Thanks for the feedback. I've closed the service
discuss.joelonsoftware.com
discuss.joelonsoftware.com
RubyPay was a points based payment system for digital content that anyone could use. Points were bought for cash, and redeemable for cash. It was released because we wanted to generate some feedback on the model.
RubyPay was closed so quickly because we realized some problems, and didn't want any live transactions going through our system that we'd later have to refund. Among some of the problems were:
1) allowing anyone to sell content without a screening process for them or the content
2) allowing consumers to redeem the points for cash, which brought a whole new set of laws into play
3) not anticipating all of the ways that fraud could propagate through the system
We're currently working on the service to address these and other issues. We've also discussed the business further with lawyers, became PCI-DSS compliant, and are in the process of forming industry partnerships. As always thanks for the feedback (there was another discussion thread on HN too), it helped us quickly pivot and iterate on our model, and probably saved us tons of time and headaches.
The original thread: http://news.ycombinator.com/item?id=1709481
Knowing when you’re in over your head is crucial and it looks like they caught it early enough since they opened up the feedback thread. Hopefully they’ll take this, regroup, and have a bit more ground to stand on in the next phase or project.
Bill Gates' first idea for a company was one that made devices that were supposed to be installed at traffic junctions, IIRC. (ref: business at the speed of thought)
Way to go Vasudeva.
My first reaction was WTF. In fact, I think the OPs last comment is a little rude. None of the commenters were advising him to shut down the service. They were trying to help improve the service ...
Altogether it's just weird.
My guess is that it's the realization that he was in way over his head, rather than your suggestion that he edit the copy on his site, that led him to change course.
You, among others, saved him from lots of trouble.
The primary problem is that to do this right, you will need to spend a lot on legal fees or find a lawyer to work for equity in your idea(you wouldn't even have a single customer yet).
I've run the scenario a million times and I would love to create a start-up that can disrupt, maybe even revolutionize the payment processing industry. My friend runs one of the big PayPal sucks sites, and makes several million collecting residuals by forwarding angry PayPal customers to open a real merchant account. I've seen first hand every possible complaint and gripe you can imagine.
Someone find me a VC that wants in on this. I'll take a $1 salary.
I had a startup in this industry, and I still work in it. Here's your biggest problem. It isn't PayPal or Google or any online service.
It's the credit card companies and the banks that control this. The best part is, your entire business will be based on the premise that the bank lets you process. They can drop you for whatever reason. It's not hard. Trust me, they'll manufacture whatever evidence they need to. Sure, you could take them to court, but meanwhile, you are without processing.
No. You cannot disrupt an industry when you rely on that industry to help you disrupt it.
Of course, you could bypass the credit card companies all together. A lot of companies do this with prepaid cards. Not only does it allow those without a credit card purchase their service. You could create a generic pricing card. But then you have to convince merchants to use your system, a system that has no users. And users need to buy your cards with no merchants on board. It's a chicken and egg problem.
Honestly, I think social networks will play a part in this in some manner. Flattr, while using credit cards, shows a unique angle on micro-payments, and is probably the first really innovative payment scheme I've seen since... well, ever since credit cards. Being positioned in Europe probably helps matters.
PayPal's automated fraud detection is notoriously inaccurate. They also don't have very good customer service. For years their phone number was hidden 10 pages deep where no one could find it. They freeze your account and hide from you.
A while back they ran into some trouble with the bank that was sponsoring their merchant account, they had to quickly make changes to keep processing.
Instead of spending money to improve their fraud/risk algorithm, they just lowered the threshold that triggers an account freeze, which helps with fraud but also drastically increases the number of false-positives, which they consider acceptable collateral damage.
They aren't even nice about it. Why tell me my account is "frozen"? Why can't they say "Congratulations on the recent spike in transactions. Your business must be doing well and we are delighted to hear that! Please give us a call when you can so we can go over some additional documentation that we will need from you".
Think about this: PayPal freezes your account, which brings your business to a halt, then you have to scramble to fix it. PayPal doesn't need to freeze your account, they can just as easily prevent you from withdrawing money to your bank account, which sucks but it probably won't kill your business. At least your customers can still pay you. They even have a "window" to reverse most transactions, but they would rather just freeze your account and act all nonchalant about it.
The logistics of PayPal is all wrong. Work with your customers, not against them.
Wrong. I know this first hand. First, "banks" do not decide whether you process or not. People do, and these people are, in my experience, fairly corrupt. Most people don't deal with the banks directly, but even if they do, the agents their aren't just dealing with you. All it takes is for you and a competitor to end up using the same bank, and if that competitor is bigger than you, they can push you out.
It's not difficult.
I've been on the receiving end of this. I've heard it all. I've had the agent on the phone, and wouldn't answer the question regarding which transaction they were claiming was against their policy. A few weeks later, after closing us down, the send us the information for a transaction that occurred after they shut us down, claiming that was why we were closed.
Chargeback levels? Well below the threshold. We had practically no actual fraudulent transactions, and more than 95% of the transactions that were pending chargebacks were friendly fraud (authorized card holder claiming a chargeback).
I'm not talking about some small time shop. We were pumping 8 figures through our banks at our prime, all as legit as we could make it (which at the time, was far more secure than most other processors at the time).
Your sentiments are right. The banks are interested in money, and if you are bringing in the transactions, they'll process. Unfortunately, if you're a small fish in a big pond (and yes, a small fish processing in the 10s of millions a year), and a bigger fish wants you put down, the bank will take the work to keep the big fish happy.
And if it sounds like I'm pissed, it's because I am. It's working so hard for so many years, pushing forth so many cool things, just to see it collapse. Not because you did anything wrong, but because someone maliciously screwed you over.
That's why I avoid looking at anything as a startup that forces me to rely on a single point of failure. Working with Visa and MasterCard puts you under their control. Sure, accepting money online puts you at their mercy as well, but it's not the same as building your business being an actual processor.
Anyways, I've rambled on long enough. Don't take offense if I caused any. That wasn't my intent.
There have been some less than scrupulous operators of payment systems in the past which have made it much harder for bona-fide operators to get started or to become even moderately successful. The fact that any such service instantly attracts a bunch of money launderers also does not help (that's not fraud from your perspective, but it is illegal and you are instrumental in making it work).
> PayPal doesn't need to freeze your account, they can
> just as easily prevent you from withdrawing money to
> your bank account, which sucks but it probably won't
> kill your business. At least your customers can still
> pay you.
They did this to me last week. They sent a message Friday night that they would need some extra documentation. I acted upon that on the spot. They then proceeded to restrict my account next Monday because they didn't bother to process my response to their request from Friday. That sucked, but they only locked withdrawals. My customers didn't see a thing, and they finally suspended restrictions Thursday. Took a few phone calls to make sure they hurry (to a number that is not free and not on the front page, but definitely not "10 pages deep": from your account > contact (footer) > call us).
Like anticipated, I feel dirty for speaking to their defense.
See e-gold,1mdc, Liberty Reserve,Phoenix Dollar,etc,etc - pretty much anyone who has tried to create an alternative currency or payment system.
The problem with a payment system in 2010 vs. 1995 is that credit cards and paypal are "good enough" for most applications. The only niches available are micropayments (never proven to be viable), markets incompatible with paypal or cc (square extends cc; P2P, international, high risk, porn, gaming, other banned things), or non-cash transactions (trading credits for WoW, or gigabytes of storage, etc., might be an option)