We're doing for payments what MP3s did for CDs

http://willgrant.org/were-doing-for-payments-what-mp3-did-for-cds/

by wgx • 14 years ago

46 67 14 years ago

jasonlingx2• 14 years ago

Fraud prevention will never be free. Neither will payments.

aptwebapps• 14 years ago

I was going to say, 'Is risk management free?'. However, there are other ways to make money than transaction fees. For instance, merely having people hold money in their accounts allows them to earn interest on it.

netcan3• 14 years ago

Accepting cash is free. With cash fraud prevention is unnecessary.

Uchikoma• 14 years ago

I beg you pardon, but a large segment of internet fraud is: You pay me for a laptop, I send you a brick.

This does not depend on a payment method, the problem is the time delay between sending money and sending the goods - especially goods delivery not being instantaneous. So without an escrow service there will be this kind of fraud, and someone will want his money back.

[edit] And people will not only send to friends if you are successful.

aes2562• 14 years ago

> Accepting cash is free.

Accepting it might be free, but what happens when you need to transfer large amounts of cash from your premises to a bank? Cash-in-transit services aren't free.

> With cash fraud prevention is unnecessary.

Not if we include the identification and rejection of counterfeit currency.

wwwtyro• 14 years ago

Cash includes anti-counterfeiting measures, though, which are not free. The cash itself must be printed, too - also not free.

DougBTX• 14 years ago

In the US, the transfer of cash is regulated, which might be relevant to the argument you are making: http://en.wikipedia.org/wiki/Money_laundering#Preventive

rmc• 14 years ago

Accepting cash is free.

What about the costs of storing cash? What about the costs of going to the bank and depositing cash? What about the transport and storage of storing low denomination notes/coins so you can give change? What about the costs & risks of being robbed of your cash? What about the costs of a staff member being robbed of the cash?

Accepting cash is not free.

With cash fraud prevention is unnecessary.

Ever seen a fake note? A fake coin (yes they exist)? What about a coin from a foreign country that looks like one of your coins, but is worth a fraction of the amount? What about the costs of the little ultraviolet light to check notes for legitimacy? What about the cost of the few seconds the cashier needs to look at each note to check that it's not a fake? What about the costs of the little highlighter pen they can run across it?

Fraud preventing for cash isn't free.

matthewowen2• 14 years ago

This is clearly incorrect. Visit the UK some time. Bank accounts are free, interest bearing, often come with incentives (I get £5 a month from my bank for paying my salary into the account), and offer free online transfer to other UK bank accounts. Oh, and you can withdraw money from any cashpoint for free - not just those of your own bank

Of course, this probably isn't something the bank makes money on. They make money on fees for overdrafts, and on the profit making products they can more easily sell to existing customers. But the same thing happens in the US, too.

In short, don't assume that the massive flaws in US consumer banking are universal, or that they're fundamental to the nature of consumer banking.

jasonlingx2• 14 years ago

I'm from Singapore, I've never been to the US and I've lived in the UK for 6 years previously.

Remember we're talking about accepting payments here, not opening a bank account. And if free online transfers are so viable for this, why do hardly any UK online merchants accept it as a form of payment and almost all accept the usual credit cards and Paypal? My guess: fraud /risk management and scale.

mtgx• 14 years ago

There is Bitcoin already, and the companies dealing with transactions already have to charge 1% to sustain themselves. How does this company make money then? And this is only for iPhones?

RobAley2• 14 years ago

I guess the difference is you don't earn interest by holding other peoples bitcoins, you do by holding their cash. Apparently there is an android app coming.

damian20003• 14 years ago

From the support page (https://dropletpay.com/support/) ...

"What happens if I want to take my money back out?

To take your money out of Droplet to your personal bank account you need to have Direct Debit enabled. This is a feature that’s coming soon, so during Beta you’ll need to contact us and we’ll send you the funds by bank transfer within five working days."

In other words the only way right now to take your money out is via a wire transfer? ... along with the possibly hefty bank charges associated with it.

wgx• 14 years ago

No, there are no charges to the user to get their money back out - the service is totally fee-free to users.

damian20003• 14 years ago

It sounds like a good service then, so good that there must be a catch. ;-)

zby• 14 years ago

They state:

Droplet is the first app of its kind that lets you send payments completely outside of the traditional banking and credit card systems. It’s a bit like cash – but digital and mobile. You don’t need to connect your phone to your bank account to use Droplet. Instead you just top up your account via your phone, a bit like you’d draw money out of a cash point. https://dropletpay.com/about/

What does that mean? Is that a new implementation of chaumian e-cash?

netcan3• 14 years ago

I think it's pretty self explanatory.

Instead of an account with a credit card company, you have an account with droplet.

delinka2• 14 years ago

"Instead you just top up your account via your phone..."

What's self-explanatory about that? Are they billing my carrier so the charge shows up on my bill? Are they drawing directly from my bank account? Do they charge my credit card?

ericmoritz• 14 years ago

It is basically a pre-paid credit card without the plastic and fees

aes2562• 14 years ago

Minor criticism, but I think the 'military-grade security' section on the homepage could be doing more harm than good.

By all means tout the security benefits of the encryption you use, but I don't think the other two points (vetted personal and different bank accounts for internal/customer use) are really necessary from a customer perspective.

I don't think I would have considered either of those as potential security risks before reading them on your homepage. Reading them plants seeds of doubt in my mind; Why do they vet personnel? Because they have access to my payment details? What if the vetting isn't good enough? Why do they point out they have separate bank accounts; are they planning on going under?

The measures that you have taken re: those two points should be taken as given for any established payments processing business.

sravfeyn3• 14 years ago

Putting aside the feasibility of such an idea at a global scale, the clarity with which the idea is described in such a minimalistic scheme is awesome.

ilanco• 14 years ago

If Droplet doesn't charge fees, how are they going to make money? Ads?

spo81rty2• 14 years ago

Probably interest from holding your money you deposit with them.

tobinfricke• 14 years ago

That was also the original revenue scheme of Paypal, but it doesn't appear to have been successful--now they rely on transaction fees. Why would it work here?

koide• 14 years ago

It would be a nice thing if you had an external team of security experts validate your protocol.

We've seen too many start ups hacking away MVPs before even thinking about security. It all crumbles down when somebody takes an interest.

Just mentioning TLS/SSL on the FAQ does not make your system secure. And it's better to know now if what you've done is the best you can do, not when you have hundreds of thousands of users.

sravfeyn3• 14 years ago

I completely agree with this. The site is not even returning a proper 404 for ill-formatted urls such as https://dropletpay.com/jsds. Instead it's giving a plain 500 error!

celticninja• 14 years ago

plane = aeroplane plain = ordinary

easytiger• 14 years ago

This is really starting to get to me.

The platform of this as iOS app based only is beyond retarded. You should be selling the service platform you create. Limiting an interaction to just an App is as stupid as those messaging systems that don't have a web front end component.

damian20003• 14 years ago

I think it makes sense for them since they are still in Beta with less than 1000 users if I read correctly. But yeah, a web app would be useful.

spo81rty2• 14 years ago

Check out Dwolla. You can use their service to send money for free under $10 for free or $0.25 for more than $10. They have been around for 3 years now and have quite a bit of traction with what they are doing.

https://www.dwolla.com/

delinka2• 14 years ago

Someone please explain to me how this "holding people's cash lets you earn interest" bit.

In traditional banking, you put money into savings and get a low return interest rate, or you commit to leave your deposit for a longer term to get a higher rate of return (Certificate of Deposit or "CD.") The reason this works is that the bank can now leverage your deposit with the Federal Reserve to borrow money to loan to others. So they take the interest the Fed charges, add some percentage to compensate depositors, add more to make a profit, and charge the consumer borrower a certain interest rate.

Some banks offer interest on their draft accounts (usually called "checking" accounts) but not many. And lots still charge a monthly fee for the privilege of keeping your money with then if your balance falls under a certain percentage.

So are you people saying this company is in the loan business? Or that their bank is providing them with an interest-bearing account for operating their business within? In the latter case, the margin would be so thin as to me non-existant.

freerobby• 14 years ago

You don't have to be in the loan business to make money on the float, you just need to invest it. Say you have $100M of revenue per month and are paying out all $100M of it in 60 days. You can very safely keep the float in an interest-bearing account earning, say 3%, giving you $500k/mo. Because your revenue stream is constant, so is your investment. In practice you would also need to buy some insurance (FDIC won't cover you and surely there are some regulations here), but that's the idea.

josteink• 14 years ago

Some banks offer interest on their draft accounts (usually called "checking" accounts) but not many

Not debating the rest of your post, but in lots of European countries you will find the exact opposite. That is, almost noone provides zero-interest accounts. Because those who didn't give interests, even on checking-accounts, quickly found themselves losing most of their customers. Basically markets and competition in action as they should work.

So don't be too eager to extrapolate the (reasonably backwards, technologically under-developed and un-modern) US banking industry to a global de-facto statement. It usually doesn't hold ;)

I mean... You guys still use cheques. What's up with that?

NateDad2• 14 years ago

Only old people use checks, or when you need to send money through the mail (which is almost never). It can be handy to be able to give someone an amount of money that isn't limited by the amount of cash you have on hand, and without requiring them to have anything more complicated than a bank account to receive the money (and even that is optional if you use a check cashing service).

Which is not to say that the US banking industry isn't backwards and bizarre.

meritt• 14 years ago

> You guys still use cheques.

Only old women do that. Usually while in front of you when attempting to pay the cashier.

namdnay2• 14 years ago

> You guys still use cheques

So do the French. Cheques are very convenient in several usecases. For safety deposits they're brilliant: You write the owner a cheque for X hundred euros or whatever, and if at the end of your holiday all is good, he gives it back and you tear it up. They're also great for paying largish sums of money to people who don't have credit card machines (when buying second hand goods for example)

gregsq• 14 years ago

See clearing banks. When transferring monies between unrelated accounts, and often financial bodies, the amount is held in clearing bank limbo. One reason for this is that so aggregated amounts from one entities account can be offset against another entities. Where for example bank A transfers X to bank B, and the same amount X within the clearing time is a transfer from B to A, the amounts are adjusted, smoothing capital flow.

The more pertinent fact in respect of your question is that while your funds are being held in this state, the interest available accumulates to the originator A. Not your account from which the fund was withdrawn.

namdnay2• 14 years ago

I wish all these startups didn't go so overboard on the hyperbole. "Military-grade security": What does that even mean? Which military protocols exactly are you following? What level of military vetting do your personnel have? Which certifications have you received?

EliRivers• 14 years ago

It means that vast numbers of people around the world will have unsupervised access to it and if you wait a few weeks someone will post it all to Wikileaks.

jeffehobbs• 14 years ago

(In Birmingham only)

lwhi3• 14 years ago

The switch from CDs to MP3s greatly reduced the profitability of the music market.

If this company is intending to do the same for payments, perhaps we should all expect to be paid nothing?

jmilloy• 14 years ago

No, only companies in the payments business should expect to be making less, not the people being paid.

lwhi3• 14 years ago

I understand, but I think the comparison isn't really as useful as it wants to be when it's linked to a commercial venture.

gabemart2• 14 years ago

I hope I'm not being overly pedantic, but:

>If you think of the internet as just a series of pipes; then it’s what you push down those pipes that matters.

That should be a comma, not a semicolon. Semicolons are used for separating related independent clauses.

I know it doesn't really matter, but when it's the first sentence it really stands out.

SquareWheel2• 14 years ago

Also, the original reference is "series of tubes" if that's the illusion they're trying to make.

Joeboy• 14 years ago

Allusion.

kayloos3• 14 years ago

You might not be overly pedantic, but you are wrong.

http://en.wikipedia.org/wiki/Semicolon#Usage

Nevertheless, I also do not take kindly to semicolon usage, because it's so vague. But that does not mean I can claim that it's wrong, without being wrong myself.

lwhi3• 14 years ago

Both parts of the sentence need to be able to stand alone; they can't stand alone in the described instance.

gabemart2• 14 years ago

I'm not sure how that link supports your assertion I'm wrong. Can you be a little more specific?

ccarpenterg• 14 years ago

Recently I've been playing with Stripe to put a payment form (url) into a QR code. So the cashier prints the receipt, the user scans the QR code and pays using the form on her iPhone/Android.

But why would merchants or users prefer this solution? why not just use the credit card? Perhaps these kinds of ideas are what pg calls made-up startup ideas.

jQueryIsAwesome2• 14 years ago

I do see many advantages; credit cards are insecure (all the important info is written on them) and even debit cards machines can be modified or replaced to save your password and card info; but with the phone there is none of those risks. Also I would like to mention that there is no need to read it from a printed receipt, you read it from another device the cashier haves and that is it; wish is a green solution and can be promoted as such.

And if someone steals your phone (hopefully) you have a pattern to unblock it and before the thief can crack it you cancel the app account or change its password.

Samuel_Michon• 14 years ago

Most of the world's consumers don't own a credit card.

Admittedly, this startup is based in the UK, where most consumers have several credit cards.

http://www.creditcards.com/credit-card-news/credit-cards-aro...

NateDad2• 14 years ago

No android app at launch is dumb. You're losing half your potential audience.... and honestly, that's the half that's more likely to use alternative payment schemes. Even Paypal is too new for a lot of my iPhone wielding aunts and uncles.

Cherian_Abraham• 14 years ago

Issue with disrupting existing payment modalities is that you need scale, which is really hard to do when you are a startup and there is not much differentiating you from the rest.

Ubiquity trumps novelty. Every single time.

rythie• 14 years ago

Which is of course a catch-22, though people like Facebook and Foursquare solved this by launching in small geographic areas first to get ubiquitus in those areas.

Oh look, Droplet is targetting Birmingham UK, first - looks like they know this.

not_robthatcher• 14 years ago

I had this idea when I worked at Fusebox in NYC in 1999.

We're doing for payments what MP3s did for CDs

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