Payment woes continued

My startup dot-com project continues to plod along in the gap between university labs, assignments, tests and other studious miscellanea.

Today I spent some time getting down to the nuts and holts of payment systems.

I’ve done some work on this before, of course. Westpac knocked me back for their ordinary merchant account. I began to look further into third-party payment services. I have concluded that Australia is a terrible country for entrepreneurs who aren’t doing something ordinary.

To recap, these are my requirements from a merchant or payments facility:

It must:

  1. Allow me to bank with an Australian bank
  2. Provide multi-currency support. I need to be able to charge an amount in a currency and hold it in that currency — ie, it can’t be billed in USD and received in AUD. It has to be billed in USD, held in USD, then payed out in USD.
  3. Have some method of recurring billing where I do not hold credit card details.

I was chatting about this with other University Computer Club members today. Turns one of them is working on his own startup project (link removed by request) and has been facing many of the same problems as I have. His research found that for multi-currency support, you have to bank with NAB. Other banks let you run foreign currency accounts but won’t accept foreign currency credit card payments, which is one of my requirements. Apparently NAB will allow you to accept foreign currency payments and hold them in the original currency.

Apparently it requires a lot of harassing of NAB staff to make progress.

Then there are the fees.

NAB presumably realise that they’re the only one in this market. It’s $1200 to set up the account (vs $330 for Westpac’s AUD merchant facilities), plus various annual, monthly and transaction fees. On top of that you’ll want to use a payment gateway for the additional services they provide (like recurring billing), incurring additional fees.

For whatever reason, NAB don’t include foreign currency accounts in their online banking scheme. Unless you want to visit the bank in person to get a statement, and then type in all transactions into your accounting system manually, you’ll need to get a Windows PC with a modem to dial in to a special 1901 number instead. This is such bad service it makes my head hurt.

My fellow UCCer has said he is now seriously considering incorporating in Delaware. Opening and managing a US bank account may be cheaper and easier than doing it here in Australia. I guess I might have to do the same.

Anybody got tips on incorporating overseas? I’ve only just learned how to do it in Australia, after all.

Update: Inquiries at startup discussion site Hacker News have yielded more suggestions, including opening a bank account in Canada (the theory is that it’s a Commonwealth country but also next door to the USA) and also some advice that HSBC may offer what I need in Australia.

Update 2: HSBC don’t offer merchant services!

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7 Responses to Payment woes continued

  1. meika says:

    I have concluded that Australia is a terrible country for entrepreneurs who arent doing something ordinary.

    LOL, Tasmania is even more odinary.

    I went through all htis bother some 6+ years ago. Amazed it hasn’t changed at all.

  2. Jacques Chester says:

    What did you wind up doing?

  3. A nice illustration of why we need more attention to the minutiae of innovation. It’s not all white coats. There are oodles of these small barriers to innovation all over the place, often provided by government practices and regulations of various kinds. Of course in this case it’s not regulation (though it may be implicated in some unknown way). But governments could still make themselves useful by trying to provide some services to you in trying to get the private sector to get a reasonable solution together.

  4. Tel_ says:

    Provide multi-currency support. I need to be able to charge an amount in a currency and hold it in that currency ie, it cant be billed in USD and received in AUD. It has to be billed in USD, held in USD, then payed out in USD.

    This is one is hurting you, remember that the banks see you as a small fish and expensive to service. If you were a retail store, doing the sort of over-the-counter transactions that they easily understand then you would probably be rubber-stamped by now and away. Production-line orders are cheap to service: no brains required. And think about it, suppose they design a product that fits your needs perfectly, who else is going to buy that product?

    If you are willing to carry some risk on your own shoulders, I suggest that you just get any account that can accept foreign payments and let it all convert over to AUD. Then you will be more “normal” and on average the currencies will bounce around and average out. If you find yourself too far out on a limb then buy a decent chunk of foreign money (or shares / assets denominated in foreign money, whatever works) to hedge. If you can hedge against USD, Euro and Yen then maybe the exotic currencies don’t matter too much. The problem with hedging in this way is that the minimum workable chunk size is probably kind of large and if you hedge with cash (e.g. over the Amex counter) then there’s a transaction penalty on that too.

    Have some method of recurring billing where I do not hold credit card details.

    Many of the ISPs I’ve known were willing to keep credit card details month to month. I’m not going to pretend to know exactly how dangerous this is, but lots of people do it. The other thing that some of them do is direct bank debit, so they keep bank account details on file rather than credit cards (is this any safer?) There were a few famous cases where big lists of credit cards were stolen and the business in question just shrugged it off, I’m guessing you don’t have the connections to get away with this :-)

  5. Jacques Chester says:

    I do have trouble explaining my business model to people. I spent half an hour on the phone to a bloke from the ATO when I incorporated. They categorise ABN registrants on behalf of the ABS and he couldn’t fit me in anywhere. I had exactly the same problem with Westpac when I applied for merchant services — I don’t fit into any of their preset categories.

    Transferring into and out of currencies doesn’t work because part of what I do is take payment from party A, hold it for a month, then transfer to party B. If I move USD into AUD on the 1st and then back out on the 31st, there could be a big spread. I don’t have the money to hedge with and besides it would just piss people off.

    I was only interested in the AUD and major currencies anyway — probably USD, GBP, EUR and JPY. Other currencies I can deal with later on. The USD is the most important, really; my core market will be stateside to start with.

    There are several disadvantages to holding card details myself. The first is PCI-DSS compliance. It’s not anything I can’t do technically, it just adds overhead, complexity and paperwork to what is still a one man show.

    The second disadvantage, and this is the one I care most about, is that holding card details makes you a target. If I accumulate a lot of card numbers, people will try to break into my system. I want to make the incentives for fraud and intrusion as low as possible. If someone else holds the details, that risk is off my books.

  6. Jacques Chester says:

    Nicholas;

    It doesn’t seem like a small barrier to me! :D

    One thing that struck me was my Dad’s observation that if you want a bank to help you, ask for something insanely large. If you’re a modest risk they’ll spurn you as a matter of procedure; do something huge and the senior managers will take a punt. Maybe I should be walking around asking for millions of dollars.

  7. Jacques – without having aclue as to what you are doing might I suggest you need to learn how to give people like banks and Gov depts the short sharp answer they want that fits into their schema/ mindset/ tickboxes that isn’t an actual lie – don’t give ’em long winded geeky explanations.

    Happy to help refine the message

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