Answer by Gleb Klimshin:
not all of course… not in one source anyway
Answer by Zach Abrams:
Unfortunately, this is not the easiest of tasks. I foundedapprox. 8 months ago to accomplish the exact goal you described above.
I don't have a ton on the backend side to add to Chris' answer. However, I can say, you should rely on as many third parties as possible until you've proven product-market fit. There's no sense in spending months building deep payment relationships and then seeing your platform get no traction. Integrate with us, WePay, or someone else, prove that you've found something amazing, and then invest behind unique payments relationships.
It's also worth noting, there are companies like Splitwise, Billmonk, etc. that have built everything up to (but excluding) the actual payment experience – this is another route to take depending on proposition of your idea.
Moreover, there's a lot more to building a payment system than just the processing. You're handling people's money. That means users must trust you and, in return, you have to be there to support them whenever something goes wrong. You can't just put up a splash page and start moving money (we tried and it didnt work :] ). Over time, we learned to incorporate all sorts of messaging via email, text, and in-app to help people understand the system. Copy across your entire platform is tremendously important – I can't understate the value of solid error messages and emails. We also incorporated lots of support channels, so we could help our users wherever they are – today, we have live chat, an FAQ page, email and twitter.
And even if you build an amazing system, you have to convince people to use your product (not an easy task!). Our solution is/was to focus on group treasurers and organizers on college campuses. Many people simply don't want to change how they pay – they write checks, withdraw and hand over cash, etc. It may not be convenient, but it works … so, motivating a user to change this behavior requires a herculean effort. On the other hand, treasurers face a nightmarish few weeks every semester as they collect dues – organizing a 5 person roadtrip is pretty hard, let alone handling fraternity dues for an 80 person organization. We've found these folks more willing to experiment with new technologies – and, as a result, they've been a great entry point for us into the university ecosystem.
I hope this helps. Feel free to reach out with any follow ups questions 🙂
Answer by Faisal Khan:
Though the question is very deep, here is a brief answer:
- On a legal level, this would constitute as a money transmitter business, so hence you would need a money transmitter license in 44 states (so far) that require you to be licensed for money transmitter services. You can see a list for example by PayPal here: https://www.paypal-media.com/state_licenses.cfm
- Here is a blog that I usually follow with regards to the legal aspects of money transmission business – http://www.perkinscoie.com/news/newspubs.aspx (also view their publications list).
- Here is a good question that was asked onon
- You also want to pay attention to the FinCEN (Financial Crimes Enforcement Unit) – http://www.fincen.gov/financial_institutions/msb/ – you will have to do checks/reporting like: SAR, CTR, AML, KYC, OFAC, etc.
- From a monetary processing angle, you would need a merchant account to process the card related transactions, especially cash advance transactions
- Depending on your model, you might also want ACH processing
- You also need to be careful not to be 'holding' money into any escrow account, as that would require a banking license if you are holding on to the deposits.
- On a Technical level, it is so nascent to describe, without having some detailed information about your payment processing (paying/receiving processes) and how you have modeled them.
Answer by George Koo:
One problem we face with one of our ecommerce sites is the lack of Latin American payment platforms that accept multicurrency. This region's ecommerce is dominated by Mercado Libre and their payment solution Mercado Pago. However their service is awful, they don't even provide phone support and payments get rejected often and sometimes money gets stock somewhere between buyer and seller…
PayPal is not supported in some Latin American countries and the people don't use it or know about it.
On the other side I'm very happy with the payment solution offered by the chinese group Alibaba, Alipay. Has low process fees, easy to use and secure for sellers. It works as a bank transfer because it doesn't accept charge backs unless you are using it to pay something through their ecommerce site Taobao.
I wish more payment systems learn from Alipay…
Note: I'm not affiliated to any of the companies mentioned above, is just my personal experience.
Answer by Brian Roemmele:
This is a great question! I have some direct and indirect knowledge of this program. The way Target has crafted the retail transaction experience I think portends to the direction I believe a vast majority of retail experiences will migrate to. I will digress with a bit of background.
Target And Technology
Target has always been on the leading edge of technology on front end systems and back end systems. Most of the technology is not seen and operating in the background. For example, the POS and Inventory management software is so well tuned, that it does an incredible job in predicting demand for a particular item up to the not only the day, hour or minute, but to the second.
They also have a great deal of foresight in branding most customer facing technology in the store's iconic color of Red. And look to the finest detail on how to improve the entire check out experience. Not just optimized for speed (see Walmart) but optimized for the best possible experience. This is one of the largest forces driving the company's adoption of technology and perhaps the high wisdom that is seen in the way they deploy this technology.
There is a great deal of study in retail psychology that most of us are not aware of that plays out when you are completing a purchase. You and I want to get through the checkout line in a very efficient manner. We want the experience to be fast, but perhaps not too fast. The 10 feet that surrounds a checkout line has some of the highest profitability for most retailers and we as consumers love this little area. So Target thought very long and hard about the entire process and reached out to a number of industry experts over the last 15 years to help craft the best possible experience we see today.
Electronic Signatures. Swipe And Sign Before The Final Barcode Scan
Target was one of the first national retailers to embrace electronic signature pads instead of signing a paper receipt. They did this not so much for how it allowed the company to not need to manage and store the customer's signed receipts, that was important, but more so on how much faster the check out process was conducted. The new technology allowed for a new concept in retail, the early presentation and authorization of the transaction, prior to the final barcode scan. It allows the customer to swipe their Payment Card and sign the receipt all before the last product was bagged. Target was one of the first retailers to implement this very new experience. It sure seems simple and logical today, but it was anything but that when the ideas were being hashed out.
Over the years. Target has experimented with a number of customer facing systems from IBM, Verifone and Hypercom. The most recent standardization is with a customized version of the Hypercom Optimum L4150 High-Performance Multi-Lane Payment and Advertising Terminal.
How Does Target Speed Up Payment Card Acceptance?
There are many parts that go into creating the very speedy Payment Card experience at most Target stores. As mentioned above the customized L4150 is the point of interaction and allowed for much of the changes we see in the checkout experience. But there is a lot going on in the background. The L4150 is connected to the POS system usually and IBM SurePOS 500 or 700 and routed through custom software that is connected to the Payment Card Authorization systems. All of this tech has been optimized by and for Target.
The process starts when the customer swipes the Payment card and this can be the moment the first item is scanned by the cashier. Once the card is swiped there is an immediate request for a signature. When the last item is scanned the system completes the transaction and prints the last lines of the receipt and this can be as fast as 2 seconds. If one waits to the end of the last scan to swipe the credit card and the transaction is below $50 there will be no prompt for a signature and this is equally as fast.
A Pleasant Surprise
The entire process is designed to be highly efficient and very simple for the consumer to translate. It comes as a pleasant surprise to just about all of us, even when when have experienced the process before. It is in stark contrast to most Payment Card transaction experiences.
This well thought out process is combined with one of the fastest Payment Card Authorization network connections, at a major retailer, using M-Dex (() established by Visa to process at 1mb+ speeds for very large retailers (500,000+ transaction/month). The entire backend is driven by a 5mb-25mb connection to the Target's VPN (Virtual Private Network) using Microsoft's Virtualization solution— Hyper-V. The system is run on Dell R710 servers for the hosts running Hyper-V and Dell MD1000 storage units. There are 15,000 virtual guests running on more than 3,600 Hyper-V hosts across the entire store network. This supports updates to more than 300,000 endpoints across the network, including servers, virtual machines, mobile devices, PCs, and POS registers.
Target, with about 1,768 stores, usually has no IT personnel on-site and has found the Hyper-V virtualization allows a vast majority of issues to be solved at the data center and not locally. Microsoft has a great case study of some aspects of Target’s backend technology with the use of the Hyper-V product here:.
This system shows a rather huge commitment to technology and a desire to create the most optimal consumer experience. To see how the same set of circumstances is translated with other national retailers, visit Walmart or Kmart and judge the experience. In Walmart's case, they have a profound, "If it was not invented here, it is not relevant" attitude with its study of the retail experience, and one can surmise if this translates to a richer experience for its customers. By contrast, Target is more than willing to continue to test and experiment and to reach outside of the company for experts that have studied these processes.
I personally think Target is the best example one can find in balancing all important aspects and crafts into one of the top 5 best retail experiences and I feel strongly that wise retailers can gain great insights by studying Target and the way they see its customers.
It says "Transaction Complete" less than half a second after my swipe, almost an order of magnitude faster than any credit card authorization system I've seen to date. I'm interested in knowing anything I can about this system and how it works.
Answer by Michal Ugor:
I wouldn't say so… studies show there are 2 kinds of motivation prevention focused and promotion focused – Read more:
People with promotion focus are motivated by achievement… if they do well, they try harder, if you praise them they get extra boost.
People with prevention focus are motivated by preventing failure… if you remind them they can fail they work harder and if you criticise them they get extra boost.
Studies show that both perform equally well.
So a person with a better starting point (successful parents etc.) might be motivated to achieve more or prevent being failure … as well as the person who started from nothing.
However, it's not the motivation that determines the success… it's your work ethic and discipline… motivation burns out fast and most people quit when that happens. However discipline and work ethic keeps you going and with the progress the real motivation builds up. It looks like this:
From my experience, I have learned that people who had successful parents (regardless of are of success) or grew up in a favourable environment generally have a better work ethic.
Likewise, from my experience, if your parents were underachievers you are more likely (not always) to have inner self-doubts that hold you back… E.g. some friends of mine whose parents were entrepreneurs find it much more easy or natural to start a business or cold-call a customer as they've observed it's a normal thing… my parents were the ones happy they have jobs and very risk averse, so naturally there was a much higher fear element when I started and much more self-doubt to overcome… (but I did)
So I would say, environment matters… but not so much whether your parents are wealthy but rather having positive models around you when you grow up is what matters.
PS: I am not a big fan of calling others 'privileged' – you either believe external factors determine your success or you determine it…. whatever is true the latter will get you further in life…
Answer by Faisal Khan:
How do banks transfer money?
A question asked of me often is How do banks transfer money? How is money transferred from one country to another? I mean how does it work? How does my account get debited of $100 and somewhere around the world someone’s account get credited for $100.
Another parallel question is, How does $100 Million transfer? I mean, say if America is giving someone loan, how do the two countries transfer $100 Million? Or even $10 Billion? How does this work? How can the wealth of one country decrease by $10 Billion and another one’s increase by $10 Billion?
Is money physically moved? Do they transfer cash in vaults?
How does this all work?
The most common answer cited by many is SWIFT or Wire Transfer but it still doesn’t answer the question. You still walk away feeling equally baffled by the whole thing.
So, how does money really get transferred between banks?
It’s all about trust and ledger adjustments. Essentially, IOUs being exchanged.
There are a million ways to explain the solution. Some use complex ledger examples, others, will use a mix of ledger and trust lines, etc. I decided to use an exceedingly simple example that explains the general concept well.
Granted, a lot many things are left out, or not quite accurate, but then again, the whole goal here is to make sure you grasp the concept of how banking transfer work.
The Lemonade Bunch
For any bank to function, there must be deposits and customers. So for our example, lets assume this lemonade stand business, aptly called The Lemonade Bunch.
These three hard working folks, generate a lot of income. They sell lemonade like crazy and make lots of money.
At the end of the day, they tally their sales and its US$100,000. Now they are holding on to that cash. They need to deposit this money in some bank. Wells-Fargo seems to be their bank of choice, so they walk in to a Wells-Fargo branch and deposit their money (assume for a minute, they are the only clients for Wells-Fargo)
So they go, deposit the money and then get a receipt for their deposit, which would look something like this:
The bank now has one customer, and the bank’s balance would look something like this:
The Banking System
To truly understand how the whole banking eco-system works, imagine a school. A school's hallway has access to all the classes. Each class having students and a teacher.
In our example, imagine each class being a country.
With each class representing a country, then within each class are students and a teacher. The students would be the banks, and the teacher the central bank.
This is how USA (for example) would look like:
As you can see, that young lady over there, representing Wells-Fargo. She is holding on to US$ 100,000 in deposits of The Lemonade Bunch.
So, like in regular school, at the start of each class, there is a roll call, remember that? except this roll-call is slightly different. To start out with, every student (i.e. bank) has brought with them, their ledger book. The ledger book contains all the deposit slips they have issued, and in their back-pack, let us assume, they have brought the money (currency notes & coins) that was deposited.
In case of Wells-Fargo, she would have brought in US$ 100,000 and a copy of the receipt she gave out to The Lemonade Bunch. Likewise, the teacher would ask this of everyone:
- Teacher (pointing to a certain bank): How much money do you have? (and prove it)
- Student (being the bank), would they say out loud, how much money they have and show their cash/coins as well.
Everyone makes notes. So if Bank of America says it has so much money, the teacher notes it down and other banks can too note it down.
This what for example how the balance sheets would look like for the US Classroom. I've deliberately not shown the Debit / Credit, etc. for non-accounting people would have a hard time grasping the concept. In plain English, it shows:
- A Bank (and how much client money they are holding)
- The Teacher (and how much bank money he/she is holding)
Typical example of how the ledger would look like for customers, banks and central bank.
To make sense of this screenshot, ignore the Teacher (French) and Teacher (China), we will come to them later on. The spreadsheet ledger view shows three banks and their clients:
- Bank of America
- Steve Construction (Client)
- Arthur Photography (Client)
- JP Morgan Chase
- Jane's Bakery (Client)
- Megan Old Books (Client)
- The Lemonade Bunch (Client)
- Josh Music (Client)
The deposits of each client are marked, and it shows how each client's balances are in check with the bank.
The balance money from customers (money taken from customers) matches the books of the customers (balance in bank).
…and as you would expect, all the balances of the bank, are reflected in the ledger of the Teacher (the Central Bank):
Consolidated view of Balance information as filed with the Central Bank, in this case the Federal Reserve.
So the total balance in the classroom for USA is US$ 1,100,000 (One Million One Hundred Thousand Only). There are a couple of walk-way points from this exercise:
- The total amount of money in circulation is known. (US$ 1,100,000)
- The distribution of this money as deposited in various banks is known.
- There is a general consensus (based on the ledger being maintained by the Central Bank) as to how much money each bank holds.
- If a bank tries to create money (for example: JP Morgan Chase makes up a fake client and says it has received US$ 1 Million from that client), it would have to demonstrate to the teacher (central bank) that it has the money (classical case of Show me the money!). If JP Morgan Chase is able to show the currency notes, etc. its balances would be adjusted accordingly. However, if they cannot show the money, then the central bank will not accept their new found wealth and general consensus amongst the banks will be, not to accept JP Morgan Chase's claim that it has additional US$ 1 Million.
- The consensus and double-entry system ensures to a larger extent (for our example) that unfounded creation of wealth cannot be done.
The Central Banks
So, at the end of the school (banking) day, all the teachers (central banks) then get together in a common room.
Central Bankers in a room comparing notes (wealth statements)
As you might have guessed, the Teacher, too compare notes. Here the information regarding the wealth ledgers of countries is going to be shared amongst the group.
Assume, that the de facto currency being traded in the world is the US Dollar (to make things simple), this is how the ledger positions for all the central banks would look like:
Ledger Statement of All the Central Banks after their first Meetup!
Is this wealth?
Yup! This is it. What were you expecting?
This is how the wealth of nations is recorded. In ledgers, which are consensus based amongst the banks, central bank and the.
To keep the example simple, as cited earlier, if anyone tries to add value into their economy, the others would have to agree to it. Because the system is based on double-ledger entries, one cannot unilaterally try to take advantage of the system.
Because each country has its own currency (just to spice up matters a bit), and If anyone tries to make money out of thin air, then can, but they can only do so in their own denominated currency. Others will agree that a particular country's money supply has increased and will adjust accordingly, based on the exchange rate against the US Dollar (which in our example is the global currency being used by all the banks).
So How Does Money Transfer Work?
So, let us assume our company The Lemonade Bunch needs to do a wire transfer of US$ 50,000 to China and $10,000 to France. How does this value really get transported? The answer again, is simple a consensus based value transfer.
In our example, you will see The Lemonade Bunch, sets aside two IOUs for US$ 50,000 and US$ 10,000 aside. The ledger statement would look something like this:
Notice how the total wealth of The Lemonade Bunch is reduced down to US$ 40,000 in their ledger. Likewise the wealth of Wells-Fargo has also been reduced down to US$ 115,000 (as IOUs are created).
These two IOUs are then moved to Wells-Fargo's IOUs, and the money is deducted from The Lemonade Bunch's account. Now the ledger position would look something like this:
Continuing with the same pattern, the next logical step is to deduct the IOUs total from Wells-Fargo's total wealth in the ledger and pass these IOUs to American Central Bank (Teacher). The ledger statement would now look like this (the two IOUs have been lumped together):
You can already see the total wealth as recorded by the US Central Bank has also been reduced from US$ 1,100,000 down to US$ 1,040,000.
Giving Money To The Counter-party
As per the previous experience, all the Teachers (Central Banks) gather in a room and exchange wealth statements. The same would happen this time around, except the ledger is slightly different (as can be seen below):
The reverse process would now start. US Central Bank would have the following conversation at the end of the initial wealth exchange:
US Central Bank: "Hey China!"
China Central Bank: "Yo! What up?"
US Central Bank: "Hey, I got a US$ 50,000 IOU for you, for "Bank of China" that needs to be credited to "Xing Framers" account with them."
China Central Bank: "Cool. Give it to me and I will hand it over to them with the instruction to credit further."
the same conversation would happen with the French Central Bank
US Central Bank: "Hey France!"
French Central Bank: "Oui?"
US Central Bank: (Grrrrr) [smiling] "Hey, I got a US$ 10,000 IOU for you, for "BNP Paribas" that needs to be credited to John-Pierre Imports account with them."
French Central Bank: "Cool. Give it to me and I will hand it over to them with the instruction to credit further."
US Central Bank does just that, and the ledger statement would look something like this:
Once both the Central Bank of France and Central Bank of China accept the IOUs, there collective wealth would increase (as well as the wealth of the bank where further credit is due). The ledger would look something like this:
Just two more steps left, before the entire money (value) transfer is completed.
Both the Central Bank of China and Central Bank of France, credit the IOUs to the Bank. The Banks (namely Bank of China and BNP Paribas) now have an IOU Credit liability for further credit into the account of the beneficiary which would be Xing Framers and John Pierre Imports respectively.
The last step is to credit the bank account balances of each company, which would essentially bring this money (value) transfer cycle to come to an end.
Once this credit to bank ledger is done, the final ledgers would look like this:
I hope with the above example, you will get a very good (if not heuristic) sense of how money is transferred. Though the above example has been simplified almost to an elementary level, this is pretty much all that happens when money (wealth) value transfer happens from one bank to another, be it within the country, or across borders.
The above model can be expanded to include how correspondent banking would work and how balances are maintained with each other, etc. however, that might be a blog article for some other day.
If you look closely, this somewhat mimics what a blockchain looks like? Its not public or decentralized, but it is consensus based and has a double-entry system to ensure there is no double spend or creation of wealth that others may (or may not agree to).
I initially wrote this answer as a blog post:
Answer by Dion Lisle:
Let me add a few points to Gus's well thought out answer:
– Fraud – no one thinks of ACH fraud, but it is over $2 billion annually in the US. Compared to $13 billion Credit and Debit card fraud.
– Consumer protection – using a credit card is far more secure due to the legal and systemic protections built into the system. Worst case example, if your ACH data (bank account and routing) is stolen and used improperly it would take some time and effort to recover those funds depleted from your account.
– User experience – the above described user experience is….sub-optimal at best.
A final note of clarification is that ACH systems are not real-time, so settlement takes 1-2 days, legally allowed up to 3 days and weekends don't count. So from a merchant perspective that introduces some risk. The cost of ACH is so low it might be worth it though it is pennies per transaction.
Answer by Suchi Dey:
I think I can tell you exactly why! But first, let me tell you a story…
A couple of days back, I hired an Uber cab to go to a mall in Calcutta to meet some friends. The journey was about 40 minutes long and I was travelling alone. About 20 minutes into my journey, the driver asked me, "Madam, would you mind giving me a 5 star rating for this trip?"
I said, "No, I don't mind. I will. But why do you ask suddenly?"
He replied with a sad, long face, "Madam, a few days back two lady passengers gave me extremely poor rating, dropping my rating to 2 stars."
When I asked why, this is what he said..
"At around 11.30 PM, I picked up two lady passengers from Quest mall. They were both extremely drunk. One was falling over the other. They sat in the car and started talking about their personal stuff aloud. They were talking about things that made me uncomfortable as a man. But that was still okay. Then they opened up cans of beer and started smoking too. I warned them.. "unko bola, yeh sab nahi chalega gaadi me" but they did not listen.
At one point, it was enough for me. I asked them to stop immediately or I would call Uber office and get their accounts blocked. Then they got angry and started calling me idiot, stupid and what not. They cursed me in english too. (In his thick Bihari accent it sounded funny to an extent, but I saw him weigh his every single word and it made drop dead sense)
Then I asked him, "what did you do then?"
He said, "I made myself to drop them till their home. I did not want to. But still, I did."
I'm sure you get the point of the story. That was my taste of a featured interview with an Indian man.
You ask why India is furious?? Here's why –
On International Women's day, the entire world is going to see a highly skewed picture of India and Indian men. Our men are not male chauvinists. They are supportive to women in equal measure. They are rational, responsible, sensible, protective and sensitive. We all know it, we all live and laugh with them. India's daughters' don't give a fuck about what a rapist has to say about men, women and culture. They just want him to be hanged!
Thanks for A2A.
Thanks all of you for sharing your responses and opinions.
This is a very sensitive issue – the issue of rape. Hence, I will cut short my response within limits of reasoning and statistics, not allowing for any emotional bias.
Okay, so you all are justified in all of your concerns. I have them too.
I said the documentary presents a "highly skewed" picture of India and Indian mentality perpetuating rapes.
Some people said, "No! Indian men and their mentality alone are majorly responsible for rapes."
I have nothing but some statistics to highlight here.
Guess which country is the rape capital of the world? It's one of our fav. countries.I'll tell you- it's USA.
"In India, a country of over 1.2 billion people, 24,206 rapes were reported in 2011. The same year in the United States, a nation of 300 million, 83,425 rapes were reported. In the United States, every 6.2 minutes a woman is raped."
Moreover,India with its sick mentality and chauvinist men seem to take the issue of rape pretty seriously. Here you go…
"According to the Guardian, just 7% of reported rapes in the U.K. resulted in convictions during 2011-12. In Sweden, the conviction rate is as low as 10%. France had a conviction rate of 25% in 2006. Poor India, a developing nation with countless challenges, managed an impressive 24.2% conviction rate in 2012. That’s thanks to the efforts of a lot of good people — police, lawyers, victims and their families — working heroically with limited resources."
Source: TIME MAGAZINE ARTICLE:
India features nowhere in the list of Top ten countries with highest rates(r/100,000) of rape.This statistic gives a clearer picture than if we see the total number of reported rapes, as the total goes higher with the population.
I would rather like to see few more documentaries along with this one, namely "USA's daughters" and of course "UK's daughters".
Finally, about the ban.
Well, when my nation's and half of its population's image is dragged and stretched to fit stereotypes. I am certainly not okay.
BBC airs its shows on radio, TV and other mass reaching media outlets. Some of our countrymen unfortunately are not educated enough to debate and discuss like us. They might take it in a way which is unhealthy, hatred-prone and anti-social. Why take that risk when frankly the video gave us nothing new, except a rapist narrating his story as the voice of Indian mindset.
I support the ban. That's my opinion. You all are free.
This would be my only edit as I see no point in stretching a sensitive issue beyond a respectable point.