Another fundraiser but the same old moral dilemma. Donating $5, $50, $500, or whatever you can give makes a difference to this community. If you’ve been generous enough to have kindly supported Naked Capitalism by making a donation via our Tip Jar, you’ll already have seen the option to click on the Orange Buttons of Doom (when I was briefly involved in website design at my Too Big To Fail bank, the agency we had at the time referred to them disparagingly but correctly as “lollipop sticks”) that allows you to make your payment through PayPal.
If you’ve not already given, then yes, Naked Capitalism does offer the facility to donate (or subscribe) via PayPal which is the only channel for card payments if you don’t want to mail a check. If you do send a check (and those instructions are in the Tip Jar too), please tell Yves at yves@nakedcapitalism. Put “Check is in the mail” in the subject line and tell her how much is en route so she can include your contribution in her running tally.
Some readers are neutral or ambivalent about using PayPal but many are, understandably, not exactly thrilled at that being the only option for making a card payment. That last group includes myself, for reasons I’ll explain in a moment. We’ve even featured fully justified shreddings of PayPal’s poor business practices here on Naked Capitalism (Wolf Richter’s excellent diatribe being my personal favourite) so why do we put up with it?
The sad fact is, PayPal is a microcosm of just the kind of problems in big finance and economics, regulation and markets, and the difficulties in trying to strike a balance between allowing and rewarding innovation but preventing abuse from resultant monopolies, that Naked Capitalism covers on a daily basis.
Let’s start with the basics. The ability for Naked Capitalism to take, and readers to make, card payments, such as for our fundraiser, is convenient — for a variety of reasons. You, the reader, like card payments because they are simple, quick and secure. There’s no check to write, envelope to post, or risk of anything getting lost or delayed in the mail. And card payments save Yves from having to bank a load of checks and reconcile the donations with the addresses to reply back to, to acknowledge receipt and make sure you get a well-deserved “thank you.” Big finance likes to talk about innovation but scarcely ever delivers it. Well, card payments and ecommerce are genuinely one example of something that makes life easier for everyone. I would add “lower cost,” but by the time the various industry players have taken their cuts, the cost advantage is most certainly not as good as it could be. But we’ll let that pass for now.
And for us non-U.S. readers, card payments mean that I can make my donations in U.S. dollars even though I may have a sterling, euro or Australian dollar (or whatever) denominated account. While I can rightly complain about high fees from my bank for financial services, it is undeniably a non-standard and fairly labour intensive process for my bank to draw up a U.S. dollar check for me. Whether it quite justifies the £10 charge levied is another matter, but on the sort of small-ish payment value we’re talking about here, it is clearly sub-optimal — and that’s before we get to the cost of international postage (another £ or two).
So, Naked Capitalism has to offer the facility to take card payments for donations. But more than that, there are some other requirements which stem from the constraints which Yves is working under in trying to keep this particular show on the road. These arise from a lack of time for admin, the need to have a minimum technical knowledge or overheads to implement the card payment facility, and the risk that even the smallest glitch or problem — however legitimate the cause — can snowball into something that could take hours and hours of Yves’ time to resolve, time which simply isn’t available. I’ll list here the deal-breakers for any card payment processor and the nice-to-haves. If you start, while reading this list, to think “purple squirrel,” you’re not alone.
- Work with WordPress, be a drop-in tech-free solution
- Offer billing summaries and reconciliation to donations
- Have hassle-free, reliable support (both technical and for payments)
- Not cause any big problems for readers donating (incorrect deductions, any kind of scamming)
- Be a one-stop-shop solution, not needing to interface to anything else
- Fair fee structure (across all services, not just on the initial transactions)
- Be trustable by readers
- Be an ethical, non-exploitative company
- Not be a monopoly or oligopoly or, if they are, they don’t abuse that market dominance
Before this year’s fundraiser, I really racked my brains for a platform that would meet Yves’ requirements list above. Keep in view that I have spent my entire life in finance in one way or another, the last 20 years in consumer credit and most of that has been in the field of credit/debit cards, card payment acquiring, merchant services, and payments infrastructure. Frankly, if I didn’t know of something that did all that was needed — and was as a minimum a bit better behaved than PayPal — then it didn’t exist.
In short, there are no saints in this market (ecommerce card payment acquiring), only sinners who exhibit varying degrees of sin. And with PayPal, at least they daren’t be too awful in terms of helping site owners with admin or in the case of a query that needs resolving. They are, loathed though I am to say it, the least-worst.
By way of a worked example, one well-informed source pointed us in the direction of Stripe. But as it turned out, Stripe has exactly the same business model as PayPal (they are an acquirer of payments from debit/credit cards. They are also a merchant: their “product” is in effect buying and selling money, providing a billing and management service plus a way of letting customers set their card details up in one place and then use them without anything more than a single login). How they describe their services though is a masterpiece of vagueness, it was only when I looked at the nitty-gritty of their technical documentation that I was able to figure out what, exactly, they did. It’s like on their marketing pages, they don’t want to give the game away that they’re just another PayPal wannabe and not doing anything that PayPal doesn’t already do.
Their fee structure is comparable-to-slightly-worse than PayPal (headline transaction fees being similar, some extra graft on the unavoidable add-ons such as chargebacks handling Stripe is $15 c/w $14 for PayPal).
The only advantage I can see with Stripe is that it doesn’t come with the brand baggage that, rightly, afflicts PayPal.
In terms of whether Stripe is a nicer company than PayPal, I can’t see anything to justify that. From their website’s boasting:
“Stripe’s investors include Sequoia Capital, Andreessen Horowitz, and PayPal co-founders Peter Thiel, Max Levchin, and Elon Musk.”
Ooh, some of my most favourite squillionaires. Lovely people. If you’ve not heard of Sequoia Capital, as Yves recounted:
“Even by the standards of [Venture Capital] firms, Sequoia is a really problematic actor, They are a standout in refusing to engage in basic standards of transparency. And even though their flagship fund outperforms… drumrolll… investors don’t get that return even though they brag about it. They are required to invest in other Sequoia funds as the price of being allowed to get past the velvet. The blended returns are not even remotely special.”
Bad though all that looks (and is!), I could give you 10 similar ecommerce payment services providers who are far, far, worse than Stripe just off the top of my head. Pilfering your customer’s data (and then selling that data on to competitors), junk fees, junk and forced-placed insurance — insurance against the egregious fees charged by the payment processor, if you can believe it — laughable security at the back-end systems, non-existent customer service, non-implementation of the card schemes’ minimum technical requirements (so your card gets declined because it is a newer standard and the card issuer fails it when the payment processor submits non-compliant authorisation messages), impenetrable contracts, vaguely specified jurisdictions, and that’s just for starters.
Some are so bad, the Too Big To Fail card issuers will put them on a bad-boy list and decline any incoming transactions from those companies. You, the reader, end up just being stuck there not knowing why your card payment hasn’t gone through, and Yves gets all manner of headaches in trying, most likely failing, to get to the root cause. And that’s before we get to the sinking pit of despair induced by incorrectly processed or charge-back’ed transactions.
If readers do though have any bright ideas after reading the above (and do please take particular care to review the requirements lists) then please let me know in the Comments section. I do still, in spite of myself, believe in miracles. Until then, yes, we’re really – really – sorry about the PayPal.
But we hope that will not deter you from giving, particularly now that you know all those friendlier-seeming alternative really aren’t. So please ive whatever you can, whether it’s $5, or $5000, yes, via the Tip Jar, which tells you how to donate by check, credit, or debit card.
Or you can send a check made out in the name of “Aurora Advisors Incorporated” to:
Aurora Advisors Incorporated
903 Park Avenue, 8th Floor
New York, NY 10075
And if you send a check, tell Yves at yves@nakedcapitalism. Put “Check is in the mail” in the subject line and tell her how much is en route so she can include your contribution in her running tally. And get back to her day job of making life hard for all these rentiers.