Experience in third party payment aggregation (credit card processing) in Australia and the US
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Chris Hexton
Jan 4, 2012, 7:50:02 PM1/4/12
to Silicon Beach Australia
Hi all,
I'm a co-founder of invc.me (http://invc.me), a simple SaaS based
invoicing tool.
A key aim of ours is to make accepting credit cards for our customers
extremely simple. To do this, we need to become a third party
aggregator. This would mean we can collect payments on _behalf_ of
other merchants.
If anyone has any experience in setting up a third party payment
aggregation account or knows someone who does, please get in touch.
We're interested in both Australia and the US, though our
understanding of the process in the US is better as there are a few
players who do similar things already and the number of payment
processors that can help underwrite third party aggregators is
greater.
There is no one who does this well in Australia, so we'd love to be
the ones to make it work.
Chris
chris AT semblancesystems.com
I'm a co-founder of invc.me (http://invc.me), a simple SaaS based
invoicing tool.
A key aim of ours is to make accepting credit cards for our customers
extremely simple. To do this, we need to become a third party
aggregator. This would mean we can collect payments on _behalf_ of
other merchants.
If anyone has any experience in setting up a third party payment
aggregation account or knows someone who does, please get in touch.
We're interested in both Australia and the US, though our
understanding of the process in the US is better as there are a few
players who do similar things already and the number of payment
processors that can help underwrite third party aggregators is
greater.
There is no one who does this well in Australia, so we'd love to be
the ones to make it work.
Chris
chris AT semblancesystems.com
Scott Handsaker
Jan 4, 2012, 8:14:12 PM1/4/12
to silicon-bea...@googlegroups.com
We are a 3rd party aggregator of credit card payments in Aus (www.eventarc.com) as part of our events business.
i.e. We take the money into our merchant account and pay out the respective organiser.
It is outrageously...outrageously hard to be a 3rd party payments provider in Australia (Banks hate us).
Drop me an email at sc...@eventarc.com with any questions...happy to help.
If you have done any US research I would be keen to learn from you, as we will be launching a new product into the US later this year..where again we will be a 3rd party payments aggregator.
Cheers,
Scott.
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Isaak
Jan 9, 2012, 2:52:12 AM1/9/12
to Silicon Beach Australia, Scott Handsaker
Hi Chris/Scott,
We have been trying to get a system - exactly like you have described
(master merchant account) established in Australia for sometime, and
it is a whole lot more difficult that it should be. We are effectively
trying to do the same thing as you both, bounce on payments to our
clients bank through our software.
At the moment we only offer PayPal - using Adaptive payments which is
less than ideal.
If you don't mind Scott I also would like to drop you a line and find
out more about the Eventarc learnings!
Cheers,
Isaak Dury
TidyClub.com
We have been trying to get a system - exactly like you have described
(master merchant account) established in Australia for sometime, and
it is a whole lot more difficult that it should be. We are effectively
trying to do the same thing as you both, bounce on payments to our
clients bank through our software.
At the moment we only offer PayPal - using Adaptive payments which is
less than ideal.
If you don't mind Scott I also would like to drop you a line and find
out more about the Eventarc learnings!
Cheers,
Isaak Dury
TidyClub.com
caseyjohnellis
Jan 9, 2012, 7:14:46 AM1/9/12
to Silicon Beach Australia
Hey Chris
Scott's method is the most logical - Set up a vanilla merchant account
and write/rent/borrow/steal a referencing system that keeps track of
which $$$ belong to whom for payouts. The most obvious existing
example of this is Paypal's standard payments model. I'm not aware of
anyone who offers this service with the associated accounting/tracking
etc already set up but I will ask around - This has got me thinking.
On a related but relevant note - have you factored PCI DSS compliance
into all of this?
If you aggregate you'll likely end up being classified by your
acquiring bank as both a merchant and a service provider under PCI
DSS. This will give your security capex costs a smart kick in the
pants and will introduce an annual audit fee. If you continue to use a
gateway then much of this can be avoided - you'll still be considered
a merchant but the compliance burden will be less. It's a trade off
(low capex + high per transaction cost using a gateway vs high capex +
low transaction cost if done in-house...) and one that you will need
to eventually make when you get big enough but I bring it up in case
it's not on your radar.
Scott is right - Banks aren't super partial to aggregator/processor
business models, this in part because they are the guys who usually
end up getting pwned the worst (although I'm sure Eventarc are ship-
shape!)
Casey
http://caseyjohnellis.com
+61 2 8022 8351
Scott's method is the most logical - Set up a vanilla merchant account
and write/rent/borrow/steal a referencing system that keeps track of
which $$$ belong to whom for payouts. The most obvious existing
example of this is Paypal's standard payments model. I'm not aware of
anyone who offers this service with the associated accounting/tracking
etc already set up but I will ask around - This has got me thinking.
On a related but relevant note - have you factored PCI DSS compliance
into all of this?
If you aggregate you'll likely end up being classified by your
acquiring bank as both a merchant and a service provider under PCI
DSS. This will give your security capex costs a smart kick in the
pants and will introduce an annual audit fee. If you continue to use a
gateway then much of this can be avoided - you'll still be considered
a merchant but the compliance burden will be less. It's a trade off
(low capex + high per transaction cost using a gateway vs high capex +
low transaction cost if done in-house...) and one that you will need
to eventually make when you get big enough but I bring it up in case
it's not on your radar.
Scott is right - Banks aren't super partial to aggregator/processor
business models, this in part because they are the guys who usually
end up getting pwned the worst (although I'm sure Eventarc are ship-
shape!)
Casey
http://caseyjohnellis.com
+61 2 8022 8351
eltreno
Jan 10, 2012, 9:35:57 AM1/10/12
to Silicon Beach Australia
Chris,
Can you list the companies in the US that you have found that do the
3rd party payments?
And anyone who finds any in Australia list them as well please.
Paypay have said they allow it, but they say you do need to be careful
that "charge backs/complaints" (by bad 3rd parties taking payments)
are not too common otherwise "your" paypal account gets disabled.
That's why banks hate this type of thing - it's open to abuse -
pending your product/untrustworthy clients etc.
Can you list the companies in the US that you have found that do the
3rd party payments?
And anyone who finds any in Australia list them as well please.
Paypay have said they allow it, but they say you do need to be careful
that "charge backs/complaints" (by bad 3rd parties taking payments)
are not too common otherwise "your" paypal account gets disabled.
That's why banks hate this type of thing - it's open to abuse -
pending your product/untrustworthy clients etc.
Stuart Guest-Smith
Jan 13, 2012, 2:40:17 AM1/13/12
to silicon-bea...@googlegroups.com
Hello All,
I have been an observer for a few months on this group and thought I should comment/provide some input. Firstly, I would like to state that its fantastic to see a startup support community building stronger in OZ! Time to show the world, even more, what we can contribute.
One quick thought from the aspects above - perhaps an extension of the topic? What's everyones experiences and thoughts regarding subscription solutions (*or support through say Chargify, Recurly, Spreedly, PayPal etc..) and associated payment gateways (*Paypal, Payment Solutions etc..) for Australian based companies. I thought it would be interesting to hear, in applicable startups, what people have done to solve the recurring payments - and also allow for non-local currency and international payment processing?
What is everyone thoughts? Is it easy and/or hard? What solutions/options have been located to resolve the international aspects? Etc..
Cheers,
Stuart
Stuart
Co-Founder
Isaak
Jan 20, 2012, 3:56:27 AM1/20/12
to Silicon Beach Australia
Scott (www.eventarc.com) has said how he 'luckily' managed to get an
payment aggregation system going before the financial industry
'tightened' up...
But how do groups like handle payments?
http://www.ivvy.com/
http://www.stickytickets.com.au/
http://www.trybooking.com/
http://ticketbooth.com.au/
How have these groups navigated the Australian banking system to
facilitate the transactions, and who have they gone through? Seemingly
they have the money dropped into their own accounts and then have it
cleared out to the customers?
All the banks I seem to turn to don't want a bar of this?
What technology are they using to automate this? Where are we going
wrong? Kind of over using PayPal! :P
Cheers, Isaak
payment aggregation system going before the financial industry
'tightened' up...
But how do groups like handle payments?
http://www.ivvy.com/
http://www.stickytickets.com.au/
http://www.trybooking.com/
http://ticketbooth.com.au/
How have these groups navigated the Australian banking system to
facilitate the transactions, and who have they gone through? Seemingly
they have the money dropped into their own accounts and then have it
cleared out to the customers?
All the banks I seem to turn to don't want a bar of this?
What technology are they using to automate this? Where are we going
wrong? Kind of over using PayPal! :P
Cheers, Isaak
Patrick Collins
Jan 20, 2012, 10:47:26 AM1/20/12
to silicon-bea...@googlegroups.com, Silicon Beach Australia
Go and ask them! Would love to hear what you find out.
Sent from my iPhone
Rob Manson
Jan 22, 2012, 8:26:22 PM1/22/12
to silicon-bea...@googlegroups.com
This really is a complex area and the complexity comes from the business
risk and not the technology side (although don't underestimate the PCI
compliance time costs). The chargeback responsibility persists for 90
days so you'll need to make sure you have sufficient capital to cover
that risk for your banking partner.
risk and not the technology side (although don't underestimate the PCI
compliance time costs). The chargeback responsibility persists for 90
days so you'll need to make sure you have sufficient capital to cover
that risk for your banking partner.
However, it definitely is do-able.
But if this topic is the starting point for any of your discussions with
the local banks you'll just get put into the "too hard" basket. There's
just too much risk without any real benefit for them.
We've spent the last few months working through integration with the NAB
Transact API and while the business process was unreasonably painful and
1980's style archaic...the functionality it has delivered is excellent.
We've just released the 2.0 version of our https://buildAR.com service
that supports natural feature tracking/image based Augmented Reality.
For that we've used the NAB Transact API to implement multi-currency
recurring payments. This has already noticeably improved our sales! We
used to use PayPal and found we had a minimum of a 6:1 abandonment rate
once people got to the PayPal payment page. Now with our simple "one
click" style purchase model this has almost disappeared and sales are
starting to build nicely.
The Transact API lets you store Credit Cards and Bank Accounts that you
can then trigger payments against at any time. This really reduces your
PCI compliance risks/costs while allowing you to easily implement
recurring payments.
And if you setup your own company Bank Account as one of these then
triggering payments out to third parties in the last leg of your payment
cycle would be really easy.
But none of the banks are going to be helpful with this. You need to
work out a technical solution like I've described above, jump through
all the hoops they throw at you and take control of this process for
yourself.
If you have any questions about this I'm happy to answer simple
questions...but it's a pretty deep and time consuming space so anything
other than quick pointers really constitutes consulting 8)
BTW: We launched Australia's first PCI compliant mobile payment service
5 years ago. But in the end we made a business decision that it simply
wasn't scalable because of the way the chargeback risk made the banks
behave. Once our customers were on board they were perfect self-service
SaaS customers. But getting them there involved an unreasonable and
unprofitable level of involvement in setting up each of their merchant
accounts. This was just the reality of Australia's banking ecosystem
and regulations at the time...and nothing much has changed.
roBman
Varun Kerof
Aug 16, 2013, 11:51:22 AM8/16/13
to silicon-bea...@googlegroups.com
Hi Scott,
When one becomes a third party aggregator in Australia, was curious on a couple things;
1. Is an aggregator required to follow the insanely strict rules in regards to KYC (know your customer), AML (anti-money laundering), CTF (counter terrorism financing) etc.?
2. What methods are there to reduce business risks for other situations, for example of the customer (in your case organizer) is not legitimate, in bankruptcy proceeding, creating false events, etc.
Thanks,
Varun
Edwin McGusty
Aug 19, 2013, 10:32:47 PM8/19/13
to silicon-bea...@googlegroups.com
Varun,
I think it depends whether you are talking about providing merchant services (Visa, Mastercard, etc.) or providing a payment gateway (direct debit) ... or both. For merchant services you will have to abide by and stay compliant with the rules for the bank that sets up your merchant account ... probably NAB. I don't know if they requirey you to manage KYC, AML and CTF as opposed to them but would assume so unless you find out otherwise - worth having a conversation with them to discuss details. Braintree has an account with NAB and provides a good list on their site of the businesses types they are not allowed to deal with, but each company they deal with in Australia has to open it's own merchant account with NAB ... which essentially keeps the KYC, AML and CTF requirements in tact. For a payment gateway aggregator system you are separately responsible for all those things if you can get an account opened through a bank.
Long story short, Australian banks are some of the largest and most profitable in the world because they are in control of the market here ... and they want to keep it that way. With little risk they make a lot of money. So there is little incentive for them to take on higher risk business models.
Cheers,
Edwin
Edwin
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