I would love if someone from Stripe talked about how they handled this sort of stuff. Everyone keeps saying "I use Stripe and love them", but the process people describe of signing up seems to be begging people to scam them.

There are actually good reasons why merchant accounts work the way that they do, and Stripe doesn't provide any argument for why they don't: until they do, I can't imagine trusting them for anything important at my business.

I mean, they are almost sketchy when it comes to talking about "when bad things happen"; example: when chargebacks happen (and they do happen: I get one every couple days), can I easily (as in: no human interaction) tie it to an individual payment? The only mentions on their entire website about chargebacks are in the painfully informal FAQ/pricing (that it costs $15), and in their terms of service (which indicates that the $15 doesn't include mediation, which I'm pretty certain PayPal's $20 does).

The first thing I think, of course, is "they charge more, duh": if you do any kind of volume at all, or are involved in small transactions, they are a /lot/ more expensive than PayPal: I'd easily be paying them hundreds of thousands of dollars a year for the privilege of not spending a few hours on the phone negotiating a merchant account.

(For those not looking at their pricing, their fixed fee is PayPal's worst case fee; PayPal discounts 1-2% from that for volume, and supports a fundamentally better fee schedule for payments under $12: 5.0%+$0.05 vs. 2.9%+$0.30. Unless you are handling small numbers of transactions all over $12, Stripe is going to burn you on fees.)

However, when I think through "where does the risk of credit fraud mostly occur", I'd imagine it would be reasonable sized transactions (trying to launder tons of money $1 at a time will get noticed pretty quickly), and I'd imagine the merchant fraud is mostly small volume (as if you actually have a functional business, you are able to easily able to cover the risks).

So yeah: I just don't get it... is the Stripe 7 day hold enough? (PayPal doesn't have any hold for most businesses.) I certainly wouldn't touch it over PayPal if the only reason is "PayPal seems overly cautious": Stripe simply seems to be "asking for it".

(And this is just looking at normal chargebacks: pre-orders are a whole different ballgame, and if Stripe doesn't have a policy forbidding them then they will probably be out of business, seemingly out of nowhere, in a few months.)

Hi Saurik,

First off, we have more detail about the chargeback procedure at https://stripe.com/help/chargebacks. (The short answer to your question about whether or not you can tie a chargeback to an individual charge without human interaction is "yes".) We don't currently link to this page in the FAQ, but we should; we'll get that fixed.

To your more general question as to how we (and our fraud policies) differ from standard merchant accounts: there's no simple answer. There are a couple of things probably worth pointing out, though:

- First off, we should acknowledge that in this particular situation, it's extremely unlikely that Xenonauts is a scam. There are certainly valid questions around "how tractable is it to distinguish such non-scams from actual scams", but the fact remains: in this specific case, what has happened is a bad outcome for the world. Legitimate, trustworthy individuals are being prevented from getting paid.

- Secondly, we're not as radically different as you might think. We use many of the same fraud screening measures that traditional merchant account providers do. We work directly with the same banks and processors. We've worked with the same consultants. It's not the case that merchant account providers use a bevy of effective fraud screening measures which we have now discarded. In reality, most of our friction-elimination is in the removal of information requirements with weak fraud signaling value, and the fixing of senselessly inefficient processes. (You don't fax forms to Stripe.) There is not much fraud screening a traditional merchant account provider does that we can't do. (And there's certainly plenty that we do that they don't do.)

- While PayPal is definitely sometimes cheaper, this is the case more rarely than you might think. PayPal has a lot of fine print that has a bearing on the overall cost.

We're acutely aware of the challenges of online payment processing. Stripe has actually been handling production transactions for over 18 months. Peter and Elon, two of PayPal's founders, are investors. (Trust me; they remain viscerally aware of just how bad it can get.)

None of this is -- or can be -- a proof of how Stripe is invulnerable to fraud. And, of course, we're not. But I can assure you that we get it. We're not oblivious to the challenges, the mechanisms used by others, and their successes and failings.

Happy to discuss more over email: I'm patrick@stripe.com.

FWIW, you not only don't link to that page in your FAQ: you actually don't link to that page at all on your entire site (which is why Google didn't index it). (I just verified this by doing a quick wget -m.) ;P

1) Thank you: I did not find that link while doing a "site:stripe.com chargeback" search on Google. That said, nothing on that page helps me automate the process excepting if I'm willing to parse an as-yet-unknown e-mail message that likely does not have a permanent fixed format.

Really, though: why is there no mention at all of chargebacks on the API definition page? PayPal's APIs in this regard are not perfect (I've actually filed some bugs against a few of the more horrendous corner cases recently), but at least they document how chargebacks work, providing an API-driven, machine-automatable process for the entire dispute, reversal, and chargeback set of features.

2) Correct, Xenonauts is not a "scam", it is simply a "bad investment": I used to be in the game development business (http://www.cocommand.com/), and most of these projects don't ever actually happen; of those that do, most do not succeed.

To be clear, my wording surrounding "scam" was not about this situation in particular: it is that allowing pre-orders like this is asking for a giant scam to be perpetrated, as described by some of the other posters here on HN; you just accept a ton of payments, "spend" it all, and walk away: you don't have the money anymore, so it will be very difficult for PayPal to get it back. That said, even without "scams", this is still a serious "risk".

Remember, this game is not done: the website claims that they are raising money for the development. In essence, they are using pre-orders like Kickstarter. Even worse, their backup plan if they fail is that the money will be refundable if they haven't finished by 2012, despite being clear that they intend to spend the money before then (and we are not talking chump change: they have done $54k in presales).

If Stripe is willing to accept clients like this, that means that they are willing to foot the risk for these kinds of companies: in essence, you are acting as a financing option, akin to someone getting a credit card and taking out their entire credit line in cash. Even if most projects like this succeed (incredibly unlikely), your 2.9%+$0.30 margin is not high enough to deal with these companies going belly up.

This is why PayPal is actually /correct/ for not allowing these sorts of deals to early stage companies (ones that don't have enough money in the bank, or other assets, to cover any possible risks). I went through their underwriting, and it made me feel happy that they were covering their asses: /I can trust them/.

So, I guess what I'm asking here, is: why is it a good thing for my payment processer to be helping early stage startups do debt-backed financing? You say "trustworthy individuals are being prevented from being paid", but whether they are trustworthy or not is irrelevant to whether they are a "reasonable risk": would a bank finance this? Probably not.

3) I would actually love to know what these fine print situations are (I run tons of money through them, and have for years: as far as I know I understand all of their fees ;P); mind going over a few of them here?

So far there have been no surprises: 1% extra for cross-border transactions, 2% overhead on currency conversions, $20 chargebacks, and 2.9%+$0.30 with a discount on volume (I am down to 2.2%+$0.30 currently). I normally am doing micropayments, at 5.0%+$0.05, which is much lower for the large number of $1 transactions I am involved with.

The one thing I can imagine is (as Stripe doesn't mention it at all), that your international payments (including currency conversion) might have a lower (or even no) overhead, but the majority of those fees are actually paid "on the other end", and the remainder end up being swamped by the discount to 2.2% (and, in my particular case, are orders of magnitude less than the micropayments difference).

You raise some valid points–although, I wonder if Stripe would provide volume discounts if one asked, perhaps just not saying they do upfront at this point in their young company.

About how they handle chargebacks, I honestly can't comment on that part since I haven't had to deal with that. However, re: mediation, based solely on my past experiences with their excellent support team, I do believe they have the developers' interests at heart too and would work with that accordingly. Again, I haven't dealt with it personally though, so I can't guarantee that and comment reliably on how they truly would act in such a situation.

Edit: their TOS does mention that they may help you with mediation, but also reserve the right to charge a fee for it.

One issue with Paypal's microfinance stuff is that you have to have a separate account for that. I see a fair number of $4.99 sales, but also a fair number of $50 sales, and in practice I have to have two accounts, which is probably against some internal TOS. However, it's a risk I take right now, as I'd be paying hundreds of dollars more running everything through one account otherwise. It would be nicer if they'd just give you the lower rate for lower priced purchases.

I have been told by people at PayPal that there is no issue with having multiple accounts for this purpose, and by someone high up in the digital products division that they are working on unifying the process. (In fact, I believe they already are with the new adaptive payments flow, but I haven't had time to look into it yet. I am totally willing to believe that they haven't gotten to it yet.)

On that note, however, if you are doing US transactions, Amazon Flexible Payments is amazing: the fees are, again, worst case, the Stripe fees, but they automatically select the payment bracket that makes the most sense for the transaction at hand; they can scale transactions down to fractions of a cent.

More importantly, with Amazon Flexible Payments, they charge you a different amount of money depending on how the money was transferred: their risk profile is different for credit cards, bank transfers, and account-to-account movement, and they expose this directly to you, decreasing the costs for less risky transactions.

(Of course, unlike PayPal and Stripe, Flexible Payments isn't quite as integrated a solution: they do not support things like card-present transactions, for example, and require all purchases to go through their payment flow.)

"I mean, they are almost sketchy when it comes to talking about "when bad things happen"; example: when chargebacks happen (and they do happen: I get one every couple days), can I easily (as in: no human interaction) tie it to an individual payment?"

Said sketchiness ensued when I presented Stripe with a simple chargeback scenario, one which could result in disaster for a small startup.

http://news.ycombinator.com/item?id=3058166