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Ok, and now the answer to that question is, "No, actuarially, we cannot offer you a merchant account backed only by your corporation." Like I said before.

Well, I don't believe that would be the universal answer in most cases, and perhaps where it really is there is a lesson that someone should learn cheaply. But let's assume you're right for the sake of this discussion.

Your response is... what?

That a financial service company with no new clients is not long for the business world.




This is not a serious argument. It suggests that a simple form of contract between two consenting counterparties should be made unlawful, and then, to get around the fact that this would result in a market where small startups would never be able to get merchant accounts, suggests that the entire payment processing market would either restructure itself or be forced to restructure itself to get around that problem.

No. That's not going to happen. I'll go one further: if you so much as sign your name on a contract the wrong way, for instance by leaving out your title, you can easily create situations in which contracts that individual officers of your company sign bind directly to them; for instance, your VP/Engineering could easily sign a contract with a consulting developer that would leave them personally liable to that consultant if the company went out of business and didn't pay the consultant. The VP/Engineering in that scenario didn't even intend to create a personal attachment, and yet cases like this have been decided against people like that.

Similarly, in some states, payroll obligations --- which are contractual, precisely the type of exposure that limited liability covers --- can automatically pierce corporate liability and bind to the owners of the company.

I think you drastically overestimate the protection afforded by limited liability.

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This is not a serious argument. It suggests that a simple form of contract between two consenting counterparties should be made unlawful

Which happens all the time, particularly when the parties have unequal bargaining positions, in which case frankly your characterisation of the parties as "consenting" is a stretch at best.

and then, to get around the fact that this would result in a market where small startups would never be able to get merchant accounts

Of course they would. The industry is extremely profitable despite the ever-present risk of fraud, and the rates that merchant account providers charge to start-ups are often at least double what they can get away with for more savvy established businesses. You keep saying that start-ups wouldn't be able to get a merchant account at all if piercing agreements weren't allowed, but you've given no evidence for this and your position defies all logic. As I've argued elsewhere, piercing agreements are unlikely to provide much cover for the merchant account provider most of the time anyway, and I'm quite sure that the people in the industry have concrete figures for things like how often they really have to rely on such agreements and how much of their losses they are really able to recoup in those cases.

suggests that the entire payment processing market would either restructure itself or be forced to restructure itself to get around that problem.

In case you hadn't noticed, the on-line payments industry is restructuring.

For one thing, companies like Stripe are taking traditional merchant account/payment gateway set-ups to the cleaners. Every HN discussion on this topic is full of people who are involved with start-ups bemoaning the lack of alternatives outside the US, and as the new generation of payment companies establishes itself globally, things are only going to get better for merchant-experience-focussed companies like Stripe. The industry giants with their month-plus application processes and hundred-page legalese documents are either going to have to play nicely with the new kids (and I'm betting even a young company like Stripe is already able to negotiate much better terms than their start-up clients could) or lose out in the ever-growing on-line sales market.

Obviously there are already alternatives with different business models like PayPal, and despite the horror stories, they still potentially offer a much better experience to merchants than the old school providers. As offerings from other big names like Google and Amazon improve, and as more companies like Stripe go international, competition will also force PayPal to improve rather than relying on often being the only salesman in town.

And then there's the small issue of companies like GoCardless, who eschew the anachronisms and merchant-hostile terms of the card payment industry entirely. I expect they're going to do pretty well out of that, too.

In short, I think you put way too much faith in dinosaurs. The question isn't if they're going to change, it's only when. The issue for most of us running small companies outside the US right now is just that we're a bit early. I expect in five years time we'll all look back on this conversation and laugh.

The VP/Engineering in that scenario didn't even intend to create a personal attachment, and yet cases like this have been decided against people like that.

I'm not sure what your argument was in that part, but surely you know that as a basic matter of law a contract requires understanding by both parties of what the agreement is, so whatever cases you're thinking of probably weren't as simple as you're suggesting.

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