Acceptance of online payments in Europe in 2013
To make money online, you must be able to accept payments. It may seem simple, but in reality it is not quite so, and American subversive innovative companies, such as Stripe and Square , are not yet functioning in Europe.
Searching for payment options for Vinetrade was one of the most difficult tasks for me, but I learned a lot. Therefore, I decided that it is worth expressing my thoughts about the market of card payments, about the prospects for its development and about what the European segment of this market lacks.
The easiest way to receive payments online is to use a bank card (credit or debit). For all card payments there is a certain number of bank transactions. Consumer protection laws allow customers to demand a refund from their bank if something goes wrong (for example, if they paid for the product but did not receive it). If the bank is unable to receive this money from the company that accepted the payment, it suffers losses.
This means that banks will try to do everything possible to minimize their risk. Often this is expressed in the direct rejection of new applications (some banks took us by the nose for a month, forcing us to provide them with detailed documentation, and in the end they said that they would refuse us anyway because we are too young). Among their other methods are high commissions (sometimes constituting 5% or more of each completed transaction) or keeping a rolling balance (for example, 20% of the value of all transactions made within 6 weeks to cover possible repayments).
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Until recently, British entrepreneurs wishing to accept payments online had three main options: filing an application for opening a commercial account directly to a bank or registering an account with WorldPay or PayPal.
Applying directly to the bank can be a painful process: you must be prepared to provide you with a variety of different documents (business plan, cash flow forecast, documents confirming the identity of the director and shareholders, etc.) and plenty of time waiting for a response. Among the advantages of this option are the ability to control payment acceptance (for example, you can accept payments on your website without redirecting buyers to external services), relatively low fees (approximately 1.5-2% of the transaction value for payments made using credit cards, or a fixed fee of approximately £ 0.40 for debit cards and clearly defined dates for transferring money to your main account (which allows you to manage the money).
For those who have problems with banks, WorldPay has been a popular alternative due to its relatively simple online registration procedure. Among the shortcomings, it should be noted that commission fees are too high (in my case I had to pay £ 150 for opening an account, deposit a substantial amount to the account and pay about 5% of each transaction) and restrictions on the types of activities for which payments are made (for example, under the ban everything related to alcohol, and everything that falls under the category of "adults only").
PayPal has always been popular due to the fact that almost anyone can open an account in it and accept payments. Commissions are quite acceptable (about 3% of the transaction value), but the disadvantages are the imperfection of the technical part (their API is a real nightmare) and poor customer service. Unfortunately, PayPal is, in fact, an unregulated bank, and there are many stories related to closing accounts, freezing money and complicating business life. This may well happen, since this service has always been a target for fraudsters, so it will be much easier and cheaper to take the side of the buyer and return the money to him than to carry out a detailed investigation of each claim.
During the last 12 months, a number of new companies appeared on the market, founded by entrepreneurs who are aware of the need for better solutions. These new players allow you to register and accept payments with greater simplicity, charge low fees, quickly transfer money to your bank account, and the verification process (if it is present at all) is very short.
GoCardless (UK only)
GoCardless is perhaps the most innovative company that allows all UK residents to accept payments by direct debit, that is, directly from the buyer's bank account, bypassing the card system.
Direct debit is well suited for recurring payments or for one-time payment of services. However, unfortunately, it is not suitable for payments for products that need to be quickly sent to the buyer, due to small delays (3-4 days) to issue an order for the bank to conduct such an operation and receive payment.
A direct debit guarantee may make your business vulnerable to fraudsters, since buyers, according to this guarantee, have the right to demand a refund from their banks (however this is not significantly different from the requirements to return credit card payments). Bypassing the network of card payments means that GoCardless can charge low fees - they currently make up 1%, but not more than £ 2 per transaction.
Braintree Payment Solutions
This American company quickly developed its network (it deals with payments of such well-known sites like Github, Airbnb, Fab, Uber, 37 Signals) and recently started working in Europe. Her model is based on providing a simple application programming interface (API) and transparent prices. Integration with this service is quite simple, and its support service works perfectly. However, you still need to provide various business information and get approval from their guarantor bank ( Adyen in Europe), but this process is relatively painless and you will need to provide fewer documents than if you applied directly to the bank. In addition, consideration of the application is much faster, so that you can start work in a few days, and not in a few weeks.
Paymill
This is a German project, which, in fact, is a clone of the American service Stripe developed by Rocket Internet. Like Stripe, there is an easily integrated application programming interface, and you can get started quickly (you will also need to provide some documents, but there are no special problems).
Vinetrade’s business model scares banks and card payment providers. We sell expensive goods (prices range from £ 1.5 thousand to £ 20 thousand), which is often not delivered to the buyer, but stored in remote warehouses.
Ultimately, thanks to the assistance of our investors, we were able to open an account with BarclayCard . Unfortunately, this process was not easy, and since this company requires that we use its interface (with limited documentation and software), we still have not completed the integration work. Thus, we still accept payments through non-automatic bank transfers (fortunately, this is standard in our market) until we can resolve all technical issues.
If I had to launch a new company (or products) today, I would consider the use cases for GoCardless, Braintree or Paymill payments and pay more attention to the inclusion of payment expenses in the business model. I no longer see any reason to apply to banks, put up with failures and go through various other obstacles until, finally, it is possible to get to work. Although, you may have to pay higher commissions than when you contact the bank directly (1-2% extra), but you can get to work faster and focus on checking your business model (payment costs can be optimized later).
In the past, I would use PayPal by default, but now I’d stay away from it and address it only as a last resort.
Now that companies like Braintree and Paymill have appeared in Europe, as well as more innovative services like GoCardless, it seems that the payment market is finally moving in the right direction.
Any progress that minimizes the need for direct interaction with banks and simplifies the procedure for customers to make payments for goods and services is always good. Hopefully, as a result of this, European Internet companies will become stronger and be able to compete with American ones.
Searching for payment options for Vinetrade was one of the most difficult tasks for me, but I learned a lot. Therefore, I decided that it is worth expressing my thoughts about the market of card payments, about the prospects for its development and about what the European segment of this market lacks.
Why is it difficult
The easiest way to receive payments online is to use a bank card (credit or debit). For all card payments there is a certain number of bank transactions. Consumer protection laws allow customers to demand a refund from their bank if something goes wrong (for example, if they paid for the product but did not receive it). If the bank is unable to receive this money from the company that accepted the payment, it suffers losses.
This means that banks will try to do everything possible to minimize their risk. Often this is expressed in the direct rejection of new applications (some banks took us by the nose for a month, forcing us to provide them with detailed documentation, and in the end they said that they would refuse us anyway because we are too young). Among their other methods are high commissions (sometimes constituting 5% or more of each completed transaction) or keeping a rolling balance (for example, 20% of the value of all transactions made within 6 weeks to cover possible repayments).
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Traditional options are banks, WorldPay or PayPal
Until recently, British entrepreneurs wishing to accept payments online had three main options: filing an application for opening a commercial account directly to a bank or registering an account with WorldPay or PayPal.
Applying directly to the bank can be a painful process: you must be prepared to provide you with a variety of different documents (business plan, cash flow forecast, documents confirming the identity of the director and shareholders, etc.) and plenty of time waiting for a response. Among the advantages of this option are the ability to control payment acceptance (for example, you can accept payments on your website without redirecting buyers to external services), relatively low fees (approximately 1.5-2% of the transaction value for payments made using credit cards, or a fixed fee of approximately £ 0.40 for debit cards and clearly defined dates for transferring money to your main account (which allows you to manage the money).
For those who have problems with banks, WorldPay has been a popular alternative due to its relatively simple online registration procedure. Among the shortcomings, it should be noted that commission fees are too high (in my case I had to pay £ 150 for opening an account, deposit a substantial amount to the account and pay about 5% of each transaction) and restrictions on the types of activities for which payments are made (for example, under the ban everything related to alcohol, and everything that falls under the category of "adults only").
PayPal has always been popular due to the fact that almost anyone can open an account in it and accept payments. Commissions are quite acceptable (about 3% of the transaction value), but the disadvantages are the imperfection of the technical part (their API is a real nightmare) and poor customer service. Unfortunately, PayPal is, in fact, an unregulated bank, and there are many stories related to closing accounts, freezing money and complicating business life. This may well happen, since this service has always been a target for fraudsters, so it will be much easier and cheaper to take the side of the buyer and return the money to him than to carry out a detailed investigation of each claim.
New players on the market
During the last 12 months, a number of new companies appeared on the market, founded by entrepreneurs who are aware of the need for better solutions. These new players allow you to register and accept payments with greater simplicity, charge low fees, quickly transfer money to your bank account, and the verification process (if it is present at all) is very short.
GoCardless (UK only)
GoCardless is perhaps the most innovative company that allows all UK residents to accept payments by direct debit, that is, directly from the buyer's bank account, bypassing the card system.
Direct debit is well suited for recurring payments or for one-time payment of services. However, unfortunately, it is not suitable for payments for products that need to be quickly sent to the buyer, due to small delays (3-4 days) to issue an order for the bank to conduct such an operation and receive payment.
A direct debit guarantee may make your business vulnerable to fraudsters, since buyers, according to this guarantee, have the right to demand a refund from their banks (however this is not significantly different from the requirements to return credit card payments). Bypassing the network of card payments means that GoCardless can charge low fees - they currently make up 1%, but not more than £ 2 per transaction.
Braintree Payment Solutions
This American company quickly developed its network (it deals with payments of such well-known sites like Github, Airbnb, Fab, Uber, 37 Signals) and recently started working in Europe. Her model is based on providing a simple application programming interface (API) and transparent prices. Integration with this service is quite simple, and its support service works perfectly. However, you still need to provide various business information and get approval from their guarantor bank ( Adyen in Europe), but this process is relatively painless and you will need to provide fewer documents than if you applied directly to the bank. In addition, consideration of the application is much faster, so that you can start work in a few days, and not in a few weeks.
Paymill
This is a German project, which, in fact, is a clone of the American service Stripe developed by Rocket Internet. Like Stripe, there is an easily integrated application programming interface, and you can get started quickly (you will also need to provide some documents, but there are no special problems).
The decision we came to
Vinetrade’s business model scares banks and card payment providers. We sell expensive goods (prices range from £ 1.5 thousand to £ 20 thousand), which is often not delivered to the buyer, but stored in remote warehouses.
Ultimately, thanks to the assistance of our investors, we were able to open an account with BarclayCard . Unfortunately, this process was not easy, and since this company requires that we use its interface (with limited documentation and software), we still have not completed the integration work. Thus, we still accept payments through non-automatic bank transfers (fortunately, this is standard in our market) until we can resolve all technical issues.
What i would do next time
If I had to launch a new company (or products) today, I would consider the use cases for GoCardless, Braintree or Paymill payments and pay more attention to the inclusion of payment expenses in the business model. I no longer see any reason to apply to banks, put up with failures and go through various other obstacles until, finally, it is possible to get to work. Although, you may have to pay higher commissions than when you contact the bank directly (1-2% extra), but you can get to work faster and focus on checking your business model (payment costs can be optimized later).
In the past, I would use PayPal by default, but now I’d stay away from it and address it only as a last resort.
What does the market need
Now that companies like Braintree and Paymill have appeared in Europe, as well as more innovative services like GoCardless, it seems that the payment market is finally moving in the right direction.
Any progress that minimizes the need for direct interaction with banks and simplifies the procedure for customers to make payments for goods and services is always good. Hopefully, as a result of this, European Internet companies will become stronger and be able to compete with American ones.
Source: https://habr.com/ru/post/166695/
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