Online marketplaces and payment gateways!
So as the previous milestone indicates that we have finished the MVP product! models have already registered and we have a good start to test out our business.
Before we could launch our MVP online, we started looking for a payment gateway to start processing credit cards online.
At first glance this looks very easy task to do, after a few searches on google, we came up with the best two options (Stripe and PayPal), which are the obvious two options for any one trying to have online payments.
We started with PayPal, integration was super easy using express checkout, and here we are now ready to process payments. But wait you need PayPal business to send invoices with your business name instead of personal name. We went and applied for PayPal business it was super easy, but reading around on the forums and communities we have found that it's not as straight forward as it seems!
To have a valid business account then you need to have a business bank account opened in the country that you have registered your PayPal account from, living in Jordan we have only one bank that supports PayPal but unfortunately opening a business bank account is not that straight forward in my country as you need to register your business, get some certificates rent an office, get more certificates and some more certificates. Then you would be able to start applying for the business bank account.
So we thought to cut this time and try to incorporate in USA using Stripe Atlas, so applied to start atlas and waited for 1 week to get the "Unfortunately your business is not accepted" message, so we contacted them back to know whats the issue and the reason of the rejection. The answer was its due to the potential back charges that might be caused from our business model, so our business is considered as a high risk business.
Hmmm, after that we've started looking for other options to open our business online, one of our friends suggested to checkout the services provided through the Estonian e nation, this is another full topic that i will right about it in a full article, but as a summery we couldn't use the e nation services because we need to get the e-residency card and it can't be delivered to Jordan and due some personal stuff i couldn't travel in that time to one of the delivery countries.
Searching for the services provided by the e-nation, we've found that we can incorporate our business in UK, without the need to travel or move away from the laptop screen! one of the service providers was http://1office.co/, from my experience they are very good and responsive, they also offered me to open a business bank account using https://transferwise.com/, which i wasn't aware of how they work but as they mentioned they would give you an IBAN account then i was convinced to incorporate in UK and use TransferWise, the fees were minimal and the resources about the taxes in UK were really clear enough and somehow matching the ones here in Jordan, so i went on and incorporated in UK using 1office services.
Within 2 days my company was registered in UK, and the TransferWise team contacted me to initiate the business account process, then a few days later they have sent me some questions to complete my business validation, and here i got a heads up of the headache that i will be facing after incorporating in EU region, the TransferWise team asked me if i have a PSD2 license to work as a Marketplace and if not then i need to be using a PSD2 licensed payment gateway.
I started searching for PSD2 and what that really means, i found that the EU laws have updated the regulations for money institutes and 3rd party payment processors which have also affected the Marketplaces because they are considered as 3rd party payment processors.
Looking for getting a PSD2 license, lead us to a dead end since such a license would cost us ~200k Euro, and around 2 years of work process.
So we are left with the other option for working with PSD2 licensed payment services provider, we started out looking for options on google and we've found the following options:
Stripe Connect
PayPal Commerce Platform
Mangopay
Epayments
Adyen
So we've started contacting the different providers before applying to them and here is the answers we got from them and our opinion from our experience trying to deal with them:
Stripe Connect:
Unfortunately you can't use Stripe Connect because your business have already been rejected from Stripe platform!
So even if they have build the solution for the marketplaces and controlling the back charges, they will still consider your online marketplace as a high risk business and it's up to them and your luck to be able to use there solution as a startup!
PayPal Commerce Platform:
The platform APIs are only available for verified partners, We contacted them through the partner ship form on the PayPal website, but they have never got back to us it's been 2 months later now at the time of writing this update.
Epayments:
They accepted our business model but they don't accept Jordan as a residence country.
But i have a business registered in the UK, why do you require me to live in EU or UK!
Adyen:
Unfortunately we don't support your business model.
It's weird why such companies are creating solutions for marketplaces and 3rd party payment processors and then they would decline our business model which is a marketplace!
I guess these solutions are not built for startups and small businesses
MangoPay
Mango pay accepted our business model, and was ready to start working with us. But after applying using our TransferWise bank details they have declined our application as they require a business bank account and they couldn't accept TransferWise as a bank account.
This was a shock for us and our team, as the fintech companies are not supporting each other and partnering together to make things easier for startups.
So after knowing that TransferWise is not accepted from payment processors and fintech companies.
We are now back to zero!
We started looking on how to open a business bank account in UK, and we found some online information but unfortunately we need to travel to UK.
So we decided to focus on building and marketing the marketplace itself connecting it to PayPal express checkout for the mean time, until we travel to UK at the end of this year and open a business bank account from there.
If you have any experience or advices for us, please let us know :)
Hi Waleed,
I am from Jordan as well, but I live in Dubai. I know how frustrating it is to get basic payment gateway setup for your business.
In your case since you are just testing out, I'd suggest to go with paypal business account. You dont have to create a business bank account for this to work, you can use your debit card (Visa card) and receive the money directly to your debit card, the only catch is that you should prove to Paypal that you are the business owner (the business in your name) then you can add debit card that is registered in your name to your paypal business account.
Paypal do not cross-check your business registration, since you dont have TAX number associated with your business. At some point if you scale and receive more than 20k USD, they might contact you to verify your business. You can register a business when you reach that volume.
Keep in mind that you cannot open Stripe account (even if you managed to get a US LLC, which I did in the past). I was able to get Stripe working for a few months, but then they decided to close my account as I didn't have Social Security Number!
However I see 2 major issues in your product/marketplace:
1- You are running a marketplace platform on top of wordpress, which means you are limited by the components built by other people. i.e paypal express doesn't allow people to use their credit cards unless they create paypal account, whereas I in my marketplace allow users to pay with their credit/debit cards without having paypal account (because I dont use Shopify/Wordpress).
2- Your business model is transactional, which means you will take small fee per each transaction, then forward the remaining money to the model on your website. This works if you were using Stripe as they only charge 2.9% + small fee, but Paypal will charge you a base 4.6% + around 3% currency exchange (since you want to get the money to your bank account in Jordan), then when you want to transfer to your models, you have to account for additional 4.6% paypal fee and 3% currency exchange.
Note: when you withdraw from Paypal to your bank account they will additionally charge 4 to 5JD each time you withdraw.
If you calculate this, you will have to charge 50% from each model to be profitable.
The only way for you to survive, is that you get your business big enough and create a company and register with Payfort (which still take 3.6% in addition to 0.5JD) and almost 85JD per month, in addition to 40JD per currency per month. But if you have large volume that might make more sense.
Hope this helps.
Hello Mohammed,
Thank you for the feedback! it's really helpful, you've just confirmed our decision to go with PayPal for now.
And as you've said it's not worth it to spend any money, time and effort to integrate the platform built on worldpress with other payment services since we have only <100$/month, once we reach more revenue i guess we would be able to integrate with other payment services.
Thank you again for the helpful advice!