If you normally wait 30 days for your money, but you opt for next day pay for a 1.5% charge on your $100 dollars in receivables, what's the real cost? The provider earns $1.50 for 29 days worth of floating money on your behalf (you'd get in in 30, but you opt for it tomorrow for $1.50).
Now, let's say the company flips the same $98.50 12 times per year. That's earnings of $18 on $98.50, or 18.25% on the company's money...not bad. But wait. What if the company has a strong cash position and can finance the $98.50 at prime, at 90% of receivables (cause that or better is what strong companies can get). Well, then the company needs to borrow $88.65 for the year, at 3.5% per year (prime rate). The company pays $2.66 per year in interest, out of the $18, to earn $15.34 on their initial 10% of the $98.50. So, 1.5% quick pay actually yields the company 15.34 / 9.85 or 156% on their money.
156% isn't a bad ROI.
This has an even better "turn" on money. Basically, it's not getting money today that would take 30 days, it's really getting money today that might take another 5 days. That means there can be 73 turns per year vs. the 12 turns.
This is still much better than a payday loan btw.
This is the killer for us and, I'm guessing, many other marketplaces without a Lyft-sized (20%) rake.
Our current solution for marketplace payouts charges one quarter per payout. The funds are direct deposited in the user's account the next business day. Maybe we have a sweet deal, but to go from this to 1.5%, in addition to Stripe's other (higher than average) fees, is hard to justify. (Which is unfortunate, we'd love to use their great libraries!)
It's unclear how all the pricing works. Does the normal stripe fee occur for the user of the market place in addition to the marketplace fee or does it only trigger when you the marketplace owner receives the payments? Or does it not trigger at all?
During the beta, we've seen many end users choose to pay a fee when they could have waited to receive a slower payout for free. We think the value of this product is in providing choice and giving end users immediate access to their funds when they want it. The stories I've heard from Lyft drivers about the difference it makes to have this flexibility has been my favorite part of working on Instant Payouts.
Thanks!
[0] does it rhyme with holla?
I can say that we aren't processing anything close to Lyft levels of revenue. (I wish.)
Handling information requests: instead of requesting
it directly from the account holder, Stripe will request
information, such as a social security number or passport
scan, from you. You must collect this information from
the user and provide it to Stripe, otherwise Stripe may
disable transfers to the account.
1) it didn’t take all that much work to integrate/support instant payouts
2) of course we at goPanache would rather work directly with our clients to collect barber and stylists info, since the whole point is that Stripe is behind the scenes/invisible to our Barbers and Beauty Professionals.
3. Our Clients- The Barbers and Hairstylist love getting paid same day and even on the weekends.
Two years ago, we tried this at Homejoy as an incentives for the cleaners to get 5 stars.ie. If you get 5's on your appointment, we'll pay you out the same day. We did this manually via Stripe, of course.
Efficacy of the incentive aside (it didn't actually have an impact on 5s), we cut this program for two reasons:
1) Transaction cost, as many users pointed out
2) Unpredictability - most of the workers on our marketplace preferred the predictability of weekly or biweekly payouts, even if the size of those payouts varied. It's hard enough for people to manage personal finances on a regular schedule without the added headache of getting money instantly, or daily.
A question for the Stripe engineers: does this mean we would instantly know if a transfer has failed? One of our biggest pain points right now is when a user enters incorrect account details, we transfer money to them, and the payment is reversed a week later.
And one other question: if we're using balanced transactions to take charges and use them to fund transfers, we still need to wait for the charge to settle right? So in that scenario, "instant" means 5-7 days instead of twice that?
Within 30 minutes in the worst case. Most failures we would be able to communicate synchronously, such as if the card is not a debit card or the bank doesn't support instant payouts. Some other failures we communicate asynchronously, but ~instantly (e.g. if the bank account behind the debit card has been closed), as we have to reach out to financial partners for that information.
> we still need to wait for the charge to settle right?
Nope, we support instant payouts from the moment a charge succeeds, you do not need to wait for funds to settle in the traditional card-to-ACH sense! Specifically, instant payouts can be made off of an account's "pending" balance, as opposed to the usual limitation of "available" only.
The timing aspect that both of these questions touch on are one of the big features of this launch, and something we spent a lot of time on to get the logistics to work exactly right (there's a lot under the hood there). We're really excited to have something that operates faster than the 2-3 days ACH can take, both in moving money and giving you success feedback.
They just implemented a venmo-style "balance", and taking money out instantly now carries a 1% fee: https://squareup.com/help/us/en/article/5589-where-is-my-squ...
On the plus side, they give you a virtual card that you can use to spend that money, but it's a far cry from "the money is now available in your bank account"
The Visa/Mastercard oligopoly's fee structure isn't Stripe's fault...
EDIT: Gosh - it looks like they're building it around ACH in the US and taking the risk "on us". That's bold. I wouldn't even for 1.5%.
It really depends where the cost is being eaten. Is Lyft eating this or is the driver? Why would anyone agree to a 1.5% reduction in earnings to get their money now instead of tomorrow/2 days?
Will the owner of the marketplace be held responsible for the requirements like maintaining a low chargeback percentage, or is that requirement passed on to the managed account (which could be closed if that becomes an issue)?
https://stripe.com/docs/connect/bank-transfers
Normally it takes a few days for the payment to clear. With the new Instant Transfers option it shows up immediately.
$ flows like this:
X -> Y -> Z
Consumer -> Marketplace -> Provider
Now marketplaces can basically transact from Consumer to Provider instantly. That's huge.
What? It takes a few seconds. Or is this the USA and the USA is different from the rest of the world?
Only in the UK. In the US the average is 2-3% + $0.30
Are you taking about credit?