I've been resisting the urge to market my startup as a PayPal alternative, because we're really focused on payments for in-person retail sales (largely to avoid competing with PayPal), but this is probably the fifth or sixth PayPal-froze-my-account posting I've seen on Hacker News and they all seem to garner enormous amounts of sympathy from readers. We've also built all of the infrastructure you'd need to do internet payments. As an aside, my non-profit's account was frozen once but I got it unfrozen in fairly short order, and at worst it was a minor annoyance. I gather that people have had much worse experiences, however. So that leads me to wonder:
- Would people really consider signing up for a payment startup's services they'd never heard of? Everyone complains about PayPal, and I'd argue rightly so, but at the same time everyone is also quick to say that they don't trust a company they don't know with their information.
- What's the most important service that PayPal offers that people are looking for? Just plain, vanilla, pay-me-through-my-web-site? Something else?
- Are these accounts that are routinely frozen related to international transactions somehow? Because we can't do business internationally and most payment startups can't. The regulatory and risk barriers are serious.
If there's a market for U.S.-based services that we can offer, maybe it's time to think more seriously about starting to compete.
The most important service: instant money transfer (mostly) irrespective of physical location.
I had one use-case this week where paypal would not work. I needed to withdraw the amount I was to be paid by my client and paypal has a $400/day ATM limit. So I asked the client to see if he can pay directly to my bank.
The obvious solution is wire. Of course, my client happens to be in a state that didn't have his business bank so wire was a no go. You have to visit a bank to wire.
In order for him to send me money he had to write a check from his business account to his personal BOA account, then withdraw from his BOA account and then run to a Wachovia and deposit into my wachovia account--all before 2pm cuz' after that the funds wouldn't be available until the next day for me.
After I got the money, I was to deposit it into a friend's account. I couldn't do it online through my bank's interface even though we share the same bank. I ran few blocks to Wells Fargo to withdraw cash I just received from my client and transfer to my buddy.
My story is probably one of the extreme cases in terms of urgency but it does point out all the hoops you have to jump to do a simple bank-to-bank money transfer just within the US.
American banks are really terrible with this, and I just don't understand why.
I live in Sweden, but I get paid for work I do for a U.S. company. Both my employer and I have Bank of America accounts in the states, and my employer sending a wire to my BoA account takes longer to process than me sending a wire from my BoA account to my Swedish bank.
So it takes longer to send a wire WITHIN THE SAME BANK thank it does to send internationally halfway around the globe. There's really something truly deeply wrong with U.S. banking.
Meanwhile, here in Sweden, cheques don't exist and everyone uses wire transfers to pay each other, pay rent etc. They're always free, can be done online, take seconds within the same bank, and half a business day between banks. And this system has been in place for literally decades.
The reason that paypal stays in business is not because they provide really great consumer support. The reason is that no one can operate at the scale they do and handle fraud at the level they can (and as you mentioned, international payments are extremely difficult). WePay may be a contender soon, but they aren't yet. There is really no easy way to do personal transactions, and certainly not at scale. This isn't a fight consumer support and a great product can win alone, you'd need serious talent and infrastructure both technology and business wise.
In terms of web startups, what PayPal offers over most other services is simple: let the user directly enter a credit card number to pay you some money - without the user having a PayPal account. There are lots of options for payments such as Google, Amazon and others but they all require the payer to have an account. PayPal doesn't - you effectively get credit-card processing with no setup and no hassles for absolutely nothing (apart from transaction fees). Compared to getting a merchant account etc, it's child's play. Of course, the "hassles" part turns out to be not so great once they suspend your account.
I think the only way to get around the awfulness of the payment systems is to break completely from the extant banking system and to find a way to define yourself outside of the normal regulatory definition. It's just too restrictive to allow us to do anything we want if you have to work with VISA or MC or even just follow the normal legal procedures necessary for a bank. Really there's no reason transferring money shouldn't be super easy and simple, and cost barely anything, except that banks like money and they like using regulation to stop new competition and innovation.
- Would people really consider signing up for a payment startup's services they'd never heard of? Everyone complains about PayPal, and I'd argue rightly so, but at the same time everyone is also quick to say that they don't trust a company they don't know with their information.
- What's the most important service that PayPal offers that people are looking for? Just plain, vanilla, pay-me-through-my-web-site? Something else?
- Are these accounts that are routinely frozen related to international transactions somehow? Because we can't do business internationally and most payment startups can't. The regulatory and risk barriers are serious.
If there's a market for U.S.-based services that we can offer, maybe it's time to think more seriously about starting to compete.