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Why We Believe Transaction Fees are Unfair

January 8, 2014 by admin

fees arent fairPayStand is one of first payment companies to not charge organizations a fee for every transaction. Instead we charge a fixed monthly cost to use our software. This saves organizations a significant amount of money. Given that this is an entirely new approach to payments, we wanted to describe how we got here and why we are taking a different approach to our business model.

BACKGROUND ON PAYMENTS

As a refresher, pretty much every payment company charges a fee per transaction as their business model. Whether you are using PayPal, Stripe, or a merchant account from your bank, you are likely paying something to the order of 2.9% +0.30 for every transaction. This adds up. Now there's lots of historical reasons why the payment industry's business model works this way , but the simple fact is that as a merchant you pretty much had no other option but to pay that.

IS A FEE BASED SYSTEM FAIR?

Many of our team members at PayStand come from retail, ecommerce, and non-profit backgrounds and we've had an experience common to many business owners- the more successful an organization is, the more money goes to the payment companies. Money that, if it was in the hands of the organization, could create more jobs, build better products, or in a non-profit's case, do the world more good. As noted investor Chris Dixon said, "giving it to banks to move bits around the Internet is probably the least desire able option".

A SOFTWARE BUSINESS

Now in the Internet age, we've become used to paying a fixed monthly cost to use business software. The industry term for this is SaaS. We do this with our accounting software like Quickbooks, or our web hosting software like GoDaddy, or our CRM system like Salesforce. And we certainly can't imagine our accounting software taking a cut every time it saw we made money. That would seem unfair. and its perhaps one of the reasons why the financial sector is not a particularly liked industry by the general public. Providing software at a fixed monthly cost seems like a fairer model to us. As a business succeeds they should enjoy that success and the cost should stay relatively the same.

TECHNOLOGY TO THE RESCUE

One of the most exciting inventions of the last decade is the technology behind emerging digital money standards. Because its entirely a digital math based system that essentially amounts to moving 1s and 0s around on computer, theres no need for variable fee based system. This means a company like PayStand can offer payment software at a fixed cost. What's more, we can offer payment services that support the legacy credit card processing and pledge to make no profit from it. Whereas traditional payment companies make money on top of the interchange rate from Visa and MasterCard, we can focus on getting that rate as low as possible over time and by not making money on it, driving down its cost and helping move more money over the newer digital money protocols where there are no transaction fees. Given this, we can treat ourselves like a software company, have monthly cost to use our service, and leave taxing to someone else. We think this is a fairer and better way to approach payment software.

Tags:   Payments, PayStand News