Accepting online payments in Europe in 2013

Original author: James Maskell
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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 innovation companies such as Stripe and Square are not yet operational in Europe.

Finding payment options for Vinetrade has become one of the most difficult tasks for me, but I have learned a lot. Therefore, I decided that it would be worthwhile to express my thoughts on the card payment market, on the prospects for its development and on what the European segment of this market lacks.

Why is it difficult


The easiest way to accept payments online is to use a credit card (credit or debit). Behind all card payments is a certain number of banking operations. Consumer protection laws allow customers to demand a refund from their bank if something goes wrong (for example, if they paid for a product but didn’t receive it). If the bank cannot 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 all month for a nose, 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 a company). Among their other methods - high commissions (sometimes amounting to 5% or more of each transaction made) or holding a moving balance (for example, 20% of the value of all transactions carried out over 6 weeks to cover possible chargebacks).

Traditional options - banks, WorldPay or PayPal


Until recently, British entrepreneurs wishing to accept payments online had three main options: submitting an application for opening a commercial account directly to a bank or registering an account with WorldPay or PayPal.

Filing an application directly to the bank can be a painful process: you must be prepared for the fact that you need to provide many different documents (business plan, cash flow forecast, documents confirming the identity of the director and shareholders, etc.) and hold a lot of time waiting for an answer. Among the advantages of this option are the ability to control the acceptance of payments (for example, you can accept payments on your website without redirecting customers to external services), relatively low fees (approximately 1.5-2% of the transaction value for payments made by credit cards, or a fixed fee of approximately £ 0.40 for debit cards) and clearly defined dates for the transfer of money to your main account (which allows you to manage money).

For those who had problems with banks, WorldPay was a popular alternative due to its relatively simple online registration process. Among the shortcomings, one should note too high commissions (in my case, I had to pay £ 150 for opening an account, depositing a substantial amount into the account and paying about 5% of each transaction) and restrictions on the types of activities for which payments are made (for example, under prohibition everything related to alcohol, and everything that falls into the category of “adult only”).

PaypalIt 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 cost), 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 many stories are known related to closing accounts, freezing funds and making business more difficult. This may well happen, since this service has always been a target for scammers, so it’s much easier and cheaper to take the side of the buyer and return the money to him than to conduct a detailed investigation of each claim.

New market players


Over the past 12 months, a number of new companies have 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 any) 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 customer’s bank account, bypassing the card system.

Direct debit is good for regular payments or for a 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) in processing the order for the bank to carry out such an operation and accept payment.

A direct debit guarantee can make your business vulnerable to fraud, as buyers, according to this guarantee, have the right to demand a refund from their banks (however, this is not significantly different from the requirements for credit card payments). Bypassing the network of card payments means that GoCardless may charge low fees - currently they make up 1%, but not more than £ 2 per transaction.

Braintree payment solutions

This American company quickly developed its network (it deals with payments from such well-known sites as Github, Airbnb, Fab, Uber, 37 Signals) and has recently started working in Europe. Her model is built on providing a simple application programming interface (API) and transparent prices. Integration with this service is quite simple, and its support team works perfectly. However, you still need to provide various business information and obtain approval from their guarantor bank (in Europe it is Adyen ), but this process is relatively painless and you 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 working in a few days, and not in a few weeks.

Paymill

This is a German project, which, in essence, is a clone of Stripe, an American service developed by Rocket Internet. Like Stripe, it has 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 here).

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 are most 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 us to 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 the standard in our market) until we can resolve all technical issues.

What would i do next time


If I had to launch a new company (or products) today, I would consider using GoCardless, Braintree or Paymill for payment and pay more attention to including payment costs in the business model. I no longer see reasons for submitting applications to banks, putting up with refusals and going through various other obstacles, until, finally, it will be possible to get to work. Although you may have to pay higher fees than when you contact the bank directly (1-2% extra), you can get to work faster and focus on checking your business model (payment costs can be optimized later).

In the past, I would have used PayPal by default, but now I would have stayed away from him and would have contacted him only as a last resort.

What the market needs


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 buyers to make payments for goods and services is always good. Let's hope that as a result of this, European Internet companies will become stronger and will be able to compete with American ones.

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