I had 100% same idea since a few months now. Didn't pursue it because of lack of companies and customers willing to use such a platform as intermediatory.
replySecondly, the legal aspect. Will this be considered as a wallet?
Anyways, loved to see it implemented by someone.
You're right to consider this, as it's an important aspect from a legal perspective.
replySince Small Transfers doesn't store customers' funds or allow them to withdraw a balance, the platform is not considered an e-money institution or a "wallet".
When the customers pay their balance, we immediately forward the funds to the merchants.
What happens when customers don't pay their balance?
replyWhat happens when the charge attempt fails after initial preauth?
Ultimately, the merchant bears the risk of non-payment, but the platform does its best, using industry-standard practices, to pre-check the customer and their payment methods for fraud and ensure a successful payment.
replyIf a merchant successfully authorizes a charge, the amount is reserved for that merchant for a limited period. Trying to capture that amount (or less) during this period will succeed.
I'm a little confused. Is Small Transfers not the merchant for the CC transaction? (Your website suggests Small Transfers is the merchant of record and then transfers funds to the seller.) If not, what's your role in the settlement process?
replyYes, Small Transfers is the merchant of record for the card charge. We transfer only funds actually received to the merchant's Stripe account; we don't advance funds. As per the Terms (§1 "Transfer" and §5.6 "Non-Payment"), chargebacks/reversals are net-deducted from future transfers, so the seller bears non-payment risk.
replyDetails: https://smalltransfers.com/terms
I mean this in the most constructive way possible: why do you think this idea hasn’t worked before, when it’s been fairly obvious and easy to build for a long time? And what’s your fix for that issue? You present the merchant side of things, but not the customer side which is more important to me, as a potential Small transfers adopter. What’s customer conversion like? Are micropayments actually better than typical payment amounts? Based on my experience I’d expect the conversion rate of a $0.01 and $1 fee to be pretty similar. The friction of inputting a credit card and trusting a service is way higher than the actual payment amount. I’d also have to introduce 2 more services to my customers: Small transfers powered by stripe, and customers would have to fund an account that realistically speaking can’t be used anywhere other than my site. Just offering some questions to think about!
replyhttps://en.wikipedia.org/wiki/Flattr figured out some parts of this. Notably, you picked your own total monthly donation, and then clicked a button on participating sites to allocate a fraction of your total to them. AFAICT it worked as advertised, but raised new issues with donation behavior. E.g. I obviously like curl every month, so should I click its button monthly? Twice monthly? If I am a developer of some other useful OSS software, should I click curl's button and the curl devs click my button? Does the money just slosh around between merchant-customers? Is that good?
replySee also: Kachingle (2007), Amazon Flexible Payment Service (2007), Dwolla (2008), Tipjoy (2008), Facebook Credits (2009), Google Checkout (2006), Flattr (2010), Changetip (2014)
replyI believe the idea has been attempted many times before, primarily by large companies that have tried to create their own currency. It seems deceptively simple, but it's quite tricky to get right, both from a legal and technical perspective. One of the main legal complications is the one mentioned in another comment: avoiding the status of an e-money institution.
replyWith Small Transfers:
- There is no wallet or funding for the account. Customers simply pay for what they owe, usually at the end of each month.
- There is a lower psychological barrier, since there is no subscription or prepay commitment. Customers who dislike recurring payments are more willing to try something new that avoids this.
- Merchants need to introduce customers to just one extra service, Small Transfers.
As more merchants adopt Small Transfers, customers will still only need one account, making micro-billing even more convenient.