This is a repost of an article I wrote in May of 2010. It was originally taken down at the request of our bank in order to be approved for an account. Ironically, the reason we relented was because there was no other bank in Australia that provided the USD merchant account we need. The fact it was demanded that we take down the post only serves to highlight the point the post was making in the first place. This still makes me laugh.
Having had another 12 months experience in running startups, with two incubators and three trips to the US under my belt, a follow up post may be in order. In the meantime, by request, here is the original post.
You've all heard about how if you want to run a successful startup, you've gotta be in the US. Well, we're quickly finding out how true that is. But first a disclaimer...I'm not a banking expert. I'm new to the whole Internet Merchant realm, and this is a tale of my experience trying to get our business selling online. I know there are far easier options than using a customised solution, but looking to the future, this is something we wanted to achieve, and we're simply astounded at how something so seemingly trivial could be so damned difficult. If at the end of this you have a solution to our problems, by all means drop us an email at firstname.lastname@example.org. I'd love to hear from you!
It's not that our business is any different than a US based business. Our websites and applications would all be exactly the same if we were in Silicon Valley. We'd likely go about our business activities the same as we do here, we'd probably have the same amount of traffic, and make the same number of sales. The one big difference, is that by being in the US, we'd be in the US already! Sounds obvious, but that's where the Internet "happens". The majority of our customers are in the US, our hosting is in the US, our suppliers are in the US, our sales are made in US dollars and most importantly when you talk Internet, people don't look at you like you're trying to launch a mission to Mars. Remove yourself from that ecosystem, and all of a sudden you find yourself asking questions which people don't understand, and trying to find information that no one has. Worst of all, you find yourself with a big fat lack of choice.
For the past 6 months one of our little applications, Fivesecondtest.com, has been trudging along earning us a nice bit of cash on the side of our usual consultancy work. It's not our main revenue source by any stretch, but that is something we're in the process of changing. As many readers will know, all our payments are currently handled by PayPal. PayPal, for all its faults, provides a cheap, flexible and easy to setup payment system. Whilst it is certainly doing its job admirably, as we move to the next phase of our little hobby, PayPal is no longer fitting the bill..... and this is when our problems started.
Our next product, Navflow.com. is designed to run as part of a subscription. When hunting around the web for ways to achieve this goal, we found a plethora of providers, gateways, carts and apps to meet our needs. So much choice!! Where to start!? Well for us, we'd be reading a heap about a little app called Chargify, and decided to check it out. I'm all for supporting those that are trying to do something different. Even if it is in Beta, we were keen to get on-board. 15 minutes after signing up, we had Chargify set up and plugged into our app. With a little tinkering, we quickly had a full test bed running that allowed us to subscribe, unsubscribe and switch plans. This is how the web is supposed to work! Fantastic!
So now the pain of learning happens.
Chargify is still in Beta, and whilst it is a remarkably polished app, it's not "feature complete" yet. For the most part this doesn't affect us, but the one thing that did catch us by surprise was their support for payment gateways. First of all, we thought Chargify WERE a payment gateway. This is an example of how we were more than a little naive about the world of credit cards and internet payments. We'd been spoiled by the one-stop-shop that is PayPal.
As it turns out, Chargify (as of writing) only support one gateway that supports Australian businesses, PaymentExpress. Well that certainly made our choice easier! So we went to Payment Express and found that to use their services we needed a Merchant Account. Ok, no problem, we had a business account already, it surely couldn't be too hard to get a Merchant account setup alongside that? Could it? We spoke to our bank only to find that they can set us up a Merchant account, but that we could only sell in AUD. Not only that, but prices have to be QUOTED in AUD. This is hardly appropriate given that around 1% of our customers are actually Australian. After much research and gnashing of teeth, it turns out that <REDACTED> are the only Australian bank (supported by Payment Express at least) that support multiple currencies....and that comes with a hefty up front fee as well as additional fees for every currency you want to support. OUCH!
So if we want to use Chargify, we MUST use Payment Express and we MUST use <REDACTED>. A quick look at transaction fees for all of the above quickly showed how big of a slice of our monthly subscription fees we'd lose. We'd make it all back again, but it's still a big punch in the face when compared to the relatively cheap PayPal solution.
This is where being Australian sucks.
If we were in the US, we'd have a choice of half a dozen payment gateways with Chargify alone, and we'd have a near endless supply of banks and merchant account suppliers queuing up to take their slice of our takings. But in the Internet backwater that is Australia, we have the choice of ONE bank that will do what we need to do, and they seem intent on taking a hefty slice of every dollar they can (they are a bank after all).
So the logical progression of thought here is that if we ditch Chargify, we can ditch PaymentExpress which means we can ditch <REDACTED>. Of course, we still want to sell in USD, so that means getting an international acquirer. We spoke to several other companies such as WorldPay, GlobalCollect, Chase PaymentTech and several others. Whilst the aforementioned providers could at least provide us Aussies with merchant accounts, the vast majority of "online" providers weren't set up to support Australian businesses. GlobalCollect and Chase, whilst helpful were quietly sniggering at our annual turnover, and politely showed us the door. WorldPay, our last remaining option told us that it would take up to TWO MONTHS to set up an account with them. WOW. In 2010, it takes that long to set up a payment gateway and merchant account?
So, we're back to square one. As an Aussie startup we have the choice of precisely one provider of Internet Merchant accounts, and they're EXPENSIVE. There are some fantastic cart providers (like Chargify) out there doing some amazing things. For the most part, they're not only simple to use, but also have excellent support and are crazy cheap to implement! The frustrating thing about all this is that the closer you get to a bank in the whole process, the slower the responses become, the worse the implementations get and all the while they charge you more and more for the privilege.
Even when we thought there was a glimmer of hope, with Chargify announcing support for PayPal Pro, our hopes were quickly dashed. If you're in the US, PayPal Pro is an all-in-one account that let's you do everything you could possibly want, and for a very reasonable fee ($30/month). Connect that to Chargify, and you have an awesome subscription system that is not only flexible but is very cheap to set up and run. Of course, that's if you're in the US. In Australia, we're stuck with PayPal Payflow Pro, which is not only significantly more expensive ($150/month), but still requires an bloody Internet Merchant account from your bank!! Back to square one....again!
So it seems that whether because of banking regulation, or lack of competition, we're stuck with a cumbersome, expensive, inflexible, slow-to-setup payment system for one reason and one reason alone.... We want to do business globally, but we're based in Australia.
At least we have better beaches I guess.