I know the solution, but it's illegal | Hacker News Reader

I know the solution, but it's illegal

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22 pointspeteforde23 comments

The suggestion in the article (instant-financing for online purchases, like with auto-sales) will simply not work, for one reason: the majority of purchases are not capital investments (as for example a car or a home), and therefore quickly depreciate in value beyond the level at which a finance agency can recoup costs in a repossession.

Until you fix the problem of defaulting, finance will be an expensive proposition for unknown borrowers, too expensive for most non-asset purchases.

A most-excellent point.

I don't have a solution for defaulting, but I do know that regulations make it near-impossible to run experiments that would lead to a solution.

Wouldn't credit cards have this same problem? It seems like most online purchases are already instant-financed through credit cards, though credit approval is done in advance. Credit cards are unsecured and the whole system is largely based on the probability of the cardholder defaulting given their payment history. I don't see how this is different.

Depends on your perspective. The vendor is covered by the credit card company, and gets paid, so doesn't need to know anything about the borrower.

The credit card company doesn't want the borrower to default, so they do a certain amount of checking before pre-approving the card to minimize that possibility across their customers (and charge a premium across the board to ensure they're covered even if some defaulters get through).

That's what I meant when I said "finance will be an expensive proposition for unknown borrowers"; they're not unknown (to the financer, i.e. the credit card company) if they have a credit card account.

Nobody extends credit to "unknown borrowers". That's exactly why credit scores exist, which map 1-to-1 with the probability that a borrower will default prior to some horizon. This is a solved problem.

He says there's no US financing. Wrong. https://www.billmelater.com

Happy to be wrong, but I see no evidence that these folks offer developer integration.

The main idea is that it would have to be an option alongside Visa/MC/PayPal.

Actually that's exactly how billmelater works. On several websites it's beside the credit card payment form. Unfortunately I can't think of an example site off the top of my head.

I see it on ecommerce sites all the time. It's on NewEgg for example last I checked. It's very common.

Logn is correct, it work exactly like this. Performance Bicycle uses it, eCost.com, and Drs. Foster and Smith. I think I've seen it for flowers as well.

Bill Me Later is owned by PayPal so it's not exactly poised to be a disruptor.

Well, it was poised to be a disrupter so PayPal bought it...

http://profy.com/2008/10/06/ebay-acquires-bill-me-later-to-m...

What does that have to do with invalidating the author's claim?

Yes, we need another way for Americans to painlessly shop their way into ruin.

Hey Pete - Alex from FinanceIt here (http://www.financeit.ca); thanks for the mention in your article! We actually do solve most of the problems you outlined in your article. Our current focus is on improving existing point of sale financing systems for retailers - however we've developed an API (https://www.financeit.ca/api/v1/index.html) so any developer can offer instant approval financing online. I would love to connect anyone whose interested with our API people. Message me at acommons at communitylend.com

There is another fundamental reason industries would want to prevent this. Competition is an anathema to capitalists. And citing Uber is hilarious considering they are also disrupting the lives of not just the industry, but their very own drivers. It is no wonder their drivers are protesting at their headquarters.

Abuse is another way companies like Uber increase "competition".

So I wonder what kind of abuse instant financing would entail among strangers.

"In exchange, they would agree to give up some percentage of their gross profit on the transaction."

Sounds just like a commission. If the problem is "marketplace founders are stumped when it comes to capturing any of that value for themselves", then the existing answers include commissions and referral fees. Setting up instant financing in order to have something to take a cut of may be a solution in search of a problem.

Are there other solutions to this "matchmaker" problem? I've been thinking about a start to match advertisers to local newsletters but I'm not sure what my business model would be?

I am completely lost as to what this solves that credit cards don't already. Things like Bill-Me-Later are fairly niche products.

Likewise. This seems like a wild theory in search of a problem with a lot of back-filling.

Perhaps I misunderstood something.

It might be useful to people with bad credit scores.

How would that work? How/why would you extend credit/financing to people with bad credit. BillMeLater is subject to credit approval.

This could be disastrous and a recipe for bankruptcy if not managed properly. My biggest concern with this software is what type of person is likely to finance a $100 purchase from NewEgg, certainly not someone with good credit I would hope. I only use BillMeLater because it's interest free so, however minimal, I get 6 months of interest I wouldn't have normally gotten if I had paid immediately. This doesn't sound like what the OP wants to do.

That said, I'd never NOT purchase because of a lack of BillMeLater or similar services so it's not like adding this feature would give you access to new customers.

What the OP proposes is basically a credit card company, it's not really disruptive. Neither was BillMeLater.

Have only skimmed, but ripple.com might be highly relevant here.

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