blog/high-risk-mech...

You should also try out Amazon FPS: https://payments.amazon.com/sdui/sdui/helpTab/Amazon-Flexibl...

In general, Paypal isn't geared to do a good job of supporting larger clients, which $500k/mo definitely qualifies as (in the Paypal world).

Their turning you down was doing you a huge favor. Better a little annoyance now than a lot of pain later when they decide you are violating their TOS midstream, and hold your funds for a few months.

That's weird because their newest API features allowed you to do just this, I think. It's called their Adaptive Payments API and the category of payments that would be applicable to your girlfriend's business is called Chained Payments.

More info here: https://cms.paypal.com/es/cgi-bin/?&cmd=_render-content&...

BTW, I'm in Toronto too and use PayPal for my startup, so if you have any other Q's, email me. My info is in my profile.

You could also do a parallel payment, then you don't get in the middle of the transaction just divert part of it to yourself.

Another good thing about adaptive payments is that you can specify who pays the fees. You can split fees between everyone or make the sender or a particular receiver pay the entire fee.

API documentation and what not here: https://www.x.com/community/ppx/adaptive_payments

Oh, forgot, the bad news for adaptive payments is that everyone involved in the transaction must have a PayPal account; No credit card transactions.

Adaptive payments just started accepting credit card transactions:

https://www.x.com/people/BaldGeek/blog/2010/06/25/its-offici...

This is one of the stuff that I have in my bookmark library that seems most relevant:

http://blog.recurly.com/2010/01/lessons-learned-in-online-su...

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