
Your Minimum Viable Product is Processing Credit Cards - garrickvanburen
http://garrickvanburen.com/archive/your-minimum-viable-product-is-processing-credit-cards/
======
patio11
You can even ask for money without having any way of receiving it. This is a
good discipline to get into when doing customer development interviews.

"So we've established that this is going to save you four hours a month. OK --
it isn't ready for you yet, but it will be soon. It costs $50 a month. Can I
get a $50 deposit from you to reserve your spot? We'll apply it against your
first month's fee."

If you've identified a problem people actually have, they'll crawl over you to
give you money. You don't even have to accept it, just watch whether they're
actually willing to get out the checkbook or not.

(n.b. A _lot_ of software is sold prior to existing at numbers substantially
higher than $50. For example, you might hypothetically be building something
enterprise-y and looking for your first anchor customer. If you are, the
conversation goes something like "OK, will you soft-commit to being our first
customer on this? We'll draw up a Letter of Intent which says that, six months
from now, after we've got the technology in place, we start implementing a
field trial for $YOUR_COMPANY, with successful implementation to be followed
by an annual purchase in the six figure region. Does that sound good to you?")

~~~
edw519
_A lot of software is sold prior to existing at numbers substantially higher
than $50._

And a lot of software that is already paid for is never delivered. Or
delivered late. Or delivered, but not as expected.

Don't. Do. This.

Please don't mix the popular memes of "Release early, release often" and "Good
enough" with "Get paid up front".

This happens so often that I've made a career from cleaning up the mess left
by people who didn't deliver what was already paid for.

Be very careful if you do this. It's a whole lot easier to repair your code
than to repair your reputation.

~~~
zupa-hu
Your points are just beautiful. Someone talking in business mode (patio11),
versus someone in product mode (edv519).

I think your argument is rather about your goals. patio11 wants to make money
first of all. edv519 wants to make the user happy first of all. Both views
have pros and cons, and you will probably both reach your goals.

~~~
enjo
You don't understand what Patio11 is saying. He wants to _know_ that your
product can actually get people to pay up. It's the ultimate in product
validation. Until people will pull out that wallet and sign on the dotted
line, you don't _know_ that your product solves a real problem.

That's what Patio11 wants. He doesn't want to get paid up front and he's not
in "business mode". He's trying to validate his product in the best possible
way.

~~~
zupa-hu
Oh you are assuming I think patio11 is wrong. I deliberately used "mode",
because one probably needs both. And I could probably learn from patio11.

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jasonkester
For what it's worth, my most profitable SaaS product launched without the
capability of processing credit cards.

It launched with a price though. But also with a 30-day Free Trial.

The logic being that I could spend all pre-launch time building the actual
thing. And then I had 30 days to get that payment processing stuff sorted out.
Back then, you almost needed that much time. Today, you need a good hour to
get Stripe up and running, so it seems even less of a priority.

So yeah, sure, you probably aught to have "makes money" baked in from day one.
But if all you have is some Stripe sample code, I don't think I'd consider
that a product.

~~~
kmfrk
You can also buy yourself some time and save money on fees by deferring all
withdrawals to an end-of-month payment. That's what Apple does with iTunes,
and it means they don't have to pay fees on microtransactions like $.99.

~~~
cstejerean
At least for me Apple certainly doesn't wait until the end of the month,
although they do batch small transactions at seemingly random intervals.

~~~
kmfrk
That sounds right. The monthly interval was pretty arbitrary, but just seemed
sensible. Wonder what triggers the withdrawals.

~~~
run4yourlives
Probably the dollar amount owing by the account.

------
joelg87
For the MVP of Buffer, I implemented PayPal (no Stripe back then), but I
avoided all the IPN hassles. The IPN is the part that would auto-upgrade
people once they paid. The way I did it was to upgrade people manually as soon
as I got the email from PayPal that they had paid for the Pro plan.

This turned out to be good for a number of reasons:

    
    
        1. I had no idea how long it'd be before the first person paid, so why optimize
           that flow? Instead I worked on things which would help me get to the first
           paying customer.
        2. The IPN was the hardest part of PayPal implementation, so it saved me
           a lot of time to avoid it. The rest of the implementation can even be done
           with their button implementation and no coding experience.
        3. Actually people having a slight delay, and my needing to personally email
           them, was a great thing. That built a lot of loyalty through the personal contact
           and those were some insightful conversations.

~~~
hayksaakian
Interesting real world insight.

------
ef4
If you want to sell something for $50/year, yes you need to take credit cards.

But if you want to sell something for $15,000/year, it's not nearly as
important.

~~~
pc86
This is definitely something that I think has been overlooked in this thread.

If you're dealing with serious money (to the point where an individual is
unlikely to be willing and able to spend that kind of money) the odds of even
being able to use a credit card are slim to none. Enterprise companies do not
generally use credit cards for large purchases. You're better off making sure
you can handle POs and ACH (which for the life of me I couldn't tell you how
to do outside of "try Dwolla").

~~~
Firehed
I'll just throw in a quick plug for WePay here, as you're absolutely correct
when dealing with high-dollar invoices and POs. Credit card fees get nasty at
that level, and the chargeback risk gets a little hard to stomach. From the
perspective of the merchant, we make it just as easy to get paid by ACH as by
credit card (plus we offer free invoicing tools, and have other invoicing
servies that use your WePay account over our API)

In practice it's a tiny bit more effort for the payer the first time around
(there's no ACH equivalent to a credit card authorization), and after that
everything is basically one-click.

Having worked with numerous ACH gateways... it's really something you're
better off avoiding if you can help it. Never mind the painfully-long merchant
agreements, there also tend to be weird limits on your volume, cryptic SEC
codes to deal with, and... ugh, the reconciliation processes.

------
jpdoctor
> _If you can’t process credit cards right now – you don’t have a product and
> you barely have a business._

Wow. Should I return a few million dollars to my customers?

------
digitalengineer
I almost _never_ use credit cards. In the Netherlands they've got iDEAL
[http://ideal.nl/?s=&lang=eng-GB](http://ideal.nl/?s=&lang=eng-GB) (online
payment through your own bank). Why use Cedit Cards at all?

Then again, I hate living on credit as do most of my countrymen. I am amazed
people would _lend_ to buy a new car. If you can't afford it buy a cheaper
model or one that's got more miles (or years) on it.

~~~
lotsofpulp
Using a credit card does not mean you have to pay interest. Buying something
with a credit card is a 0% loan for 30 to 45 days. You can pay off any or all
of your credit card balance within that time and not be charged a cent in
interest.

Here's the kicker: In the US, if you don't buy with a credit card that earns
you "rewards", then you are subsidizing those who do use credit cards with
rewards. The reason is because many credit cards give around 1%-3% back, but
the prices for everything remain the same regardless of whether or not you pay
with a credit card that gets you rewards. As a result, built into the cost of
nearly everything, is the cost of providing the airline miles, points, or cash
back rewards.

On top of this, credit cards provide you with protection because you can
dispute charges, and if someone fraudulently uses it, you do not lose that
money immediately. Also, some cards (like American Express) provide 1 year of
extra warranty for anything you buy.

TL;DR It's better to buy with a credit card, it costs nothing (individually),
and you get benefits. There is a cost to society (everything costs a few %
more), but I don't see that changing anytime soon.

~~~
pravda
_TL;DR It's better to buy with a credit card, it costs nothing (individually),
and you get benefits. There is a cost to society (everything costs a few %
more), but I don't see that changing anytime soon._

No, no ... no. The cost is not to "society", the cost is to merchants. They
just earn less profit. (Think about it, if the cost _wasn't_ to the merchants,
they wouldn't care about credit card fees).

What cards are giving over 1% back? I noticed some other commenters talking
about 2%. I just get 1% + the occasional special 3% promotion.

~~~
tg3
The cost to the merchants is then passed on to the customers through higher
prices (which they can stand because they're earning so many rewards!). Sure,
the merchants would like to get rid of fees, but that would only provide them
a short-term gain. Over the long term, their prices would come down to
compensate for their lower cost of goods sold.

~~~
pravda
Nope. Doesn't work that way. Don't get me wrong, I think merchant processing
fees are outrageously high, and that merchants should be allowed to add a few
percent for payment with credit cards, in order to encourage cash/debit card
payment.

Australia limited interchange fees around 2003 (cut them in half), and as
would be expected, merchants did not lower prices.

"Interchange fees are paid by the merchant, and there have been studies done
in Australia that said that consumers have not saved a penny by lowering
interchange rates — that the merchants have not reduced prices at all."

------
api
A little Ask HN that is relevant to this thread: what are peoples' favorite
avenues for processing cards these days? Especially for small increments (e.g.
a few bucks a month)?

~~~
mootothemax
_Especially for small increments (e.g. a few bucks a month)?_

Kill the problem altogether by charging more. Alternatively, charge annual
rates. Whatever you do though, don't try and make a living from services that
charge two or three bucks a month.

~~~
Goronmon
What if you are a building something like a game where you want to use some
form of micro-transaction model?

~~~
patio11
Essentially every game which does microtransactions does it by implementing a
dual currency system, with one free currency abundantly available if you have
infinite time to play the game, and one currency which is only available
through purchase (or _very carefully monitored_ promotions). You sell the dear
currency in odd-numbered lots (to exploit people's inability to do fourth
grade math -- sad but broadly true of the industry), for example, 7 dragons
eggs for $10, 15 dragons eggs (one free dragon egg!) for $20, etc. Even though
this essentially enables you to price your Sword of Pwnage +1 at $1.42 (one
dragon egg -- available ingame for one-click with no need to grab a credit
card), you'll never actually send a $1.42 transaction to the processor.

~~~
biot

      > You sell the dear currency in odd-numbered lots (to exploit
      > people's inability to do fourth grade math -- sad but broadly
      > true of the industry), for example, 7 dragons eggs for $10, 15
      > dragons eggs (one free dragon egg!) for $20, etc.
    

At the risk of embarassing myself through terrible fourth-grade math skills,
can you explain how selling in odd-numbered lots is exploitive? Or do you just
mean that at the $20 level it's not precisely one free?

~~~
endianswap
I believe he's referring to their inability to divide 10/7 to calculate how
much they're actually paying for each dragon egg, implying that he believes
that if players knew each egg was almost a dollar and a half then they
wouldn't purchase the eggs.

~~~
gojomo
There may also be a "hot dogs in packages of 8, buns in packages of 6"
dimension to choosing the odd-sized in-game prices/currency-bundles. A user
who has a little in-game change left may feel they have to add more, to get
full value on their previous purchases.

~~~
wiredfool
You know, they're both sold in packages that are a pound.

Some are /4s some are /6s and some are /8s.

------
ctek
I was working on my niche web app, <http://www.pageblox.com> for many months
and was at times (when feeling overly optimistic) extremely delusional about
how much I would make when I turned on payments. The truth is, you have _no
idea_ what your conversion rates will be until you actually turn on payment
processing. I thought it would be around 2% but in fact was less than .1%

Even though I only made $95 my first month (a lot less then what I had hoped)
I now have a clear idea of where I stand and what needs to be improved and
tweaked. It'll be a slow and at times painful process (SEO, A/B testing, blog
posts, re-design, features) to make the profitability worth all the hours put
in so far...

~~~
onetwothreefour
What HN fails to tell you is that making money, and turning a profit (big
enough to make things worth it) is actually really hard.

I wish you all the best in this endeavour.

~~~
charleshaanel
I couldn't agree. You have put yourself head and shoulders about the 90+% of
people who either are to fearful to even try what you did.

Congrats.... "Boldness has genius, power and magic in it..." - Goethe

------
tesmar2
I hear people keep recommending Stripe, but almost everyone I talk to here in
Raleigh, NC says that it is way too expensive. Any thoughts? What is the best
alternative that happens to be cheaper?

~~~
euroclydon
2.9% + $0.30/transaction.

What are you looking to pay instead?

~~~
jpdoctor
1% + 0.15/transaction.

I have no desire to hand $30K to anyone on $1M for counting money
electronically. Currently, we just employ someone to take care of the checks
and it is only a fraction of her time.

Around $10K it becomes an interesting proposition.

~~~
pestaa
You seriously underestimate the infrastructure, availability and security
implications of `counting money electronically'.

Give me $1M and I wouldn't blink at $30K expense.

~~~
parsnips
If your margin is 10% you would.

------
jabo
A pretty popular venture-backed SaaS company didn't have automated payment
processing until very recently. If you ask me, if you're dealing with other
businesses and your product solves their business need, it really doesn't
matter if you don't have a payment system as your MVP.

------
fallenhitokiri
Processing money should be something you consider at some point, but what I am
missing is a mention that this is coupled to your target market.

In Germany many businesses (assuming you are working on some SaaS / B2B / ...)
would look at you like you just talked Klingon if you tell them you only
accept credit cards. Sad truths is that most smaller companies do not even
think about having credit cards. There is slowly some change, form what I have
experienced, mostly due to older CEOs and business owners being replaced by a
younger generation but overall credit cards are not as common here as in
America.

On the other hand I currently looked at some providers for credit card
processoring (currently working on a project where it could become necessary).
Most of the services seem to require your company to be in America or England,
most won't work in Germany. So maybe I skip credit cards for the beginning and
chose to go with something else (just hypothetical) - does this mean I do not
have a product? Because I only support 5 out of 6 possible payment options?

Then there is still the option of in app purchases. For most apps which are
"just an app" I believe they will work way better. No need for another
service, no separate website or member area, nothing to care about but
integrate an existing system which is designed to move money from a customer
as fast and easy as possible to you (and a middle man).

The author is right that you should think about payment processing while
working on a product - but processing credit cards is _not_ the holy grail.

------
fredley
Good article, but the last paragraph had me scratching my head. $250 for a
YouTube channel subscription that notifies you with an email? If I'd paid $250
for that I'd be pissed off.

~~~
patio11
That's sort of like saying "I'll never pay $250 for a meal." Statistically
speaking, you probably will, you're just not currently thinking of a
circumstance under which it sounds reasonable, but given the circumstance it
will sound very reasonable indeed. (Example: Your wedding dinner. Granted,
once you have that context, it isn't just a meal, but once you have the
context of this purchase, it presumably isn't "just" a video on Youtube. It's
an expectation of direct value, a relationship with the producer, a statement
about one's priorities, etc etc.)

More broadly: going from "I wouldn't buy that" to "That's commercially
nonviable" is one of the classic hacker mistakes. Clearly people buy it,
right? You can fail to sell to _billions of people_ and still have a great
business.

~~~
thenomad
May not be directly relevant, but - I certainly would spend $250 on a meal.
Indeed, the first meal I ever spent that much on - at the Fat Duck in the UK -
was one of the best and most memorable single events of my life.

Which, I guess, points out another class of "actually reasonable" circumstance
- the "no, really, it actually is that good" circumstance. I've heard similar
things from people who bought top-end couture - you go in thinking "I can't
imagine spending that much" and come out thinking "holy shit, I'm so glad I
decided to spend that comparatively small sum of money".

------
programminggeek
The idea here is right on. It's like if you build a free app on the app store
and you don't have ads or in app purchase. That isn't a MVP, it's a hobby.
Things change when you start charging money for what you're doing.

A business is likely not a business if they aren't charging someone for
something. Instead it might just be an organization that builds things, but
for better or worse a business is something that is created to make money. If
you don't like that idea, you shouldn't be "in business".

------
easymovet
This post pushed me to try some of the new processing tools out there. I setup
Amazon simple pay with an IPN handler in about 20min. I didn't have an idea
for a site so it's just a novelty site :) <http://valuedchange.com/> I chose
amazon over stripe since the micropayment cost is less on amazon (5% + 5c vs
2.9%+30c )

------
armandososa
That's a problem I have. I always have ideas for this weekend projects that
could bring some extra-money but I always get discouraged because, living in
México, there's no easy way to process credit card payments. PayPal IPN is
everything we have and it kinda sucks.

------
alexpopescu
Ask HN:

1\. how many of you have actually bought a promised product with a clear
deadline?

2\. how many of you have actually bought a promised product with no deadline?

In my case the answer is 0 for both.

------
dvncan
that font is awful.

------
ltcoleman
I'm sorry, but this post completely lost me. Are we complaining about credit
card processing? Are we talking about when to ask for payment for creative
work? What are we talking about?

~~~
rjbond3rd
From the article:

> Though, the primary benefit of being able to take money isn’t really about
> being able to take money.

> It’s about seeing your product through your potential customers’ eyes. Who
> they are? Which aspects of what you’re building are most valuable to them?
> ...Build that atop your payment processing system.

