Hacker News Reader

Comment by tomasien | Hacker News Reader

It's incredibly impressive that WePay has managed to differentiate itself and stay independent in the credit card API / marketplace payments space. Balanced seemed to have dramatically higher mind share and felt compelled to shut down.

I've been asked to explain WePay's place in the market before and have been unable to - I'm not sure if their risk / chargeback protection is what puts them over the top, great BD people, I'm not sure. However, assuming their funding is a sign of progress, they're doing something right despite stiff, direct competition and that's awesome.

View on HN

Thanks for the kind words. (Bill from WePay here)

We keep a relatively low profile, since we focus primarily on marketplaces & platforms with >$10m in annual payment volume and take a pretty deep, enterprise approach with our customers vs focusing on a broadly available, self-service developer platform. One day we hope to get there too, but for now we like to go narrow and deep for the sake of focus and providing a killer customer experience.

As far as product differentiation, we focus on marketplace fraud & risk management above all else. It's a tough problem to solve - most fraud systems are built to protect retailers from bad buyers, but the most insidious fraud risk on marketplaces is from bad sellers. We guarantee our customers against this type of loss while still providing a great overall UX.

Happy to chat more! bill@wepay.com

That makes a ton of sense! I may indeed reach out for some more thoughts, thanks for that.

Having run a marketplace, the scammers are just ridiculous. The one I remember most is that some group stole the credit card numbers of a church group to "buy" PS3s from fake sellers. Thankfully, they were really naive about it, so we reversed all the transactions before they hit, but that's just the tip of the iceburg.

So here's a question: so what do your customers use before they hit $10MM in ARR and get on your radar?

It's a smattering of options: PayPal, Authorize.net, Stripe & Braintree are all good ones. We have folks that start with us from day 1, but typically fraud isn't too much of a concern until you start to really scale, and so our value proposition isn't as strong. We're working on ways to change that!

I hate to say this, but "bill" @ "*pay" looks like you're the billing department.

> the most insidious fraud risk on marketplaces is from bad sellers

This is a huge challenge in the space and I wonder what the real internal financials are of the other leaders like Square and Stripe. We just don't know yet, do we?

The easier it is to sign up to accept payments and the faster it's paid out, the easier it is for fraudulent sellers to exploit it. Example: A ticket seller conveniently accepts payment by credit card, using a hot new disruptive processor called Trapezoid that was super easy to sign up for using an email address and a stolen identity. Buyers all start charging their tickets because now they get consumer protections, convenience and cash back. The seller gets their money the next day thanks to Triangle's disruptive, cool business model.

Only it turns out the tickets were fake and a couple weeks later all those buyers file chargebacks with their credit card issuers. The seller has skipped town with the money and Trapezoid has to cover thousands of dollars in fraud. They only collect 2.9% to begin with and the majority of that goes back to banks[1], so this one fraud incident wipes out the profit on hundreds of other sellers. If they don't keep these fraud incidents to 0.X% their volume, they're out of business.

This is exactly why it's been a pain to sign up for payment processing in the past. Processors are ultimately responsible for any fraudulent merchants they connect to the network so they have to perform due diligence. It's also why fees are so much higher (2.75-3% for "easy" services vs. under 2% for traditional processors).

[1] Debit card interchange was regulated down to 0.05% + 22 cents a couple years back, a massive reduction. So far I have not seen a single online processor pass those savings on to sellers. They all still charge close to 3% and keep the difference. I theorize that debit is providing them the margin they need for this model to survive. Bill, I don't suppose you can comment on this?

Congratulations!

I interviewed at WePay about a month ago, and thoroughly enjoyed almost the entire process. I never got a response from the recruiter, which was extremely disrespectful given that I spent a day at your offices. Hopefully as you grow larger thinks like that will be straightened out.

Other than that, wish you great luck! I thought the office was really vibrant and had great conversations with everyone that interviewed me.

I am really sorry to hear that - that is unacceptable. Would you mind sending me an email so I can make sure we improve? bill@wepay.com

(WePay employee here) One thing we have spent a lot of time working on is protecting our marketplaces and their customers from regulatory risk, which is something not a lot of people think about. We've noticed the card companies are focusing the Eye of Sauron on PayFacs in the last several months, and consequently their customers. We have spent the better part of last year ensuring that all our ducks are lined up in terms of ensuring that our customers are on the right side of the regulations, and now it's paying off.

WePay has managed to differentiate itself and stay independent in the credit card API / marketplace payments space..

I've been asked to explain WePay's place in the market before and have been unable to

Because contrary to your first statement about WePay "differentiating" itself, it didn't. There has been little to zero differentiation among the companies who make money moving money around, skimming "2.9% +0.30" off the top every time.

What's happening here with this funding round says nothing about WePay being special or different... this is merely evidence of consolidation. If there's no true disruption, cartel entities that elect to cooperate tend to squeeze each other out on a LIFO basis -- "Last In First Out". The cartel gets bigger and stronger as it melds into an monopolistic oligopoly.

WePay just happened to be one of the first players, which is probably why it survived. Stripe and Balanced soon thereafter had an opportunity to strike out and differentiate (yes, on pricing; because when your product is money nothing else matters) they were both weak and chose to assimilate into the amoeba matching pricing, not challenging it.

HN is well aware that there's now one fewer player in the cartel with Balanced ... um, a sinking ship. Yeah, they threw me overboard (http://ink.hackeress.com/2015/01/why-im-boat-rocker.html), and I'm not surprised the LIFO model is playing out as expected. The Balanced engineers I worked with were all awesome, and we had the smarts and tech to compete. But in order for the trend to be away from oligopoly -> monopoly, companies _have_ to let price be the factor that drives competition. Offer more for less, and you will win market share. Take the momentum away from the amoeba, not into it.

But they didn't believe me.

There's still a huge opportunity for anybody with the guts to do it. Crowdfunding / do-gooder sites that tend to raise money. Indie freelancers.. there are more than enough people who care about price of moving money enough to go low-cost over big and shiny.

This is a hell of a ramble and I don't understand it but thanks for the insight! Maybe I'll connect the dots on it one day.

We Pay actually had a pretty clear response that jives with my understanding completely - they focus on BD to large companies and have built risk tools that they use as a selling point. They're win some and lose some in that model, but the wins are good wins and build credibility. So yes, consolidation is part of this, but it turns out variations in sales strategies and value prop can help you "differentiate". That's what I meant by that.

Reply on news.ycombinator.com