Why Payments Are Hard, Even For Apple And Google • Hacker News Board

Re: Why Payments Are Hard, Even For Apple And Google

#11

Post by ghshephard » Sun, Mar 06, 2011, 7:42 PM UTC

lsc wrote: post #8

ghshephard wrote: post #3

The author suggests that Amazon hasn't dealt with third parties at major scale. That seems counter to my experience, where almost 50% of my purchases on Amazon are fulfilled by a third party. For companies at the scale of Google, Amazon, and Apple - I'd suggest that hiring the talent and developing the risk management processes aren't as large a hurdle as he would suggest. The major challenge is convincing people (ve…

>The major challenge is convincing people (vendors and sellers) as to why they should use your system. See, that is the /first/ challenge; but as you start overcoming that barrier, you start hitting the problem the author starts talking about. E-gold, for instance, did pretty well solving the "convince people to use us" problem, but choosing to ignore the fraud issue killed them (and almost landed them in jail)

I'm going to (respectfully) take issue with your claim here, though I would happy to be proven wrong. I am clearly an early adopter (as pretty much 95% of people on HN likely are) when it comes to technology, particularly online technology. I routinely use paypal (+bump), buy almost everything online, haven't touched a paper book or newspaper in over two years. I even have a SquareUp dongle and use it from time to time. I have over 200 transactions in Paypal and over 500 purchases from Amazon.com. I won't even try to calculate the number of iTunes purchases (content+Apps) I've made.

I've heard of E-Gold, and may have created an account- but I've never used them. I just IM'd three of my friends - one had heard of it, two hadn't. None had ever used it. They all frequently use both Paypal and Amazon (one is a prime member).

I realize that anecdote is not the singular of data, but, a quick glance at Wikipedia, shows that at their peak, E-gold only had 5 million accounts - 2.5% of what Apple has today. (And, in Apple's case, these accounts are connected to an actual Credit Card customer)

So - two things to be aware of:

o E-Gold was relatively small. When you are small, you can't afford to hire the high-level risk management talent. These people are rare, and very expensive. Therefore, one of the critical tasks of _small_ payment processors (not the large ones, Apple/Google/Amazon can afford their salaries and departmental budgets) is to survive long enough and not get shut down by making these mistakes. I'm certain Paypal, when it was smaller, also came close to the abyss several times before they got to scale.

o Of course, the way you get to scale is you make yourself attractive, _or_ you subsidized your payment processing with the rest of your business. (Think about Microsoft buying their way into Console Entertainment)

I'll agree that fraud and risk management are important, but I do not believe that they are barriers to success for the companies the author had identified, they are more important to the smaller players (E-Gold).

For the larger players the question they have to answer for sellers is "Why should we use you? Which consumers are using your system that would make it worthwhile to going to the hassle to adding you as a payment option?" For the consumers it is "What do you do better than my existing Credit Card/Paypal Account which has served me well as a consumer?"

Re: Why Payments Are Hard, Even For Apple And Google

#12

Post by mjfern » Sun, Mar 06, 2011, 7:44 PM UTC

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt.

I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). This is the timeframe of a standard Electronics Fund Transfer (ETF) for bill pay, bank-to-bank transfers, etc. The only alternative, as far as I know, is a wire transfer, which is a tedious and expensive option.

Does anyone know what's preventing the U.S. banking system from improving its electronic transfer capabilities? Given the importance of the free flow of money and goods (and liquidity) to our economy, it seems like the quick movement of funds would be a significant priority for our overall banking system.

(Note that if banks could confirm electronic transfers within a few seconds (and if we added an extra layer of security beyond simple passwords, such as a challenge/response system), we could significantly reduce the occurrence of fraud. Near instant confirmation would also alleviate, or eliminate, the issue of short-term credit mentioned in this article.)

Re: Why Payments Are Hard, Even For Apple And Google

#13

Post by thinkcomp » Sun, Mar 06, 2011, 8:05 PM UTC

lisper wrote: post #10

thinkcomp wrote: post #2

Ohad knows his stuff, but he didn't cover everything here. There are other reasons payments are hard for everyone. You can't really have this discussion without talking about point of sale systems. The existing retail point of sale infrastructure in the United States is unbelievably fragmented and old. Apple and Google are in a good position to make devices that replace registers, but adoption is still just as much a…

What do you think of Square?

I think it's the most gorgeous eight-track player ever made. They have enough money to shift, so for their sake, I hope they shift soon. For my sake I hope they don't.

Re: Why Payments Are Hard, Even For Apple And Google

#14

Post by jasonlotito » Sun, Mar 06, 2011, 8:07 PM UTC

mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

That's what I like about Canadian banks. They have a system in place they promote as sending money via email. You don't really send it through email. It's simple a system all the major banks in Canada have adopted. I can transfer money from one account to another, quickly and easily, with minimal fuss. It takes 30 minutes, and I believe this is more for security reasons then purely technical reasons. It makes sending money in Canada so incredibly easy.

Re: Why Payments Are Hard, Even For Apple And Google

#15

Post by SoftwareMaven » Sun, Mar 06, 2011, 8:11 PM UTC

ghshephard wrote: post #11

lsc wrote: post #8

Earlier quoted context omitted.

>The major challenge is convincing people (vendors and sellers) as to why they should use your system. See, that is the /first/ challenge; but as you start overcoming that barrier, you start hitting the problem the author starts talking about. E-gold, for instance, did pretty well solving the "convince people to use us" problem, but choosing to ignore the fraud issue killed them (and almost landed them in jail)

I'm going to (respectfully) take issue with your claim here, though I would happy to be proven wrong. I am clearly an early adopter (as pretty much 95% of people on HN likely are) when it comes to technology, particularly online technology. I routinely use paypal (+bump), buy almost everything online, haven't touched a paper book or newspaper in over two years. I even have a SquareUp dongle and use it from time to ti…

PayPal spent $300M learning how to deal with fraud[0]. This money is in terms of investment in development and outright monetary losses. The problem is you can't get a large number of users while you are also being taken apart by fraud. When dealing with payments, finding users is not your hardest problem.

[0] Source: One of the investors in my company was involved fairly early in PayPal. We've had many conversations about this matter, especially regarding another company I was working with at the time that was building an "anonymous" wallet.

Re: Why Payments Are Hard, Even For Apple And Google

#16

Post by mjfern » Sun, Mar 06, 2011, 8:13 PM UTC

jasonlotito wrote: post #14

mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

That's what I like about Canadian banks. They have a system in place they promote as sending money via email. You don't really send it through email. It's simple a system all the major banks in Canada have adopted. I can transfer money from one account to another, quickly and easily, with minimal fuss. It takes 30 minutes, and I believe this is more for security reasons then purely technical reasons. It makes sending…

Yes, I lived in Canada for three years, and had the impression that the electronic transfer capabilities of their banks surpassed what's available in the U.S. Perhaps this is due (in part) to the fragmentation of the banking system in the U.S.? In Canada there are essentially five banks that dominate the banking industry - see http://en.wikipedia.org/wiki/Big_Five_(banks). There is also more regulatory control of banks in Canada, which likely makes it easier to require standard operating procedures, consistent infrastructure, etc.

Re: Why Payments Are Hard, Even For Apple And Google

#17

Post by lionhearted » Sun, Mar 06, 2011, 8:23 PM UTC

mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

Note: Mix of facts and speculation, take with grain of salt.

Banks (and credit card companies) make a lot of money on the float, so it's against their natural incentives unless they can win more business as a result. I think they probably could, but it would take a coordinated roll-out of new products or acquisition/integration with an external company... which is difficult to do because of regulation. So you're in a position where you'll either need more or less regulation to do it - either the government mandates it, or the government deregulates and a competitor starts up who currently doesn't have market share, so has nothing to lose by introducing the new features.

Re: Why Payments Are Hard, Even For Apple And Google

#18

Post by wildjim » Sun, Mar 06, 2011, 8:28 PM UTC

mjfern wrote: post #16

jasonlotito wrote: post #14

Earlier quoted context omitted.

That's what I like about Canadian banks. They have a system in place they promote as sending money via email. You don't really send it through email. It's simple a system all the major banks in Canada have adopted. I can transfer money from one account to another, quickly and easily, with minimal fuss. It takes 30 minutes, and I believe this is more for security reasons then purely technical reasons. It makes sending…

Yes, I lived in Canada for three years, and had the impression that the electronic transfer capabilities of their banks surpassed what's available in the U.S. Perhaps this is due (in part) to the fragmentation of the banking system in the U.S.? In Canada there are essentially five banks that dominate the banking industry - see http://en.wikipedia.org/wiki/Big_Five_(banks) . There is also more regulatory control of ba…

I remember payments in NZ being <1 min -- possibly seconds -- 10-15 years ago, as there was a single clearing-house for all EFT, nationally.

Re: Why Payments Are Hard, Even For Apple And Google

#19

Post by thinkcomp » Sun, Mar 06, 2011, 8:43 PM UTC

lionhearted wrote: post #17

mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

Note: Mix of facts and speculation, take with grain of salt. Banks (and credit card companies) make a lot of money on the float, so it's against their natural incentives unless they can win more business as a result. I think they probably could, but it would take a coordinated roll-out of new products or acquisition/integration with an external company... which is difficult to do because of regulation. So you're in a…

I was a NACHA member for the better part of the past year so I've talked to many of the bankers, consultants and government-types involved with running the ACH network about this.

It's not about the float. It's about the up-front investment in the standard, which millions of bank customers have already implemented. It's also about the risk of allowing instantaneous funds transfers; the current delay allows for at least some mitigation. It's also about the fact that there is no new standard yet. (Based on what I know about NACHA, there won't be for a while.)

Re: Why Payments Are Hard, Even For Apple And Google

#20

Post by jaskerr » Sun, Mar 06, 2011, 8:57 PM UTC

thinkcomp wrote: post #13

lisper wrote: post #10

Earlier quoted context omitted.

What do you think of Square?

I think it's the most gorgeous eight-track player ever made. They have enough money to shift, so for their sake, I hope they shift soon. For my sake I hope they don't.

I'll bite ... what is it about their reader / product line that makes it equivalent to a "gorgeous eight-track"?

I've thought the reader looked a bit fragile (and wouldn't hold up to heavy use), but that doesn't make it obsolete right out of the gate.