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by cedws148 days ago |
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upvoteby strnisa148 days ago|
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Requiring money upfront would classify the platform as an e-money institution, which is highly problematic from the legal perspective.
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upvoteby jazzyjackson148 days ago|
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How does tarsnap handle it? I think there's lots of services that bill up front... Isn't it only e-money if you can convert it back to cash?
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upvoteby strnisa148 days ago|
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If you store funds for a specific service that you provide, it's fine. If it's for many services or services provided by others, it's legally problematic.
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upvoteby strbean147 days ago|
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What if you inverted the trust equation by giving the money to the service provider immediately, rather than holding any of the up front payment?
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upvoteby strnisa147 days ago|
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We don't hold upfront funds. When a customer pays, we initiate Stripe transfers to the merchant as soon as the funds are available.

Paying the merchant before the customer's card payment settles would mean advancing funds, which would start to resemble lending/guarantee rather than payments, raising regulatory issues. It would also concentrate risk at the platform: defaults from one merchant’s customers could jeopardize the platform for all merchants.

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upvoteby strbean144 days ago|
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I was thinking more in an upfront payment model, where the customer pre-funds their account with the merchant. If you immediately sent those funds to the merchant, then would you avoid functioning as an e-money institution?

Of course, this would then mean that the customer is trusting merchant not to run off with their money.

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upvoteby strnisa144 days ago|
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That's an interesting idea. This may avoid the e-money issues, but:

  - The customer has to pay upfront, which lowers conversion rates.
  - No shared balance across multiple merchants, resulting in higher total payment processing fees.
  - As you already noted, trust shifts to each merchant to honor unused balances.
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upvoteby jazzyjackson147 days ago|
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Ah neat, thanks for the clarification.
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upvoteby namibj147 days ago|
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> Requiring money upfront would classify the platform as an e-money institution, which is highly problematic from the legal perspective.

What if you just reserve it on the card?

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upvoteby strnisa147 days ago|
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Online card holds typically expire in ~7 days (often sooner, depending on the issuer), which is too short for our use case.
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upvoteby namibj146 days ago|
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I thought 30 days are an option at least when you can explain the reason/necessity to stripe?

Could be an option to funnel default-risky (as distinct from chargeback-risky!) customers to a customer-selectable hold amount rolling the per-transaction flat fee into basically a per-bill flat fee thus indirectly giving volume/commitment discounts to those that select 30-day intervals with large holds?

I guess ideally offer an option to force a billing (transaction finalization) to release the hold if a customer changes their mind (or just happened to use a debit card)...

Though even with 7 day holds it'd allow you to offer service to poor people (which mostly overlaps "people with bad credit") without the APIs having to maintain revenue margins large enough to just eat that default risk, and without having to hold onto any funds yourself.

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upvoteby strnisa146 days ago|
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Authorization hold periods are set by the card networks/issuers and by merchant category, not Stripe.

Even if longer holds were possible, using authorization holds as a prepayment proxy can raise regulatory/consumer-protection issues similar to holding customer funds.

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