Vinetrade has the kind of business model that scares banks and card payment providers. We trade high value goods (prices in the region of £1.5-20k) that are rarely delivered to the buyer (they're stored in remote warehouses).
I love virtually all startups and wish for their success. That said: I'm thinking that when every bank in Creation was saying "We won't take CC payments for that. No, no, you simply can't convince us that is a good idea." they were actually being appropriately conservative about legitimate operation risks uniquely incurred by this business model.
If you don't have a Fraud Guy, I respectfully suggest either hiring or training a Fraud Guy very, very soon, preferably before enabling any form of credit card payment. Your Fraud Guy is going to have some recommendations, including recommendations which meaningfully interfere with the product team's ability to meet user demands. If you do not listen to your Fraud Guy's recommendations (or, regrettably, even if you do), you may eventually get an expensive lesson in why both BigCo and startups in related fields eventually have to hire a/several/an entire department of Fraud Guys.
One of your Fraud Guy's first questions is going to be "Is there any pathway by which I can take a credit card and turn it into cash using this service? If so, what is the timeline on that?" I am not a Fraud Guy, but I count two ways to cash out credit cards, just reading the website FAQs. If you are discovered by the adversaries to be the weakest link in the UK financial system with regards to cash outs, you can expect heavy, dedicated adversarial interest.
This is an extremely important message. Fraud is very easily the thing that can sink many small companies that aren't used to the levels of fraud that you will see on the Internet. And because there are so many ways to defraud a merchant that isn't obvious, merchants need to be extremely careful and educated on the process. And handling chargebacks will become a full-time job for someone in your company, once your company becomes big enough. I work at a payments company, and fraud is something that ends up being a headache, although we are at lower-than average industry norms.
It seems relatively easy for someone to turn credit card payments directly into cash, by making a trade and then extracting cash through the bank account. And the gap between your withdrawal policies and the chargeback policies of credit cards are pretty wide. I would be very careful about this. Forcing users to enter bank accounts make it a bit harder for average people to defraud, but not a motivated fraudster. Also, allowing people to take delivery of wine through the purchase of a credit card, and then being subject to a chargeback will be extremely painful, although I'm not sure how easily chargebacks are fought in Europe. If you do suffer a lot of chargebacks though, even if you successfully fight them all, be prepared to be dropped by your credit card processor.
I think your business is actually very interesting, but I'm surprised that credit card companies would allow you to accept credit cards at all, since I would think they would lazily lump you in as a form of brokerage site. Not that I believe this, but it seems like an easy translation to stock brokerages, which don't accept credit card payments, but force you to transfer real cash into your accounts before you trade. Then once you have money in a brokerage, they can extend margin, but they maintain their own risk by monitoring the margin levels, etc.
Good luck though, I read through your site and I think it's a very neat idea!
1. A number of wine investment companies took card payments but never bought the wine. So the bank was liable for the money lost in those situations - and as a result that put a blanket ban on all fine wine companies. We were able to talk Barclays around on this.
2. Storage of wine would be handled by a third party warehouse. If they screwed anything up (e.g. broke the case, had a fire, and insurance refused to pay out), there was a chance that buyers could get the money back through their bank if they paid by credit card.
and for us when we did accept this:
3. Getting the fees to work with our model - we wanted to offer a fixed fee for trading cases, but all banks / payment services wanted to take a percentage, including for debit card payments (hence my point about doing more work to get the model to work payment charges).
Obviously fraud is a major concern, and is something that we do a lot of work on as we scale up (e.g. at the moment we're manually processing all orders, taking ID for anyone buying more than £10k total etc). It's not something that we're naive too and we're definitely not going to launch a completed automated system without adequate processes in place.
2) If you're talking about chargebacks, it would be YOU that the buyers would be charging back the money from, not the warehouse, since you were the merchant that accepted the payment.
And am I right in that you are basically saying that the buyers take on all risk of storage at the warehouse facility? If so, you should probably outline that as well, including what the insurance policy of the warehouse, covers, etc.
I should have been more accurate - the bank would be liable if the customer charged back and couldn't reclaim the money from Vinetrade (e.g. we'd ceased trading).
There isn't huge risk for the buyers - all wine in the warehouses is insured at full replacement value. It's more of a hypothetical "what if" or worst case scenario.
From the Vinetrade site:"Secure and trustworthy. Your transactions are encrypted."
Step 1:
Start posting username/pwd to your server over HTTPS and
start delivering signup & login forms over HTTPS.
At the moment, both of these happen in plain text so I don't see how you can say you take security seriously if you can't even get the low hanging fruit.
Yeah. Paypal was in that boat early on. They survived only because they were able to solve some very tough fraud problems. Otherwise it would have sunk them. I don't remember who was talking about it - maybe it was Thiel - but he said that at first it didn't seem like a big problem (in terms of how much it was costing the company), but someone at Paypal noticed that it was growing exponentially and if they didn't address it quickly they would not survive.
Not to forget the other half of the story: issuing invoices.
In Europe this can quickly become a pain, not only due to the extra information you need to collect (names, addresses and so on) but especially if you also need to collect Value Added Tax (VAT). This means asking for VAT IDs for companies - if they have them - and then calculating the tax based on whether the customer is in the same country as you or not. The complexity can rapidly descend into madness.
I have the added fun of having to issue bilingual invoices written in both Polish and English. Well, they could be only in Polish, but then the majority of people wouldn't understand them.
In the end, I bought a ready-made solution (http://nbill.co.uk/) which, whilst not being one of the most intuitive pieces of software I've ever used, gets the job done.
Oh, VAT, how I hate you so! You'd think if the tax authorities were going to saddle us all with worrying about other countries' VAT rules, they could at least provide a list of the ISO country codes and applicable tax rates we need to charge in a format that could easily be imported into a database. Some sort of simple automatic notification system for when the rules change would be useful too. At least that way, every small business in the known universe wouldn't have to write the same bunch of SQL after looking up the same details when they eventually found the same web pages, and then worry forever afterwards that something had changed and they didn't know and would wind up inadvertently committing tax fraud or something.
So I sell a simple SaaS service and asked my accountant one question.
Do I charge VAT. Here is his reply:
"
Vat rules
You need to identify B2B and B2C UK, EC and outside EC customers.
A vat registration number is usually accepted as evidence of B2B.
1 All sales outside the EC have no vat implications and are ‘outside the scope of vat’.
2 All sales to UK customers (B2B and B2C) have UK vat to apply to them and are standard rated.
3 All B2B sales to EC customers have no vat and are ‘outside the scope of UK vat’.
4 All B2C sales to EC customers have UK vat to apply to them and are standard rated.
There is a further twist.
If you can identify where your service is effectively used/enjoyed, then
If the place of supply would be the UK (2&4) but the service is enjoyed outside the EC, then no vat (outside the scope)
or
If the place of supply would be outside EC (1) but the service is enjoyed in the UK, then UK vat applies."
All B2B sales to EC customers have no vat and are ‘outside the scope of UK vat’.
Interesting. I was under the impression that EC B2B sales were zero-rated only for companies that are VAT-registered. This is why we grab and validate a VAT number for each EC company that we issue an invoice for.
That said, God only knows how this might tie into the living hell which is Polish bureaucracy.
You need to be able to prove that the purchase is B2B rather than B2C, and the easiest way of doing that is to get the buyer's VAT number. You could still do B2B without a VAT number, but you need to be able to prove that the buyer was a business if the tax man asks about it.
The problem is that the VAT you need to charge does not only depend on where you're located and where your business partner is located, but also on the goods/services provided and on wether the partner is a business or a person and maybe even the moon phase and the current water level of the north sea. You can't just create a lookup table, you have to implement the actual rules.
This is complex if you're selling a lot of different goods/services that may be different VAT rated, or enter into complex contract. But for companies dealing only with simple uniform stuff that's sold at the full VAT rate, it is very straightforward, and thankfully that makes up a substantial proportion of businesses.
The EU-based businesses I've handled billing for have processed a few tens of millions without ever worrying following more rules than these:
* Outside the EEA? If yes, no VAT. Done.
* Got a VAT registration number? No VAT. Done
* Otherwise, apply current standard VAT rate (20% in the UK)
Of course, I have had the "luxury" of not dealing with any products that have other VAT rates applied. But even then, for a UK seller of products it's generally sufficient to mark the products with a VAT category and apply a lookup in the last case to determine which of the handful of rates applies.
There may certainly be edge-cases where this meant we ended up overcharging VAT of customers, but nobody goes to jail for that.
If you provide B2B services with complex contracts it certainly can get quite hairy, but that can get hairy in the US and elsewhere too.
Beyond this, the only extremely vital things to consider in Europe when it comes to invoicing that seems to regularly confound US developers (and some European developers too):
* Invoices don't change. Ever. No really. And that means storing a copy of the invoice as it was presented to the user rather than dynamically regenerating it from a template that might later change.
* Specific phrases or wording and rounding rules tends to apply depending on the country you provide the service in. But this is rarely harder than getting your accountant to approve a suitable template.
You can't just create a lookup table, you have to implement the actual rules.
In general, that may be true, though certainly in some cases a look-up table seems to be sufficient. Even in more complicated cases you still typically need the same information about tax rates to start with, you just need a bunch more business logic on top.
In any case, if the tax authorities who are experts on the rules can't find a way to codify and explain them to small businesses, surely it's self-evident that the rules are too complicated for non-expert small businesses to work with and should be replaced with something fit for purpose?
> In any case, if the tax authorities who are experts on the rules can't find a way to codify and explain them to small businesses, surely it's self-evident that the rules are too complicated for non-expert small businesses to work with and should be replaced with something fit for purpose?
Full ack. Still, that's the current state. To make matters worse, those rules are subject to change and open to interpretation.
Example:
We just did an ElasticSearch training for a members of a german company that sits in Hamburg. However, the contract was via an austrian consulting company and we were just the subcontractors. Now, the question of wether we have to pay vat or not hinges around the question of that austrian company does have a german branch office or not. The first thing our tax accountant did was grab the folder with tax laws and read up on what could possibly declared as a "branch office". Is a permanent representative enough or not? Go, codify that.
The UK isn't as bad as the US, which brings the (often unknown) customer's location (present, domicile or claimed?), the (set of all) vendor locations, and the classification of the good under some all-encompassing system in to play as additional variables.
I can't wait for Stripe to get over here - fingers crossed this will happen soon. And from what I'm hearing, it may not be too far off. We've integrated with Recurly (with Sagepay as our gateway) for our recurring subscriptions at GoSquared, but the experience has been one I would hate to endure again. Thanks for sharing your experience James!
What are you hearing that suggests Stripe may not be too far off?
I'll soon be in the process of adding payment options to a new UK-based startup and really really really want to believe that Stripe will be an option for me in time.
I wasn't expecting this response, as I had heard from other sources previously that their best bet for UK / European expansion would be to buy out someone else, but I can't really argue with this: https://twitter.com/cjc/status/292350613939953666
I asked only a few days ago how soon is soon, to which no-one will actually answer. But the Stripe guy did say that he agreed that we shouldn't wait... go implement something else, and then they will help people move to them post-launch.
So don't not launch something in the UK because you're waiting for Stripe. Launch with GoCardless, launch with PayMill, hell... launch with PayPal if you have to.
Getting money through the door should be the only focus, not waiting for other people.
Once you've launched with another service, you've already done the integration work, and Stripe's main value proposition seems to be its simple sign-up and integration process.
Once you've launched with another service, you may well be tied to them anyway, if they lock in your subscribers' card data. At best, you're running multiple services in parallel until all your early subscribers quit, or you're asking everyone to resubscribe and surely losing a significant number of people during that process.
And once you've launched with another service, you've permanently accepted their legal terms, which may or may not be a smart thing to do with some of the things these guys hide away in their contracts.
I certainly wouldn't wait for a company that says "soon" forever, but it's also not as simple as just signing up for any alternative you can find and hoping you'll move later. Of course you want to start bringing the money in, but as the saying goes, if you get into bed with the wrong partner for a night, the consequences can still last a lifetime.
That's exactly what I did, I launched in December with PayPal. Moving to Stripe as soon as they launch, although I am now tempted to keep PayPal as a payment option for people who feel more comfortable using it. I will be an interesting experiment to see if anyone would still use it.
This is what I'm currently planning on doing for handling monthly (possibly annual) subscriptions.
Do you handle subscriptions and if so do you have any plans for handling moving the subscriptions from PayPal to Stripe?
If I were just to be handling one-off payments I'd not particularly care who I chose to go with (within reason). With subscriptions this gets, I believe, a bit trickier.
If I were doing subscriptions I would still go with paypal and wait for stripe (unless I have investment and going to be big). You then just prompt your users to move over at some point. Its a little more work to maintain the paypal code for existing user who don't move but with some encouragement like a month free you may be able to get them all over.
I'm thinking of using PayPal, but only for a one-off 1-year (or N-years) subscription payment, so there's no legacy to deal with once Stripe arrives, and a simpler integration. At the cost of losing some of those early subscribers later on.
At the risk of being repetitive check out Spreedlycore as another way to work with or switch between gateways as solutions you prefer become available. https://spreedlycore.com/
Their have been rumours and hints and lots of "soons", that said even if they do launch in the UK you may want to wait a few months for them to solve their teething issues.
Braintree which have an amazing reputation in the US, when they launched in Europe did so with their support still in the US, prices on demand and with paperwork requirement not even a bank would ask for to be emailed to them. Other then the support and pricing the other bits were sorted out quite quickly but for the initial customers the setup and initial period was a little choppy.
That said now I would wholeheartedly recommend Braintree in the UK based on a couple of clients more recent feedback. I suspect when Stripe launches a similar scenario will occur, so for them other then regulatory issues, I suspect the biggest issue is getting the support infrastructure in place, trained and modifying their processes to deal with different regs, as much as getting approvals and bank backing.
Every time I see an article along these lines, I can't figure out why software startups don't just use a third-party payment processor like FastSpring or Avangate. It makes all these complications go away.
Outsource anything you can, especially the things that others can do much better than you because it is their core business. Payment processing is definitely one of those things.
I started my software company in Germany and have always used a third-party payment processor.
PayPal, PayMill, Braintree etc are all 3rd party payment processors. So I don't quite understand your distinction. I believe FastSpring may mean you avoid having to get a merchant account directly so perhaps that's the difference you see? The biggest objection I've heard is the 9% flat rate they take vs 3% and 30 cents per transaction that you'd roughly see from a payment processor.
The cost for a payment processor 3% and 30 cents per transaction PLUS the costs (time-related, development-related, support-related) to manage to obtain a merchant account, deal with VAT, fraud detection, a nice customer experience, and many other things. For startups you end up way ahead by NOT rolling your own solution to this and other problems.
FastSpring charge me 5.9% + 50c
A merchant account will cost me 3% + 30c.
My software sells for $69. So it is 6.62% vs 3.43%. Actually it isn't.
The comparison is (6.62%) vs (3.43% PLUS dealing with all those VAT issues, fraud detection, fighting and/or wearing chargebacks, coding and maintaining the payment system, allowing direct bank transfers in countries where consumers prefer them, and many more things).
When you look at the service and functionality you get in exchange for paying more, you realize that in reality FastSpring actually means paying less, earning more (profit). Take a look at the FastSpring or SaaSy features pages, and as you go through the functionality and services listed, think through how much time it would take you to develop the same functionality on your own (years), how much more revenue you'd earn from day one by using this already existing global online selling functionality, how many distracting obstacles you get to avoid (try setting up on your own to accept foreign currencies and have your order page language-localized, not to mention to be able to manage global taxes and be in compliance on all global sales), the expenses you avoid taking on (you dont pay chargeback fees, you don't need the support or dev staff members you would otherwise need, you dont need to pay for file hosting), the risks you avoid (we are the merchant of record, not you, we deal with fraud and PCI compliance, you outsource to us potential company-killing risks like how credit card numbers are stored (btw we store none), the list goes on and on...
There are plenty of businesses where 9% is more than the gross margin. And plenty of businesses where the gross margin is higher than 9% but small enough for you to be totally unable to compete if you spend 9% on transaction fees.
It certainly can be worth it for high margin services and products, but it's by no means something that's always viable.
PayPal, PayMill, Braintree etc are all 3rd party payment
processors. So I don't quite understand your distinction.
I believe FastSpring may mean you avoid having to get a
merchant account directly so perhaps that's the
difference you see?
The main difference is that FastSpring acts as a reseller. One of the consequences being that Europe based startup doesn't need to handle VAT - technically it's selling to the US.
The biggest objection I've heard is the 9% flat rate they
take vs 3% and 30 cents per transaction that you'd roughly
see from a payment processor.
Well, it's not cheap but we have EU regulators to thanks for it - not having to deal with VAT can be worth the price in some cases. And when a company grows, it can optimize in the payments area.
I might be wrong, but I don't think that can work if you want to accept credit cards directly in order to keep customers on your site for the whole checkout process.
These type of solution also rarely let you set up recurring payments.
We recently switched to Braintree from PayPal Payments Pro. While we're not "small," (>£10million/year) the process was largely painless and I can't recommend them enough. We also needed to take AMEX cards and found setting that account up extremely easy (though we already had an AMEX account).
The only thing that does seem slightly annoying is all their support and accounts people are in Chicago, meaning the inevitable back-and-forth can drag on for way longer than it should for merchants based in Europe. Hopefully this is something they will get ironed out once they have some significant traction in the EU.
That's one thing I like about Paymill, from an initial impression. They're in Germany, so I'm in the same timezone. I just had a small email exchange today and it was nice knowing they could response so quickly.
Nope. We operate primarily on a recurring subscription basis, so we're just having to maintain backwards-compatibility for those customers currently on PayPal.
To be honest, PayPal could not have been less helpful at any step of the process, both before we were wanting to switch and during the process. They're a total nightmare of a company to deal with.
Yes I ask because we see a lot of companies stuck in that bind and ultimately running two processes for quite some time. Well at least the worst is by far behind you.
Unfortunately PayPal is pretty much an unregulated bank and
there are a number of horror stories about them closing accounts,
freezing funds and making life very difficult for entrepreneurs.
Actually, in Europe, paypal IS a registered, regulated bank in Luxembourg. That, to me, makes it more credible.
No normal bank can hold your founds for 180 days for "review". If any bank in any EU country tried to do that, they could get sued to hell.
Yet paypal can get away with it, but how? I don't know.
The 180 day hold is standard practice. Virtually all US merchant account agreements have clauses specifying when a reserve account, holding part or all of the merchant's transactions, will be established (when? at the processor's discretion, really). If the merchant is terminated, funds in that account are held for up to 180 days to cover future chargebacks. PayPal inherited that from the two banks underwriting all their accounts -- Wells Fargo NA and JP Morgan Chase. The policy predates PayPal's founding, and isn't anything unusual.
They require lots of documentation when you register as a business. They also have to comply with EU regulations, which, hopefully, also protects us as business owners. IANAL, so i don't know what are the practical implications.
According to the law you're supposed to tax EU customers if your business is in the EU. Obviously the tax is different for each country and changes from year to year: https://en.wikipedia.org/wiki/Tax_rates_of_Europe . Businesses with a VAT ID can be exempted from the tax but only if they provide a valid VAT ID. At the end of the year your business then provides the list of transactions and VAT IDs to your state with the tax form and the state takes care of forwarding the taxes to the other countries.
According to the law you're supposed to check the validity of that VAT ID and because the data changes over time they provide an "API": http://ec.europa.eu/taxation_customs/vies/faqvies.do
That API forwards the query to country-specific databases and these databases go down. From their FAQ: "Some parts of the system may be unavailable at certain times due to the necessity to back-up the Member States' databases." Year right.. From my 1 month experience I've already seen two outages, one of them lasting a full day. And I'm not actively monitoring the service.
I've also had customers from Spain and Germany ask for their VAT ID to appear on their billing recipes, because of regulations again. It shouldn't be a biggie but Chargify doesn't support that field so I have to ask customers to use their Billing Address 2 field instead as a hack.
These are still things that I haven't figured out yet:
What happens if you provide invalid VAT IDs in your tax form ? I don't want to loose conversion because a state-owned service on which I have no control doesn't work properly.
I've read in multiple places that if the customer is in your business' country the rules are again different but I have no idea how.
As far as I understand it, you can check and are expected to observe and note anything odd about transactions with supplied VAT numbers but AFAIK - and I'm not a lawyer! - there's no law that you must check every one. (Note: This may be a UK specific interpretation.)
However, if they turn out to be false and the tax man comes back to you, you could be liable for the VAT. Depending on your sales profile, you might consider this an acceptable risk - I certainly do (I get perhaps 10 transactions like that each year).
We operate from Belgium. We only have to charge the Belgian tax rate (21%) for other Belgian companies or consumers living in the EU, in all other cases VAT rate is 0% (have to put a disclosure on the invoice referencing Belgian law though). Then again we don't sell any physical goods (luckily).
We don't automatically check validity of VAT number, so maybe I'll be able to answer that question in a couple of months.
When you use a full-service e-commerce service that serves as a reseller and is the merchant of record, taxes become their responsibility, not yours. At FastSpring, we handle VAT and have dealt with all the different issues that come with it: real-time VAT ID validation, exemption for B2B customers, being able to display prices using VAT net pricing mode or VAT gross pricing mode, and so on...
Anybody used Paymill yet? Their docs all look fairly straightforward, and I'm strongly considering them for a project, but I'm interested in the experience of others.
We applied and simply got a rejection email with little to no explanation of why we got rejected which is disappointing. I'm going to try and open up communications with them again to see if we can reapply now that we are fully trading (unfortunately through paypal)
The evaluation of new applications in order to accept credit card payments is subject
to strict compliance rules and risk regulations in Germany. Our current acquiring
bank has declined your contract for some reasons with regard to their risk and compliance
management guidelines. We do not receive any detailed reasons from the bank.
This is why we cannot give you a better explanation. Unfortunately,
Paymill does not have an influence on that decision.
We began to look at them, unfortunately while the API was straight forward the documentation was simply wrong in many places and contradictory which was a tad frustrating. The biggest issue for us was they simply couldn't answer even the most basic question like their current PCI-DSS status, information about their network or datacentre setup (or even where it was hosted) in effect we couldn't complete any PCI-DSS assessment docs. Needless to say, we simply did not feel confident handing over our companies account and other details they were asking to go live with. Let alone let them handle our payments. This was a few months ago, and they were having teething issues which may have now been resolved I suspect given how common such questions should be they now have the answers in place we may well relook at them in a couple of years time if they are still in the marketplace.
I've been using it since September with zero problems so far. They answer their phones, which is more than I can say about anyone else in this space. I wrote a python wrapper for their API as well. Everything's been smooth. If you have any issues with them, call them, and in my experience things get fixed instantly.
We will be using Paymill for our upcoming project. We haven't yet gone live, but the api was very easy to use and it seems to work very well. One downside for us is that they only accept Visas and Mastercards.
Going by the title of this post I was hoping it would give a solution to the segmented payment market here in Europe, but it doesn't. A more fitting title would've been "Taking payments in the UK" or Taking credit card payments in Europe".
The main problem we have here is that debit cards are a preferred payment method and each country has it's own system. From my experience and other reports I've seen up to 30% of the customers will use a debit card if that option is given. I don't know how many of them would cancel the sale if debit payment isn't possible.
Unless I'm mistaken only WorldPay offers some of the local debit cards, such as Carte Bleue in France, Bancontact in Belgium and iDeal in The Netherlands. Paymill seems to be the only one to offer ELV in Germany.
Could you explain a little bit more about what's the problem with debit cards in Europe?
I have a MasterCard debit card with which I never, ever had problems making payments and I have made such payments, either direct or through PayPal, Google Wallet or iTunes. Before this I had a Visa debit card issued by the same bank (Groupe Société Générale). Before this I had another debit card issued by another bank.
All of them worked, all of them debit cards, as indeed credit cards are not really popular here. Should mention that I'm from Romania and this debit card is linked to my bank account (are you talking about anonymous debit cards or something?).
A mastercard debit card works much like a credit card. In germany for example, your standard "debit card" is your banks card and in online transactions, you just enter bank account and the banks identifier. It's a legacy way of paying that dates back to the eurocheques. It's comparable to the Card Bleue in France which is a system that exists pretty much in France only. This fragments the market.
OK, so you are talking about a different kind of debit card of which I have no knowledge. Romania was late in this world of online transactions and credit cards so we must have skipped this legacy somehow.
I also don't understand why VAT isn't the same everywhere in EU. So yeah, Europe is a mess.
Even worse: VAT is not the same depending on what you sell:
Foodstuff in general has lower VAT (7%) in germany, but that lower tax rate includes also hotel bills, but not the breakfast which is taxed at the regular 19%, taxi bills are reduced, etc. It's a mess. When you sell services in the EU and the service is rendered in another EU country and for a company with a valid Tax ID you don't have to pay VAT, which includes Switzerland (although they're not EU) and so on.
You are correct. But they are several reasons why the situation might seem complex for a foreigner.
French people regularly use the term "carte bleue" to mean "debit card" (and most of the debit cards still feature the legacy "carte bleue" logo). Even worse, most of them say "carte de crédit" (credit card) when they really mean "debit card", because credit cards are very uncommon and people don't know the difference. I have no statistics, but from my personal experience, credit cards not linked to a bank account barely exist here.
On the other hand, we have a lot of companies offering short-term, small-amount credits easily — directly on your bank account, without a dedicated credit card. Maybe those play the same role as credit cards in the US?
I don't understand why you would consider using Braintree in Europe (or anywhere) vs. going to Adyen directly.
The Adyen guys are smart, their technical platform is simple and robust, and unlike the Stripe/Square/Braintree guys, Adyen actually does the processing so they can offer better rates and are suitable for huge volume.
About the only downside is that "At-jien"'s b2b marketing is pretty terrible. They have some faux Apple videos on their site which I think undermines their technical sophistication.
It's surprising to see how little people mention Adyen in this thread. One of the big benefits of Adyen is that they also supports many more payment options besides credit cards. For example: Paypal, iDeal, Card Blue & SOFORT Überweisung. If you're serious about receiving payments from consumers in Europe, supporting these is pretty much a necessity.
I'm in talks with one of the others on that list because I need Amex support.. but in the UK PayPal also do a tier called "Website Payments Pro". It's not the same as a vanilla PayPal account and includes a merchant account and API for doing card transactions. You have to go through screening to be accepted and I've found them to be very professional and helpful (as in, a far better service than the vanilla PayPal service). Only downside so far for me? No Amex.
I think that's a big part of it, particularly if you're trying for the procurement "loophole" which allows low to mid level employees to authorise spend of up to a certain level without going full a full blown procurement cycle.
A lot of the big firms (in the UK at least) will use Corporate AMEX charge cards (rather than credit cards) for this purpose. If they can't pay on their Corporate AMEX they'll often have to go through a more drawn out process to get the payment made by some other method unless they want to make it on a personal card and then claim it back.
I strongly prefer Amex because the consumer bonus is better for me at least and even more importantly it doesn't take me through the Verified by VISA liability shift/security nightmare.*
* Verified by VISA with my VISA card redirects to a third party domain (not the retailer or my bank) which then asks for DOB and very basic details to set a password (and little more is needed to reset the password). Even if fundamentally secure the user education message of this process is awful. I believe that some card providers make better use and of Verified by VISA mechanisms but not all.
Where possible I will use AMEX for all my personal transactions mainly as I have a longer interest free period on spends making budgeting easier, also while its a pure perception thing the few times I have had the need for a chargeback or had a problem with my card its been resolved in minutes.
Of course as a merchant it's higher fees, has weird conditions attached to it and virtually all AMEX users have another credit card (indeed Amex provide me with a visa card for when I can't use my amex) so there is little benefit to supporting amex.
In my experience, a lot of people who work in large companies who have authorization to spend decent money do. They can often get hold of a Visa or Mastercard instead but it seems to be more hassle to get authorized by a higher-up.
Personally, I have an Amex too and I'm not rich or special but maybe it's different in the UK. I use it because I get a ton of airmiles and Amex never seems to get rejected or stopped for fraud checking purposes.
Almost everywhere I go here in the UK accepts it (petrol station, supermarket, etc.) It tends to be small merchants who don't (local takeaways, particularly.)
> [Paymill] also require some business information and identification from you, but this does not appear to be particularly stringent
Actually, speaking from personal experience, it is particularly stringent. I had to give up in the end because the bureaucracy was taking too long.
From memory, you need a tax identification number, your VAT identification number a scan of your passport, to display your name and home address on your website and you need to post it all to Munich. I suppose this doesn't sound like too much but in the UK you have no reason to have a tax identification number unless you're self-employed and already trading. In the UK you don't have a VAT id unless you're making £77k. Outside Germany showing your home address on the web is considered a bit crazy. Consider now that if you're trying to get Paymill to authorise you are probably are not trading yet. It's not that appealing and I would recommend against it unless you have time to spend exchanging emails with customer service representatives who have a poor command of English.
Paypal's (admittedly lame and APIless) method of payment acceptance is to copy and paste a button.
I had never heard to Braintree, even though it seems like a just-as-mature and very comparable competitor to Stripe. Also, plenty fast-growing companies seem to have heard of them anyway, cause they're using them. What's the secret? Is it all just marketing, where Stripe markets though HN and the likes (so that people like me hear about them) and Braintree uses, say, sales people? Or have I simply been sleeping?
They were quite prominent in the Rails community early on (37signals use(d) them, as did several other well known Rails-based sites). They also used to reach out to Rails-based sites in particular but are now more general.
SpreedlyCore is another path to go down. It's a cloud based credit card vault that connects to 40+ payment gateways with a good API and docs. We have PayPal Pro customers who use PayPal for processing but develop against our API. We support GoCardless as well. Due to the fact we vault your cards away from the gateway you can change or add a gateway at anytime. I work for Spreedly who is behind SpreedlyCore.
What about using Klarna (https://klarna.com/)? Admittedly not credit card payment but also decreases risk as they take on the risk, according to themselves.
Reputable company based in Sweden so no dealing with American companies - more suitable for European markets.
It's in my opinion more costumized for the European market - they can handle credit cards - but they also have setups where they buy the invoice from the merchent and handle the payments and stuff like that.
It's extremely widely used in the Swedish online merchent business world. And they're available in most European countries it looks like.
It's easy to forget, just offering VISA/Mastercard won't be enough in a lot of European countries.
Online bank e-payment is the preferred method by customers in quite a few European countries.
Most PSPs only offer bank payment services requiring the merchant to sign up with each and every bank in each country, but there are a few PSP where you only need ONE single merchant agreement to offer payment by bank in _all_ the countries the PSP provides.
List of payment companies offering online bank payments via single merchant agreement:
Trustly.com: Spain, Sweden, Finland, Estonia and Poland
Payment-Network.com: Germany, Austria
EUTeller.com: Finland
If you know if any additional online bank e-payment companies covering European countries, please reply. Thanks!
Interesting article. We are using Paymill and it's very easy to use (official extensions for Magento and other eCommerce systems). Our old payment provider was a pain to work with (uploading excel tables to process the payments...).
Does the official extension do everything you require? We have actually just released a magento extension for Stripe and were looking at porting it over to Paymill but after some research figured out they had an official open source once so we are trying to determine if it's still going to be worth the time investment.
I'm seeing a problem with Paymill: They clearly were built by Rocket to get acquired (possibly by Stripe) in the future. So I'd be careful with integrating their services as those services might be acquired and shut down anytime.
Whoever acquires them is not likely to throw away all the money Paymill's existing customers bring in. It's not like your typical Google acquisition where the original product just dies.
Agreed, the effort required to collect payments is absurd for a UK start-up today. I haven't added up how much time we've spent just trying to find a good way to let customers pay us, but I'm quite sure we would have launched long ago if we'd had a simple no-brainer option and spent the rest of the time building our service instead! As it is, we've been looking into options for months and nothing is perfect.
For us, GoCardless win in every respect except for scope: the bank accounts they can charge have been limited to UK only and are just starting to expand out to other countries in Europe, but global sales aren't possible for now so you need at least one other option if your customers are worldwide. No complaints so far in terms of integration, support, fees, or legal terms though.
Braintree is our other current plan: there's a multi-week time lag and the hassle of providing significantly more information up-front when you apply, but like GoCardless they seem to have good support and the information they ask for doesn't seem to be unreasonable, just time-consuming. Also, unlike a lot of payment services, their legal terms were quite short and so far red-flag-free. The fees aren't bad, but they need to sort out their presentation so they don't refer to obscure bank interchange rates rather than giving a straight answer on percentages, and the minimum monthly fee just to sign up is expensive if you're only expecting a modest number of customers in the early days. They do have some serious limitations in their fraud protection that make us wary of chargebacks, such as not supporting 3D Secure and the liability shifting that should go with it.
We've considered numerous other options, including most of the ones mentioned in the article, but ruled everyone else out so far.
PayPal is a non-starter due the fact that on their new web site it seems you can't even look up basic details without signing up for an account and all that goes with doing so. Combine that with a well-documented history of poor customer service and some dubious terms last time we checked, and for us they're not a serious contender. The one thing you can see before signing up is the fees, which are high even before all the nasty extra percentages they can add on if you look carefully enough.
Paymill should be a much better option, but I simply couldn't understand their legal terms, so they've rule themselves out immediately. If they want companies like us to look at them, they need to hire a lawyer who speaks English, and then they need to write terms that are clear enough that we could confidently accept them without paying a small fortune for a lawyer to review them in detail. The Rocket relationship doesn't inspire confidence about them as a long-term partner for such a critical business function either, though that could be overcome.
We did consider a couple of traditional payment gateway + merchant account set-ups, and actually there seem to be some quite decent payment gateways these days in terms of service, fees and integration options. However, the heavyweight merchant account guys seem to be so risk averse and offer such absurd charges and waiting periods that we're not going to waste our time applying and sitting around for a month or more for an answer in case they deign to work with us.
As an extra data point, we also considered outsourcing the entire payment collection process to FastSpring. They were expensive and their system didn't seem to have a lot of flexibility, though in return they did seem to offer to do a lot of the set-up work we would otherwise need to do ourselves. The deal-breaker here was that we got the feeling they didn't really understand the tax and data protection rules in Europe and that gave us little confidence that their system would cope with our statutory obligations. This was quite a while ago, though, so perhaps they've improved more recently, and in any case they might be a better fit for people with a different business model.
Bottom line: For us, GoCardless is a clear first choice, and then once we're up and running we'll look at applying for Braintree to broaden our reach, as they want to see a bunch of stuff when you apply that we'll have done anyway by then.
Re: tax and data protection rules in Europe, over 1/2 of our clients are located outside the US, the majority of those in the EU, and so we have been handling the key EU issues (VAT, euro payment methods & currencies, EU language support, etc.) for some time now.
In terms of cost, there's a major distinction in that FastSpring's pricing of 5.9%+$.95/txn or a flat 8.9% is inclusive of the cost to process credit card and other transaction types globally (typically costs 3-4%+ of every transaction including chargeback fees when you get your own merchant account, assuming getting one is an option for you) because FastSpring is the reseller, the merchant of record. The other reason is the vast functionality FastSpring provides as part of its full-service, all-in-one solution, enabling developers to skip the months or even years of dev work and instead focus on product dev and marketing. You can view the difference here: http://bit.ly/uuklQu
Thanks for replying. As I did acknowledge, we looked into your services some time ago and things may have moved on, so perhaps for everyone's benefit you could clarify a few things that bugged us back then?
As far as VAT goes, at the time you appeared to collect it and then remit it directly to national tax authorities, not to your clients. If that is still the case, could you explain why you are required to collect VAT at all if you're acting as a reseller and based outside the EU? If you're acting as the merchant for tax/legal purposes, how do clients offset VAT they have paid themselves against VAT on the purchase if you handle all of the collection and remittance directly? If you're acting on behalf of the merchant, how do clients integrate with your systems so that any invoices generated on your side meet the requirements for sequential numbering if they also sell via other channels?
In terms of data protection, are you now covered by Safe Harbor or equivalent provisions, so there is no risk of clients running into trouble because you might be considered to be collecting personal data on their behalf and then exporting it outside the EEA?
Regarding the pricing, I'm afraid you just have to eat that one. Obviously you're offering a tailored service in exchange for the higher rates, so it's an apples to oranges comparison, but just about everyone from newcomers like Stripe and GoCardless to old school payment gateways now offers hosted options or transparent integrations that can be set up in hours, not "months or even years of dev work". Meanwhile, none of the options we've been considering recently are anywhere close to the rates you charge even with extreme adverse factors. In more normal cases, you're about 3x as expensive as various card payment services, and GoCardless charge a flat 1% and that's it.
Not enough information on their page for me to ID it. If you try it and it contains an XML interfacing option with completely insane, unheard-of levels of verbosity around fraud rules, that's the one.
(disclaimer, the last time I had to deal with these things was 11 years ago, in the states. And I don't know what your exact needs are)
I see you didn't directly mention Sage, I've seen a number of sites using Sage Pay for their online billing, and they don't seem to require a merchant account. (though fees are probably higher than others)
Please note that a lot of the difficulties with respect to taking payment for the OP are coming from two things:
- market place for alcohol;
- high value of the items exchanged, in thousands of £.
Everywhere in the world, this would flag a business as dangerous.
If you have a simple webservice offer and if you are banking with Barclays, you can get a merchant account with BarclayCard nearly "over the phone". They take a bit of money, have a 45 day retention period per default, but at the end, they are efficient with a reasonably easy to implement interaction API (if you take the hosted payment page).
Does anyone have any experience with the user experience side of GoCardless? Do customers have any issues entering their account number and sort code, rather than the usual card information?
I really like GoCardless but feel that customers might be hesitant to enter that information, especially when they're not used to doing it.
We have found that conversion can be just as good, if not better than cards in the right cases. The biggest factor that affects this is transaction type.
We see really great conversion for repeat billing where Direct Debit is already a well known method of payment. Conversion is not as good for one-off payments where DD is less expected though.
We switched from PayPal to GoCardless for one off payments and we haven't found any problems amongst our customer base. We occasionally have to explain the mechanics behind it but generally people get it and prefer it to not having the faff of a PayPal login.
That was definitely one of the concerns that we had when we decided not to implement GoCardless last year for a product. Paying by direct debit is such an unusual process online outside of Paypal and magazine subscriptions, that it's easy to imagine conversions will suffer.
That's what we recommend. It's super easy to sign up and integrate so it's absolutely worth signing up and just giving it a go. That way you can see whether it works for you and your customers.
The OP is still being naive. For 1.5k-20k transactions, you have to pretty much do (or at least start) payments the old fashioned way: 1) vet buyers and 2) wire transfers, bank transfers or checks. Going with the payment startup du jour is not prudent.
Here at YPlan in London we're using DataCash as a PSP and BarclayCard as a merchant account. We talk to DataCash directly using their API, it's not that difficult to integrate and they're very helpful with any payment related questions.
It supports recurring fees, and manage the VAT and currency issues for you. It takes those awful banks solutions away. Integration with our PHP code base went very easily.
And, in the end, we only issue one invoice.
I definitively recommend.
On the other side, Ogone is just... too 90ties. And it is really hard to deal with subscription and recurring fees.
GoCardless isn't supported by Shopify which is a big pain. Braintree does so I'm awaiting an email from them now so I can start to open my online shop.
I recently blogged[1] about the need for Stripe to come to Europe whilst the market is there. Until GoCardless, Braintree Payments start making the API just as good as Stripes, then the need for them to come here is here.
Interestingly, they used to provide a fork of stripe gem for Ruby API. But they gave up on developing on their own. They have stripe compatible ruby API now.
https://github.com/keikubo/webpay-ruby
I have no idea why they don't implement on their own.
You should look into bitcoin (at least know about it and how it can help you as a merchant). Any payment company that deals with credit cards is not just a payment company but a fraud detection service; at least that is what it should be selling themselves as. Fighting CC fraud (and bank transfer fraud) is a challenge as the system was not designed for the digital space.
it's far too difficult to acquire them at the moment for normal citizens, at least in the UK.
I spent at least 4 hours trying to legitimately acquire bitcoins to purchase some pretty physical coins from https://www.casascius.com before giving up.
If you only spent 4 hours trying to acquire a completely new currency that is not backed by any major authority yet still usable all over the internet, you might want to spend some more time :) And yes, getting a hold of them is still a challenge. If you want to buy in bulk, you can wire money to many of the exchanges for standard wire rates.
They're absolute masters of market research, delivery and execution. They don't rip off sites (i.e downloading the HTML and changing the logo) or anything unethical like that, they create real competitive businesses from scratch extremely fast without compromising the quality.
Ideas aren't worth that much (the majority of their businesses are actually "old" ideas like ecommerce), execution and speed is what matters. They're brilliant at it and deserve a ton of respect for it.
Despite being the person who said I was loathe to use it, I agree with this to a degree. I feel icky about doing it, but right now they're the only people offering a sane solution in Europe, I respect them for bringing it to market here.
"They don't rip off sites (i.e downloading the HTML and changing the logo) or anything unethical like that, they create real competitive businesses from scratch extremely fast without compromising the quality."
They come as close as they can. I simply can't trust people like that.
When I started in September it was paypal or paymill for me. No other options. Paymill may be a clone but it's brought value to a neglected market. In that sense it's much more than a regional copycat. I cannot trust paypal in any situation, so someone with zero reputation is automatically ahead of them.
Both Amazon Payments and Google Checkout are now available in the UK, at the same pricing level as PayPal.
The two main complaints levelled at PayPal in TFA are poor customer service and poor technology - two aspects that Amazon have been very good at in my experience.
Does anyone have much experience with these platforms and their use by "normal" UK consumers?
Interesting to hear that Amazon Payments is available in the UK now, but they still seem to be physical products only, no digital downloads, services, etc. so that limits their usefulness.
FWIW, we looked into Google Checkout/Wallet but the unclear branding and some tight rules about how you had to present the option on your web site put us off before we got very far.
I tried using Google Checkout early in my business and it had a fatal flaw of not letting me sell things in US dollars and British pounds but only British pounds. Since 90% of my business is in the US, it was a non-starter. I have to wonder if they've improved it since, though.
I spent months applying via braintree, 6 year old business, have accounts and good record and large site, had to give passport scans, bank statements, company accounts and other documentation spend weeks going back and forth
only to be refused because "hosting" is considered high risk
if you are in europe dont waste time with braintree!
PayEx is large in the Nordic countries (Norway,Sweden,Denmark,Finland) but apparently has some global support as well.
Unfortunatly there's no public word on pricing.
Their solution is a bit oldfashioned ... needing to skin one of their pages and send over the customer for processing but they offer plenty of payment options like debet & webbanking payment options
we're using them as well after having tried many of the other options. they are quite far ahead from other european cc payment providers like f.e. saferpay. and from experience, their support is way better when it comes to technical/api questions.
Fantastic write-up. Thanks for doing this. I was searching for an article exactly like this and it's good that i can learn from your experiences of the newer providers. I've used Worldpay, SagePay/ProtX and Paypal in the past and completely understand your frustrations.
I use Braintree for appdesignvault in thr UK and have found their service to be top notch.
The only issue was Ayden settling the funds into our UK business account every 4 days and getting charged £6 for the privilege. A quick support email fixed that
One of the larger ones not referenced at all would appear to be Wirecard. We've heard good things about them. Anyone here have a comment one way or the other?
I don't get it. Just call MerchantWarehouse (sp?) and get them to hook you up with a merchant account and an authorize.net gateway. We take payments from all over the world using them and get dinged around 3% total with very few chargebacks. It's really not that big a deal.
Have you ever set up payment processing in the US? Did you get it going in a matter of minutes and not days? Because I have, and I can clearly say that any of the solutions presented in the post as well as the one you point out (and with a tone, as if everyone just had to know about this MerchantWarehouse you speak of) require a lot more work. I'm okay with work, just not okay with jumping through hoops that are unnecessary elsewhere.
I don't get your post either. On first glance, MerchantWarehouse seems to be servicing US businesses only. "Just calling" them from Europe would likely result in a very short conversation :)
this may be a stupid question, I don't know anything about online payment processing, but is the new IBAN thing not supposed to make these things easier?
You should consider that direct debit as a payment method needs an activation process of about 7-14 days. Therefor you won’t be able to use direct debit without completed activation process.
Please note too that this service is only available in Germany right now!
EDIT: checking the terms of service fine printed at the bottom of the page I finally found this
3.1 The merchant receives the right of use to the Paymill platform limited to the duration of the contract,
territorially restricted to the following countries, which is non-exclusive, non-sublicensable, non-transferrable and non-assignable. Countries in scope: Andorra, Belgium, Denmark, Germany, Estonia, Faroe
Islands, Finland, France, Greece, Ireland, Iceland, Italy, Israel, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Austria, Poland, Portugal, Sweden, Switzerland, Slovakia, Slovenia,
Spain, Czech Rep., Turkey, UK, Hungary, Cyprus (Greek part), Vatikan City (State). The right of use is valid
for access to the platform via the Internet and for use of the functionalities associated with the Paymill
platform in accordance with the regulations of this contract and the documentation. The merchant shall
be entitled to use the documentation solely for the connection of the utilized data processing system to
the Paymill platform and to store the data transmitted to the merchant via the Paymill platform on its
data processing system or a data processing system of a third party authorized by the merchant.
The down-votes come because you assert a fact that is incorrect and can meaningfully impact the supplier and folks reading here. Perhaps "It looks like PayMill is Germany only?" is a better approach.
I love virtually all startups and wish for their success. That said: I'm thinking that when every bank in Creation was saying "We won't take CC payments for that. No, no, you simply can't convince us that is a good idea." they were actually being appropriately conservative about legitimate operation risks uniquely incurred by this business model.
If you don't have a Fraud Guy, I respectfully suggest either hiring or training a Fraud Guy very, very soon, preferably before enabling any form of credit card payment. Your Fraud Guy is going to have some recommendations, including recommendations which meaningfully interfere with the product team's ability to meet user demands. If you do not listen to your Fraud Guy's recommendations (or, regrettably, even if you do), you may eventually get an expensive lesson in why both BigCo and startups in related fields eventually have to hire a/several/an entire department of Fraud Guys.
One of your Fraud Guy's first questions is going to be "Is there any pathway by which I can take a credit card and turn it into cash using this service? If so, what is the timeline on that?" I am not a Fraud Guy, but I count two ways to cash out credit cards, just reading the website FAQs. If you are discovered by the adversaries to be the weakest link in the UK financial system with regards to cash outs, you can expect heavy, dedicated adversarial interest.