It’s a Stripe World
Posted on July 22, 2014 by Robert Ringer
When I entered the Internet marketing world back in 2001, I decided to use Bank of America for our credit-card processing, figuring it was a safe bet to go with the biggest player in the field.
Result? There is no way to describe what Bank of America put us through. I wasn’t that involved in the details, but, as best I can recall, the signup dragged on for a month or two. The information they requested was stunning. They even wanted to see three years of personal tax returns.
I got the feeling that the bank’s assumption was that most companies selling on the Internet were conducting scams, and it was up to you to prove you were legitimate … you know, the old guilty-until-proven-innocent approach.
I also recall that we had to deal separately with Arrogance, Incorporated (a.k.a. American Express). Amex had its own forms that had to be filled out, on top of all the paperwork we had already provided to Bank of America. To this day, I have no idea why Amex needed additional information, other to maintain its inflated posture of being in a class by itself.
Interestingly, after years of dealing with Bank of America, I came to realize that it’s really nothing more than a glorified middleman. That’s right, the credit cards are actually processed by a third party (even though B of A insists it isn’t true). It’s remarkable what a company can get away with if it has the financial clout and name recognition — not to mention your tax dollars to prop it up when it gets into trouble.
On top of all this, we had to pay Authorize.net a percentage of sales just for providing the “merchant account payment gateway,” as they call it — a conduit through which the orders can be processed.
What was remarkable about Authorize was that they made it crystal clear early on that they didn’t want to hear about any problems. Whenever we called them about an issue, they insisted that they had no involvement in the actual processing of the orders, and that we would have to contact our credit-card processor. It was kind of like pleading the Fifth Amendment. Talk about passive income, for Authorize.net it’s like having its own ATM machine.
But everything changed late last year when my webmaster discovered a relatively new company called Stripe, whose business model is based on eliminating the very kind of hassles that an Internet marketer has to endure when dealing with the Bank of Americas and Authorize.nets of the Internet world. I was skeptical at first, but everything my webmaster told me about the company turned out to be true.
You can sign up for Stripe’s service in twenty minutes and be processing orders within a few hours. The company requires almost no information, which puzzled me at first. How can they operate like this? I think it’s primarily because they don’t release your funds for seven days, so they’ve calculated their risk to be very small.
And if they do incur any losses, I assume they just look at it as an ordinary cost of doing business. No big deal like it is to the Internet dinosaurs who remain intent on checking your underwear.
However, once Stripe has enough experience with a client, it cuts the delay down to two days, so it’s not really a factor. In our case, based on our perfect track record, they reduced the hold time to two days just a few months after we signed on with them.
We’ve had similar experiences with other aspects of the Internet world, such as email delivery services (“CRMs”). After endless hassles, bad service, exorbitant charges, and putting up with a great deal of arrogance (a trait that runs rampant in all areas of the Internet marketing world), we finally dropped the e-mail vendor we had used for seven years, and signed on with MailChimp to do our mailings.
The difference has been stunning — a more user-friendly setup, far fewer glitches, much more reliable service — and all at a fraction of what our previous vendor had been charging us.
Amazon.com, Skype, Droplr, Gmail — the list of no-hassle companies making things simple, better, and less expensive is overwhelming the fat and sassy companies that are still living in a dream world of yesteryear. Which raises the question, how do so many companies get away with providing bad service at inflated prices manage to stay in business? One answer is homeostasis, the tendency of people to live with existing conditions and avoid change.
But another reason, I believe, is to be found in the CNBC series “American Greed.” Even though the name of the show makes me cringe (see “The Desire to Acquire”), it’s interesting because it tells you a lot about human nature. Virtually every episode is the same — a high-level con artist bilks hardworking or retired folks out of their life savings by promoting a Ponzi scheme.
That’s right, nothing clever. Just your everyday, garden-variety Ponzi scheme, used over and over again. I was discussing this with a friend, and, at one point, he shook his head and said, “I’ve often wondered how this same old scam can be used ad infinitum when it’s been exposed so many times on television for everyone to see.”
But that’s the problem — not everyone does see it. In fact, probably not more than two or three million people — out of a population of 320 million — have seen even one episode of “American Greed.”
We all know about low-information voters, but low-information people are not unique to the political realm. Staying informed takes time and work, and most people are too busy or too lazy to do much investigation.
Remember, we’re now living in a Stripe world – one where you can safely assume that there is a newer, better, less complicated, less expensive service coming on the market every day. As a consumer, you don’t have to settle for hassles, arrogance, and high costs. In the words of Milton Friedman, you are free to choose.
And if you or your company participates in the high-stakes Internet game, be vigilant about fighting complacency. No matter how secure you may believe your position in the marketplace to be, rest assured that there’s a salivating pack of high-tech whiz kids taking aim at you. Whatever you’re doing, you can take it to the bank that someone is working, right this second, on a way to do it better, faster, less expensively, and, above all, with far less hassle for customers to deal with.
Thank you, Stripe, for the reminder. A Stripe world equates to a hassle-free world. What a great objective.
Sorry to point this out, but you are already way out of date. Bitcoin allows person to person transactions in real time. No bank fees, no middleman.
Now if we could see these kinds of improvement in technology in transportation, such as competition for Amtrak just as Lyft and Uber are providing competition for taxi companies. And then there is AirBNB to compete with hotels. Whee!
Ah, but let's not ignore the problems with Bitcoin that keep the masses from using it, such as "it's hard to find an exchange" and "the value keeps fluctuating." (Please excuse my sarcasm…those are two excuses I hear routinely when I discuss it with people.) So, although there are some VERY GOOD advantages as you've mentioned, someone looking to market to "normal" people will definitely want to take advantage of Stripe.
And even more to Robert's original point…how many other current industries are filled to the brim with their own versions of BofA just waiting to be toppled by their own version of Stripe, who make it easier and cheaper to do business? My guess is: ALL OF THEM.
Let's stick with legitimate ideas. Bitcoin is ridiculous.
Are you kidding? You might think it's ridiculous, but it is accepted by thousands of retailers — like NewEgg, Overstock, 1-800-Flowers — and used legitimately every day all over the world!
One of the reasons your messages resonate with your readers is because you are one of us…you get it! I know that when I read one of yours posts you are trying to spare me some of the pain you've experienced. Moreover I may even benefit with some actionable information.
Something I recall telling my boys when they were growing up was about learning; one can learn from experience – your own, or someone else's. One is much less painful than the other. Thanks Robert for taking the hits and helping us out.
Bank of America is a blight on the landscape. I'm involved with real estate agents on a daily basis, and the trouble they've caused individual Americans is beyond belief. They should be called Bank of Anti-Americans.
Meanwhile, you're making me re-think what I'm doing. I've been using Pay Pal because it's easy and fast. Perhaps I should look into the alternatives.
We are in a totally different time. I provide a living and a place to stay to two Tortoise; just to remind myself of the first book of Ringer's … True … from here in everything changes… Get rid of loss fast .. we took on Angie's list the repair people are wonderful.. we have now had 5 and all were A+, I bank in a grocery store at a Wells Fargo Bank, I do my portfolio on line with T.D. Ameritrade , and buy most of my stuff from Amazon ! It is a new world, and yet in many ways the rules of creative energy have not changed. I read a lot my 11,500 book was "The Entrepreneur" as I close in on 12,000 RR needs to get a new one on the table … Interesting journey everything changes some good some bad … Stay the course and keep pulling, and for God's sake don't look back something might be gaining on you !!!!!
My credit union was reluctant to give me a business checking account, despite all their efforts to convince me to do business with them – on line. Banks have become internet businesses, but are still distrustful of the rest of us.
I didn't bother to ask them for a merchant account. PayPal provides the same service for less.
I said much the same thing in a reply to another comment, but I think your point here is well taken Robert. Especially if you extend it to every other industry in the world. How many other BofA's are out there waiting to be toppled by a competitor they don't even see on the horizon yet? How many other Waldenbooks and Borders are out there living blindly and happily in their arrogance while Amazon makes them irrelevant by making it easier and cheaper to do business? Thought provoking as always, Mr. Ringer. I appreciate you.
I'll second your final comment.
Thanks. Always nice to be appreciated. BTW, I was closely involved with Waldenbooks at a time when it was assumed they would dominate the retail book industry for the next hundred years. Next!
It seems to me I've heard that song before. I had a recent problem with Chase, stemming from the infamous Target scam last Christmas. Several thousand dollars were criminally charged to my Chase credit card, and I could not get the charges reversed out. As you know, so much of everything is being outsourced these days and as a result I talked with Mable in Manila and Suba who had just dismounted from his elephant in India. They live in another world, speak a stilted language and have zero customer empathy. I finally, called the branch manager of the Chase bank where I bank. He said the bank could do nothing with my problem and that it was up to me to untangle it with the credit card company. I told him my credit card had the Chase name and logo on it and I was depending on him to assist me. Finally, after months, the fraudulent charges were removed. All this is the result of the volume of business being conducted globally today and the reluctance to deal with one customer when they (Chase, AMX, Visa, etc.) have millions of customers. It is much the same in healthcare where patients are becoming expendable in terms of the overall scheme. Walden Pond looks better every day. RAM
To rub insalt into injury, no one pays you for your lost time.
Chase. Ugh. I wonder what ol' J.P. Morgan would say if he came back and saw what his company had become. Contrary to what I think the majority of history book teach about him (and what people know of him from mass media), I think he'd be horrified at the (lack of) customer non-support, federal bail-out and back room shenanigans.
I would suggest having your IT guy look into https://www.nearlyfreespeech.net/ – it's probably a lot cheaper than what Ringer or any of the rest of the commenters are paying, now.
Stripe is not competitive when it comes to costs! They charge 2.9% + 30¢/transaction.
That is WAY more expensive than most other options.
I would certainly like to hear who some of these other options are. Always interested in learning about the next great idea or company.
Another example like Authorize is the companies that handle home loans for the big banks. Most of them refuse to respond to any type of communications. One of them – Ocwen – is having their day in court and will soon be having to part with a lot of that money they made for doing close to nothing but raking it in. Ocwen handled home loans for Deutsche Bank.