Everyone is learning that factoring is a very lucrative business. It's beautiful because 1.5% is an egregious rake that doesn't sound like much...until you do the math.<p>If you normally wait 30 days for your money, but you opt for next day pay for a 1.5% charge on your $100 dollars in receivables, what's the real cost? The provider earns $1.50 for 29 days worth of floating money on your behalf (you'd get in in 30, but you opt for it tomorrow for $1.50).<p>Now, let's say the company flips the same $98.50 12 times per year. That's earnings of $18 on $98.50, or 18.25% on the company's money...not bad. But wait. What if the company has a strong cash position and can finance the $98.50 at prime, at 90% of receivables (cause that or better is what strong companies can get). Well, then the company needs to borrow $88.65 for the year, at 3.5% per year (prime rate). The company pays $2.66 per year in interest, out of the $18, to earn $15.34 on their initial 10% of the $98.50. So, 1.5% quick pay actually yields the company 15.34 / 9.85 or 156% on their money.<p>156% isn't a bad ROI.
> Instant Payouts cost 1.5% of the payout amount, with a minimum fee of 50¢.<p>This is the killer for us and, I'm guessing, many other marketplaces without a Lyft-sized (20%) rake.<p>Our current solution for marketplace payouts charges one quarter per payout. The funds are direct deposited in the user's account the next business day. Maybe we have a sweet deal, but to go from this to 1.5%, in addition to Stripe's other (higher than average) fees, is hard to justify. (Which is unfortunate, we'd love to use their great libraries!)
This looked exciting at first, but I hadn't heard about "managed accounts" and they (understandably) shift the work to the platform/API user:<p><pre><code> Handling information requests: instead of requesting
it directly from the account holder, Stripe will request
information, such as a social security number or passport
scan, from you. You must collect this information from
the user and provide it to Stripe, otherwise Stripe may
disable transfers to the account.
</code></pre>
<a href="https://stripe.com/docs/connect/managed-accounts" rel="nofollow">https://stripe.com/docs/connect/managed-accounts</a>
While this is exciting, this is not always a good thing.<p>Two years ago, we tried this at Homejoy as an incentives for the cleaners to get 5 stars.ie. If you get 5<i>'s on your appointment, we'll pay you out the same day. We did this manually via Stripe, of course.<p>Efficacy of the incentive aside (it didn't actually have an impact on 5</i>s), we cut this program for two reasons:<p>1) Transaction cost, as many users pointed out<p>2) Unpredictability - most of the workers on our marketplace preferred the predictability of weekly or biweekly payouts, even if the size of those payouts varied. It's hard enough for people to manage personal finances on a regular schedule without the added headache of getting money instantly, or daily.
Really excited to see this feature come to managed accounts on Stripe! Instant transfers are why I use Square Cash over Venmo.<p>A question for the Stripe engineers: does this mean we would instantly know if a transfer has failed? One of our biggest pain points right now is when a user enters incorrect account details, we transfer money to them, and the payment is reversed a week later.<p>And one other question: if we're using balanced transactions to take charges and use them to fund transfers, we still need to wait for the charge to settle right? So in that scenario, "instant" means 5-7 days instead of twice that?
I guess Stripe is now offering short-term lines of credit and handling intra-bank settlement themselves? That or they're issuing a "refund" to do this instantly?
Does anyone know startups working on bringing Visa Direct / Mastercard MoneySend to us, developers, without all the financial / regulatory overhead? These are world-wide payments with huge potential, but I am struggling to find any offering on the market today. "Coming soon" mostly.. :(
Braintree has a similar product, albeit not instant: <a href="https://www.braintreepayments.com/products-and-features/marketplace" rel="nofollow">https://www.braintreepayments.com/products-and-features/mark...</a>
> Unlike traditional bank transfers that can take several days,<p>What? It takes a few seconds.
Or is this the USA and the USA is different from the rest of the world?
1.5% with a $0.50 minimum is <i>incredible</i> gross margin on a debit transaction. All major debit card interchange is capped by regulation to just 0.05% + $0.22. Not sure what their fraud exposure is though.