Your opinion on a business model

**QGR2010** · 06-11-2010 02:14 PM

Hi,

I'm promoting a new method to improve the security of providing your payment data (credit card, bank account, alternative payment) online. From my perspective as a developer, an online merchant, and a shopper, this method makes sense, but I'd like to get your feedback on whether or not people care about this risk. Can you tell me if you...

-select the credit card to use based on the security perception of the site/brand? i.e. I tend to use my lowest limit card for unfamiliar/unsophisticated sites.

-hesitated or abandoned on free-trial offer that asked for your payment information?

-hesitated or abandoned on subscription services that requires re-occurring charge on your card?

-feel safe using your bank/checking account to pay (provide routing/acct info)?

What if there is a proven method that allows you to protect your payment data (encryption) and lets you control when/how much the merchants can charge, at no cost to you, would you prefer using this method to pay online?

Any comments is greatly appreciated.

**rogercbryan** · 06-11-2010 02:39 PM

I'm not sure if I fully understand but it sounds like you want to create limiters on a credit card so that people who set-up auto payments will have more control over what they are being charged? I'm not sure if I'm on the right track. I know company's like VISA are a bit of a pain to work with if you set-up an auto draft from a company and then decide you want to cancel it. They make you go through the company instead of blocking it on their end.

Am I on the right track?

**QGR2010** · 06-11-2010 03:01 PM

hm..not too far off I think. I mentioned reoccurring charge only because I often back away from committing that type of transaction feeling it'd hard to cancel the service (even if it was agreed before hand). Wouldn't it be great if I can give the merchant a protected/encrypted card and make it so they can't charge it after 1 month. If I like the service, I'll update the payment data to make it valid for longer period.

I think the service providers will welcome this feature if it can prove to bring in more cautious shoppers to try their service.

And this method is great for instances when you think the transaction is only a one time deal. Why give them real/clear card data when they don't need it after x number of days? I'm sure it's safe 95+% of the time, but so is driving without seatbelts.

**rogercbryan** · 06-12-2010 10:25 AM

Ahhh.. now I get it. You want to set a controllable expiration date on the cards... Hmmm... I can see some benefits of this but I can also see some major downfalls. Are you going to offering this service on cards with the VISA or MC logo or are you thinking of starting a whole new brand? I know things like gift cards have expiration dates on them sometimes so I guess people have seen this before. I'm just picturing the administrative costs associated with this project being extremely high. I would wager to say this will be an online controlled program but you are going to get a ton of unhappy people vendors mostly wanting to know why their monthly payments have stopped. Also, you need to consider how criminals would take advantage of something like this.

I'm not saying its a bad idea... I'm just brainstorming some of the negatives... very creative either way

**QGR2010** · 06-12-2010 04:56 PM

Aside from merchants and card brands, as a consumer, would you prefer using this at no cost to you? My rationale is that if I can convince the consumers (let's say if I can some how virally get 1M FB users to like my page), the other parties would have to oblige.

**rogercbryan** · 06-12-2010 07:26 PM

Originally Posted by QGR2010

Aside from merchants and card brands, as a consumer, would you prefer using this at no cost to you? My rationale is that if I can convince the consumers (let's say if I can some how virally get 1M FB users to like my page), the other parties would have to oblige.

I would have to argue that you might have this backwards.. Even today many places do not take American Express.. This is mostly because of the high fees and the guarantee that if you call AMEX to dispute a charge they will almost 100% of the time give your money back and then investigate what happened. Consumers do not drive this industry... the places that accept the cards do.

**QGR2010** · 06-12-2010 09:05 PM

The card brands should not object to this. Paypal has been munching away at their market share for years touting to be "A Safer Way to Pay" and the card brands have no way to counter that and worse of all, having reports of data breaches from major retailers on public media. Card brands are out of their wits trying to stop losing market share to Paypal. MasterCard even started following Paypal's moves recently, announcing P2P payment and open up API for developers. I think my method can cure this ill for them.

**rogercbryan** · 06-13-2010 01:57 PM

Sorry I do not see paypal as a competitor to credit cards... it is actually a payment portal that supports the use of credit cards... we seem to be going in the wrong direction here.

**KyleXY** · 06-13-2010 04:55 PM

I agree with Roger, PayPal isn't a competitor. I am an avid PayPal user as well as a developer for PayPal and have attended their developer conference. I also have merchant processing accounts with all the major credit card companies. PayPal is indeed a portal that supplements the usage of the primary four credit card companies: American Express, VISA, Mastercard, and Discover Card. What they are, is an online payment system that allow people to send and receive funds without a need for consumers to sign up for merchant processing accounts. If anything, they are competitors to merchant processors, not the individual credit card companies themselves.

**QGR2010** · 06-13-2010 07:10 PM

KyleXY,

I was at devcon last year too. Paypal is definitely a competitor for the card brands. A significant portion of Paypal's transactions doesn't go through the card networks and does not incurr interchange fee. That's Paypal's holy sweet spot. I use them for card processing and just last month, they forced me to add Express Checkout (their money maker) to my payment options or face higher processing fees on card transactions. They're also hinting that offline (restaurant, etc) processing of Paypal is available soon

**KyleXY** · 06-13-2010 07:42 PM

I agree to a certain extent. They do have transactions that are base on PayPal funds and debit which they've now removed charges for but bare in mind that those often also bear the VISA and Mastercard logo. So while PayPal doesn't directly charge you, it doesn't necessarily mean the credit card companies aren't benefiting from it. I agree that they are spreading their reach and trying to minimize the cost on the backend but if I remember correctly, they've also removed a lot of fees for funding your PayPal account through debit transactions both on buyer and seller side. Unless there was something I'm missing on this that perhaps you can fill me in on, I'm not seeing where the profit is coming in. Prior to this, they were still charging the standard rate for both transaction but now that portion have been removed in recent months. In either case, as I've mentioned in the other post, the only way to know if you'll succeed or not is to try the idea. This was never meant to be a post to deter you from pursuing it.