

Ask HN: Who Has Solved the Third Party Payment Aggregator (TPPA) Problem? - kerryfalk

Ladies and Gents,<p>I've been beating my head against the wall on this one for some time. I've talked with Braintree (Payment gateway which many people say great things about) and a host of payment processors to no avail, yet.<p>We've raised a seed round (Low six figs), are in a business incubator funded by the Federal Government of Canada, and have established a board of advisors to help us through problems like these and mitigate much of the risk associated with a startup.<p>Recently both Yardsellr and AirBnB have been approved for the exact payment flow we're looking to provide (Albeit in a very different market). Does the HN community have any insight on who I should be talking to, to solve this problem?<p>A little info on us can be found here, if you're interested:<p>www.twenty12.ca
www.styckyd.com<p>Any info or leads would be greatly appreciated, I've been working at this problem for about six months and feel I'm missing something key here.<p>*EDIT: To clarify the above issue, we're having trouble finding an Acquiring Bank that will approve a TPPA model. There are other startups who have found some and we're wondering who those banks are as we have come up empty handed so far.
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cd34
Marc Caron, on your Board of Advisors seems like he would have the
connections.

I deal with this on the IPSP side. TPPA really isn't difficult from your
merchant bank's standpoint, the risk factor is what they are trying to
prevent. Being the intermediary between purchase and sale carries a greater
risk if you aren't shipping the item yourself with confirmation tracking.
Since you don't know if your vendor has drop shipped the item, or the quality
of the item that was shipped, or if it was even the right part, the onus is on
you when you do TPPA.

Address that risk and how you plan to fix that with your merchant bank. Your
bank will generally require a larger reserve, financial guarantees, or perhaps
a longer hold on your funds until you've established trust/a low chargeback
percentage. You will pay a higher discount rate.

Braintree offers this service, did they tell you why they won't offer it to
you?

~~~
kerryfalk
Marc deals with the processors on a slightly different level and has been
hitting the same wall we have.

Our model is designed to cover a lot of that risk. We can determine when the
package arrives as we've built in the shipping system to our model. The model
would be:

\- We receive payment \- The seller prints out the shipping label \- Carrier
picks up the package \- Package is delivered \- When the buyer approves or 48
hours after delivery has passed we then release payment to the seller

If there's a problem with the shipment we can then enter a claims process to
solve the issue. This is designed to mitigate as much risk as possible.

I suppose to clarify it is the merchant bank that is the problem, we're unable
to find one that will take on the business. It would have been easier had I
stated that in my original post, I'll edit it.

Braintree is trying to help, but we're unable to get underwritten by their
Acquiring Bank. That particular bank wants to see $50MM in net worth, which we
cannot claim at the moment.

~~~
jeffmould
I think I better understand here. One way to further reduce risk is not
actually charge the card until the product is delivered and buyer/seller
happy. The initial charge would only be an authorization for the amount to
make sure there were enough funds to cover. Either that or do a simple $1
authorization to make sure the card is valid. Either way the actual charge
though would not be processed until buyer and the seller are happy.

Also, I would make sure that your terms & conditions on the site clearly
outline every detail and protect you from liability.

From the US side I have never seen banks out right refuse as long as your
personal/business credit is good and you would qualify for a merchant account
under normal circumstances. Most here simply require a greater reserve and/or
charge a higher percentage. I do know that Visa has some special requirements
such as filing an application direct with them, paying a premium application
fee, and then an annual fee on top, but I am not sure about the other cards.

You may want to talk to your bank directly. Go in with all the details, a
flow-chart of how the process works, have the website ready to go, and all the
details for your company/founders. It is sometimes easier to talk to a person
face-to-face and have them understand clearly what you are trying to do. It
may simply be that you are not explaining it clear enough for them to
understand your business process.

~~~
kerryfalk
Your suggestion could be a possibility but it then introduces fraud on behalf
of the buyer that we'd have to account for and put more thought into.

We've got the Ts & Cs fairly well covered, that's an evolving document though,
I think.

Perhaps this is a Canadian bank issue, I'm really not sure yet. Our experience
has been that every processor we've talked to (And thereby their Acquiring
Bank) has told us they couldn't get the model approved before we had gone
through the application process.

If you're saying that it doesn't seem to be a problem then I'm going to have
to go back to the drawing board and scratch my head a bit. There are companies
like AirBnB and Yardsellr that have been approved recently.

~~~
jeffmould
Yes, buyer fraud could be a problem in this scenario and is something that
would have to be accounted for.

I am not saying it isn't a problem, just that you should expect to have to
make concessions in the form of higher reserves and/or fees. Many companies do
similar, if not the same, scenarios so it is definitely not impossible or
something that is so difficult to accomplish that it is avoided at all costs.

From the sound of your response, you have not gone through the application
process as of yet, you have just been talking with processors. If this is the
case I would suggest going through the application process. They, like you,
are trying to reduce risk and are most likely not going to tell you upfront
that they can get it approved or not.

Try <http://globalpaymentsinc.com> I had a customer who used them in the past
and was very pleased with their service (although they were selling directly).
They offer service in Canada as well.

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jeffmould
Not sure exactly what you are asking here. Essentially companies like this
collect payment from the "buyer", deposit payment in their bank, and then when
it is time to pay the seller, they deduct the fees from the amount deposited
and pay out to the seller using their account. I am not sure exactly how
AirBnB does it, but I bet that it is pretty close to this process.

~~~
jeffjanzen
That's exactly how it's done. The problem is getting a payment processor (or
more accurately, their acquiring bank, who takes on all the risk) to approve
you to operate under that model. Since the merchant doesn't have control over
the product or service being purchased (as in the cases of airBnB and
yardsellr), there is a greater risk of chargebacks. Generally, acquiring banks
won't touch these business models.

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dools
I can't see a problem description anywhere here ...

