WePay blog

Like many of you, we were glued to our monitors as Apple announced its latest crop of product offerings last week. I suspect that we were in the minority, however, as what we were most interested in was not the new iPhone or the Apple Watch, but a new mobile payments system in iOS 8 called Apple Pay. 

If you tuned out for that part of the announcement, Apple Pay is basically a contactless payment capability for the new iPhone, allowing users to pay with a credit card stored on their phone at NFC-enabled POS systems or through in-app purchases, authenticating themselves using the iPhone’s built-in fingerprint scanner. The really cool bit is on the backend, however — rather than storing and transmitting the consumer’s actual credit card number, Apple Pay uses a chip on the phone to generate and transmit a token which is essentially a one-time use credit card number that only the Card Networks (e.g. VISA and MasterCard) can link to the customer. Unlike raw credit card information, if that token was ever compromised, it would be useless to bad guys.

We think Apple Pay is nothing short of revolutionary. A secure, tokenized way of transmitting payment details without sharing sensitive credit information with the merchant is something that’s sorely needed, as the latest Target and Home Depot breaches demonstrate. The Target breach alone resulted in 40 million compromised credit card numbers due to the exact kind of attack that Apple Pay would prevent.

We’ve long used tokenization ourselves as a way to relieve our platform partners of the need to store (and secure) credit card numbers, so we know it’s a sound technological solution to the problem. Apple’s implementation, though, is particularly elegant. Apple has implemented tokenization at the network level through partnerships with card issuing banks and most of the major card networks. That should reduce friction for merchants to adopt Apple Pay because it can work with any off-the-shelf NFC-enabled terminal, and merchant adoption has long been one of the main stumbling blocks around standardizing this practice. We can’t even begin to imagine the backroom negotiations it took to get that off the ground.

That said, we’re getting a lot of questions from partners about Apple Pay. Do we plan to support it? The short answer is “yes”, absolutely. The slightly longer one is we’re working on it. We’re excited by the possibilities of what Apple has announced, but there’s a lot of work that needs to be done to implement it in way that provides the most value to our partners.

We’re in a slightly different space than most payment companies, which makes our use case for Apple Pay slightly different. We don’t help merchants accept payments from their customers (at least not directly). Instead, we help platforms (crowdfunding sites, online marketplaces, business tools) process payments for their customers. We help you help your customers accept payments. Currently, WePay does not support in-person payments (like Square, for example), but Apple Pay does have exciting implications for online payments as well. In-app purchases are a more interesting case, particularly if the frictionless Apple Pay experience leads to the the kind of increase in conversions we would expect.

One of the biggest challenges for a fast growing startup is keeping everything running while dealing with an ever-increasing load from a an ever-increasing number of users. Here at WePay, that’s a challenge we’re happy to have — We’re tracking to more than double payment volume this year, and looking to double again the year after that.

That’s why we’re excited to have David Nye onboard as our Director of DevOps and IT, working to make our system even more robust to meet the needs of our partners as we grow. I caught up with David to hear a little more about DevOps and what he’s working on here at WePay.

  Tell me a bit about your background

My background goes all the way back 30 years in the computer industry, coming out of college. One of the first things I learned was punch cards in college, to reel-to-reel tapes and disk packs. I worked for Digital Equipment on what would be considered Big Iron. Those old two story kind of data centers with disk drives that were as big as this room. Then I ended up working at a called Bolt Barenek Newman. We were the lead DARPA contractor for what we now know as the Internet — you know, the sort of pre-commercial, research-only pre-internet. I worked on that for about 5 years.

I worked at Bay Networks, which was the big competitor to Cisco at the time. I worked at a number of other places — I’ve worked for Intel and Verizon, I’ve worked in the entertainment industry, I built server clusters for render farms. So I’ve really done a lot of different things over the course of my career.

So you’re Director of DevOps. What does that mean for the non-technical folks?

DevOps is a thing where there’s a lot of different definitions or meanings for it. It’s probably best termed as a methodology that development and operations folks use throughout the process to operationalize the product they’re dealing with. DevOps means always thinking about how the code you’re writing will be managed at scale. It’s thinking about metrics.

So the DevOps teams that are usually designed to handle this are usually evangelists — they’re working with the developers the Q/A teams, the operations teams. Sometimes they’re the active participants in those groups, sometimes they’re the support.

And what we’re trying to do here is sort of institutionalize that methodology across those groups, so we can give management the telemetry into what we’re doing on a daily basis.

So what are some concrete steps you’re taking to do that?

Well one of the first things I came in to do was stabilize what we currently have. There was some technical debt that had developed over several months that needed to be looked at. So we added some services, added some servers, created some redundancy, and we’re beginning to add metrics so we can get a better look at what’s happening on our network.

We’ve added a lot of redundancy to the maintenance of the server. We added redundancy there so that if one server goes down there’s a back-up server to go to . Basically, we’ve been systematically locating and eliminating single points of failure across our system. Those always occur, of course. But your ability to stay up during maintenance or during other events depends on hunting out those points of failure and eradicating them at all costs.

How do you define success?

Success for us is 100 percent availability, 100 percent up-time for our partners, combined with a very low latency on that availability. Because those have to work together – you can have 100 percent uptime but if the latency is high, it doesn’t really matter. And we’re getting closer to that goal. 

What is one bit of advice you’d give companies that are looking to improve how they implement DevOps?

The big thing is metrics. If you can’t measure it, you don’t know if it happened or not. That’s an old saying, but it’s true. You have to be able to measure — actually the thing that DevOps is known for, our methodology, is metrics. So my advice is work on that first — you will have no idea what’s really wrong until you establish good metrics, and if you don’t know what’s wrong you can’t fix it.

Today is a big day for WePay! It was exactly 6 years ago today that our founders, Bill and Rich, left their jobs with nothing but an idea for a group payments service, an idea that became WePay.

And while there have definitely been some twists and turns along the way (You can read a little more about some of the things that happened and the lessons we learned in this blog from Bill) we're excited to be where we are now: in position as the payments company to power the next wave of innovative e-commerce platforms online. 

Today Y Combinator is hosting a demo day for its graduating batch of startups at the Computer History Museum in Mountain View, California. Eighty-five companies will present on stage hoping to convince investors to fund their ideas.

Our CEO & Co-founder, Bill Clerico knows exactly what those founders are feeling today, because he and his co-founder Rich Aberman were in the exact same position five years ago, as part of YC's 2009 class. 

  Bill shared his perspective today on his personal blog.

If you’ve been on social media lately, you’ve probably encountered the Ice Bucket Challenge, a viral awareness and fundraising campaign started by Boston College athlete Pete Frates aimed at fighting Amyotrophic Lateral Sclerosis (ALS), better known as Lou Gehrig’s disease.

The rules are simple: once the challenge is received, you have 24 hours to either post a video of yourself dumping a bucket of ice water on your head or to donate to ALS research, and then once that’s done, you challenge someone else to do the same. Everyone from pro athletes to movie stars to prominent political families is taking the challenge.

And now, there’s at least one tech company. Here’s WePay accepting the challenge:

In addition to braving the bucket, we’re making a $500 donation to the Pete Frates fund, and a separate $500 donation to the ALS Association, a national non-profit organization that conducts research, care services, public education, and public policy aimed at putting an end to ALS.

We’ve challenged David Hornik at August Capital, Paul Purcell at Continental Investors, Chris Howard at Ignition Partners and our partners at GoFundMe to take the challenge themselves. ALS research is an eminently worthy cause, and it would be great to see the tech community step up and help put a stop to this terrible disease.

Once a company decides that it needs to have payment processing as a part of its product offerings, there are a number of ways to go about doing that. One of the easiest ways is to work with a payments services provider (PSP) like WePay. That lets you harness a payments infrastructure that’s already been built out instead of recreating the wheel by building your own, and depending on which PSP you go with, you might also get help with things like regulatory compliance and customer support.

But PSPs aren’t the only game in town. We’re a fairly recent innovation in an industry that in some regards hasn’t changed much since the 1970s, and as you might well imagine, there’s a lot of different legacy players offering a range of different services.

It goes without saying that we here at WePay have built the best possible payments solution for specific types of businesses —  online platforms like crowdfunding sites, small business software providers and marketplaces that provide value by linking payers with payees without controlling one side of the transaction the way a traditional merchant might. Nobody else in the industry offers the same blend of flexibility, regulatory compliance and 100 percent safety from losses due to fraud.

Yet payments is an area where there really doesn’t exist a one size fits all solution, despite what PayPal might like you to think. Depending on the nature of your business and what your goals are, a different type of payments processor might be right for you. Here’s some of the different types of payments partners along with their pros and cons.

Gateways

Gateway companies are the OGs of the payments world, providing a technology layer that enables a company to interface with an acquiring bank to process transactions. If you are looking to build your own payment solution from scratch, then you will probably need to work with a gateway. Gateways are not interoperable — every acquiring bank has different gateways that they work with. Some, particularly those that are wholly owned subsidiaries of an acquirer like Vantiv, only work with a single bank. Gateways offer flexibility and a lower per-transaction fee at the expense of significant upfront and ongoing costs associated with creating and running a payments system.

Examples: Chase Paymentech, First Data, Cybersource

Pros: 

Extremely flexible with regard to the flow of funds, user experience, etc

Large, reliable companies that have been around for decades

Typically, lower per-transaction fees as middlemen are cut out

Cons:

Geared toward larger companies

Developer tools are often outdated and hard to work with

Contract negotiations take a long time and can be taxing

The need to build comprehensive risk, compliance, and security teams and systems in-house at great expense

Pricing is complicated — most work on a cost plus model with upfront costs, monthly minimums, exclusive contracts and termination penalties

Not interoperable — going international will likely mean using a different gateway to interact with a different acquirer in each market, meaning a huge development load for every new expansion

Independent Sales Organizations (ISOs)

Independent Sales Organizations, or ISOs, are the value added retailers of the payments world. Their primary purpose is to market and sell merchant accounts to businesses on behalf of an acquiring bank. Most ISOs have a single acquirer they work with, but some of the larger ones work with several. It’s hard to generalize too much about ISOs, as it is a diverse industry — on the small end they may be little more than a sales office peddling merchant accounts to local brick-and-mortar businesses, while larger ISOs often offer a greater degree of technology, service, and support to their customers. ISOs are generally unsuited for platform payments, as their primary use case is providing merchant accounts for an end retailer.

Examples: Too many to list. Here’s Visa’s list of registered ISOs.

Pros:

Makes it much easier to acquire a merchant account from an acquiring bank

Generally you have a single point of contact at an ISO which may lead to a higher level of support

May offer a way for merchants in riskier industries to get an account, as some ISOs are willing to underwrite some of the risk in exchange for higher fees

Cons:

Platform payments are not a core competency, best for traditional e-commerce sites

Setup may be technically difficult

The need for platforms and larger e-commerce sites to build comprehensive risk, compliance, and security teams and systems in house at great expense

Smaller ISOs may offer little in the way of additional services beyond a basic merchant account

Payment Service Providers (PSP)

Payment Service Providers, also called PSPs and payment facilitators are a newer class of payments companies that bundle an acquirer, processor, gateway and support for alternate payment methods into a complete payments solution. PSPs are very developer-focused, providing modern tools like APIs and SDKs as well as a complete technology stack for payments processing. The downside is that the most regulatory compliant of them will impose their own checkout flow on a transaction, which can hurt brand building and the user experience, while some that are more flexible offer less in the way of fraud mitigation and regulatory compliance.

Examples: WePay, Braintree, Stripe, Balanced, PayPal

Pros:

Modern developer tools and pre-built technology stacks that make it much easier to onboard new users and start accepting payments fast

Lower upfront costs and better implementation support.

Better adapted to the needs of platform companies

(WePay specific) Handles 100 percent of regulatory compliance and risk management issues, as well as mitigating losses due to chargebacks

Cons:

Higher transaction fees

Often co-branded, diluting the platform’s brand

Often impose their own checkout flow, which can hurt conversions

To Sum Up

Monday, we at WePay had the pleasure of attending Rackspace Solve in San Francisco, the first of several major conferences by Rackspace aimed at showing how various companies are using the cloud to solve tough business problems.

Our CEO Bill Clerico gave one of the first talks of the morning on a problem that every startup eventually runs into: scaling up to meet massive user demand without falling flat on your face.

Anybody who’s not gone through it would probably put that in the “good problems to have” category, but make no mistake: scaling is one of the toughest challenges in the technology business, something that takes a robust DevOps strategy to tackle. We would know, since WePay has faced some unique scaling challenges. Put it this way — the payment volume we process is set to more than double this year, and it will double again next year if we have anything to say about it. To keep up with demand, we’ve hired about 20 people in the last month, mostly in engineering, at a company that’s only about 60 people strong.

In other words, getting to scale is a major initiative here at WePay, one on which we’ve worked closely with Rackspace. We were one of the first customers for Rackspace’s DevOps Automation Services, which helped us to keep our service running at a time when we were facing unprecedented demand, and has continued to help us as we look to take on even more volume.

You can watch Bill's full talk at the video above, but here’s some takeaways in the meantime:

The time to think about DevOps is now: Bill said that if he had one do-over at WePay, it would be to have started thinking about building great infrastructure earlier in the process, because it’s something that sets a company up for success at every stage. In the early days, the understandable temptation is to focus technical talent exclusively on product, but if you don’t also spend time building out great infrastructure, it’s easy to get stuck with early mistakes that will hurt you down the road, Bill said.

“As a technical founder, you think you can just go on Stack Overflow and find what you need solve any problem, but that’s really not the case,” he said. “You can’t have great DevOps just by reading some blog.”

DevOps isn’t just a technical problem: Because DevOps is a problem with a technical solution, it’s tempting to think of it as just a problem for the technical side of the business. But a poor or non-existent DevOps strategy hurts every part of a company. It’s a customer service problem, because especially in the enterprise  zero downtime is the one of the No. 1 demands that your customers make of you. It’s a product problem, because bad infrastructure limits how fast product teams can work and how well they can innovate. (With due respect to Mark Zuckerberg, you need to move fast, but if you break things every time you do, that’s a problem.) DevOps even affects recruiting, Bill said.

“I’ve certainly found it to be the case that the best engineers, the ones you really want to hire, won’t want to work on crappy infrastructure,” he said.

One of the common questions we often get here at WePay is about offering escrow — understandable, since many of our platform partners are services uniting a buyer and a seller who don’t know each other, and escrow offers a way for both sides to be comfortable with a transaction even with that unknown.

Yet like a lot of things in the payment industry, escrow is something that seems like it should be simple but is actually surprisingly complex when you really look at it. Given that, we thought a little primer might be useful.

What is Escrow?

Here’s the first bit of hidden complexity, because when people ask about “escrow,” that’s not always what they mean. Oftentimes, what they’re really talking about is the ability to delay payments.

There are any number of situations where a platform might need to do this. An obvious one is where a payer is buying something from a seller that can’t be readily evaluated for quality. Take a marketplace for concert tickets, for example. In this instance, the product could ship immediately, but until the buyer actually brings the ticket to the venue and is actually let into the concert, it would be very hard to say whether they got what they paid for.

The ticket platform therefore might charge the buyer but only release the funds to the seller after the show, and only if they don’t get an angry message from the buyer saying the tickets were bogus. That cuts down on fraud, because unscrupulous types know they won’t get any money from just printing out and selling fake tickets. It also might increase conversion rates for the platform, because buyers might be more comfortable using the service if they’re getting some guarantee that the things they buy will be genuine.

This might look like an escrow. Or, it might look like a money-back refund policy that the platform helps to enforce.  

And that’s an important distinction, because escrow agents are actually something that is regulated at the state level, meaning anyone who wants to offer escrow services needs a license from the states they’re accepting funds in. There’s good reason for this regulation. Since the escrow agent is holding other people’s money, there’s a lot of potential for wrongdoing. Licensing requirements help prevent the escrow agent from just disappearing into the night with the buyer’s money, or from saying they are holding something in escrow when they’re really using it to play the stock market, or any other potential abuses you can think of.

Here’s how California law sees escrow with regard to Internet companies: 

"With regard to Internet escrow companies, 'escrow' also includes any transaction in which one person, for the purpose of effecting the sale or transfer of personal property or services to another person, delivers money, or its Internet-authorized equivalent, to a third person to be held by that third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by that third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.” — California Financial Code 17003(b).  

So wait, does that mean that ANY platform that delays payments has to be licensed by the state?

The short answer? Probably not, but maybe.

You’ve probably noticed that definition looks very close to what our hypothetical ticket platform was doing in the earlier example — it was a 3rd party that was holding on to funds until a transaction could be verified to have occurred satisfactorily. But there are a couple of differences that might be relevant, legally speaking. For one thing, the escrow it’s providing here is not its primary service — rather, it's the technology that lets ticket sellers find ticket buyers and vice versa. It’s also not the buyer or the seller that’s choosing to put the funds into escrow, but rather the platform itself that’s choosing to hold onto funds as a part of its normal efforts to fight fraud and keep everyone using its service honest.

That might make the ticket platform materially different enough that it can essentially hold funds in escrow without actually being an escrow agent. Or it might not. Like a lot of legal issues, once you get outside what’s clearly spelled out in the law it becomes more a matter of probability and risk assessment than hard and fast rules.

What is clear is that, if the platform is holding the money, regulatory compliance is a burden that would fall on the platform. If the ticket platform were found to infringe, the regulators would be sending angry letters to them, not the company processing their payments.  That could be true even if the platform holds the money in a bank account “For the Benefit Of” (FBO) its customers, or if the platform uses a third party payment processor to hold customers’ money for the platform.  If the customers’ money appears on the platform’s balance sheet, the platform is exposed to regulations that apply to that money, such as the California internet escrow law.

How WePay handles delayed payments

At WePay, we hate legal ambiguity. Our promise to our partners is that they will never have to concern themselves with the regulatory risk and compliance, because we will cover that all for them. They expect us to keep everything on the up and up, so that any potential downside is minimized. Consequentially, we’re very cautious about anything that introduces additional risks.

That being said, we offer our partners a way that they can do delayed payments and ensure that they don’t have to worry about hard legal questions about escrow.

It starts with the way we process our payments: our platform partners never hold customers’ funds.  WePay assures that those funds go straight from the buyer to a special bank account, then to the seller, without ever being held by the platform or appearing on the platform’s balance sheet. That means that WePay, and not the platform, is on the hook if the states ever do decide that marketplaces (or other types of platforms) need to be licensed escrow agents to provide delayed payments.  

We also offer two options that act like escrow, but which we think are compliant:

Delayed Payouts: This works in a straightforward manner: collect a payment from the payer, but then hold onto the funds for a short time before sending them on to the payee. Because this looks the most like escrow, we currently set a limit of 14 days as the maximum time the payment can be held. We’ve generally found it to be the case that the longer you hold onto a payment before sending it to its eventual destination, the more nervous the regulators get. So we felt that this limit struck a good balance between a level of risk we were comfortable with and a level of flexibility needed by our partners.

Tipping Point Payments: For this method, the platform collects the credit info from the payer at the time that the transaction is initiated. However, we don’t actually charge the card until a later date when a given condition is met. This is a very common feature for our crowdfunding partners, who use it to create campaigns where donors’ cards aren’t charged until a fundraising threshold is met. It’s flexible enough to be used as a practical alternative to a delayed payment, but doesn’t present as much risk, because the platform is never actually holding on to funds for any length of time.

There’s a revolution in full swing that is changing the way ordinary Americans make a living.  From internet commerce technology has sprung forth the Bottom-Up Economic Revolution. It’s dramatically altered the way business is conducted by both the seller and consumer.  Front and center in this shift is platform businesses – small business cloud-based companies, online marketplaces and crowdfunding sites.  They bring buyers and sellers, as well as non-profits and donors together in new ways to interact and do business.  

Now the average Joe and Jane can create income, and in many cases a livelihood, with relative ease compared to the offline brick and mortar approach to business.  Thanks to websites designed to bring sellers and buyers together in new ways, the possibilities are virtually endless. You can find homeowners in need of your maintenance services sell your own custom made clothing, rent a room on Airbnb, to name just a few opportunities.  Need capital? Funding opportunities are also available and could be just a few clicks away at crowdfunding sites for the everyday entrepreneur.

This new group of self-employed individuals who are making part or all of their income online are fueling the Bottom-Up Economic Revolution like never before.  As traditional employment opportunities continue to be in flux, these proprietors are increasing at a fast pace.  The numbers tell it like it is:

Proprietors have steadily increased every year since 2000, in terms of a percentage of total US employment.

Between 2000 and 2012, the US labor force lost over a million private wage and salary workers yet in that same time frame, over 10 million working proprietors entered the marketplace.  Furthermore, 21% of working Americans received at least part of their income through self-employment.

Enterprises with over 1000 employees lost over 1 million employees between 2002 and 2012 while enterprises with less than 25 people gained over a 1.5 million employees—nearly half of those 1.5 million employees are with enterprises that had 5 or fewer total employees.

As the Bottom-Up Economic Revolution grows, we see two categories of platform companies driving it: marketplaces and cloud-based small business software.  These small business platforms must provide not just an excellent overall user experience, but also an easy-to-implement payment experience that protects the consumer, the seller, and the platform business itself from risk and fraud.

This new wave of ecommerce is perfectly complemented by WePay.  Unlike other general-purpose payment APIs, WePay is designed for platforms. Our patent pending risk engine technology, Veda allows us to underwrite businesses of any size and shape.  Platforms can feel confident that a robust system of fraud protection is in place to protect them as a payments process is weaved into their product seamlessly.

When Team Topia founder Mason Hale first got involved with swim teams, he wasn’t thinking about building a sports management software business. Rather, he knew two things: his kids loved to swim, and as the family “computer guy”, it was his job to support their team with technology.  

At the time, Mason had been chief technologist at the cutting-edge product design firm Frog Design for over eight years, so he thought “How hard could it be?”

Really hard, it turned out.

Like many swim teams, Mason’s daughter’s group had more than 200 members, so keeping everything organized was a massive logistics undertaking. To make matters worse, they were managing things with a clunky software package that was designed in the 1990s, the same as 90 percent of swim teams in the country.  Mason quickly found himself spending more than 15 hours a week just keeping track of swim meet information.  Add to that the need to coordinate the army of volunteers needed to run each swim meet, and it was a major headache.

Being a developer, Mason turned to technology and created a solution using Ruby on Rails. He built SwimTopia initially as a side project and hosted it on Heroku. People loved it.  Parents were happy, swim meets were running smoothly, and preparations now took minutes instead of hours. Mason knew a business opportunity when he saw it. Team Topia was born.

In 2011 Mason’s company was accepted into the Capital Factory startup incubator program and won the top prize at the Capital Factory Demo Day pitch competition. After that, Mason was ready to go big.

One of the the top priorities was finding a flexible payment platform that would scale to meet his future business needs. Mason initially started with PayPal, but quickly realized it wasn’t quite right for his business model. PayPal’s complicated onboarding process, which asks for a lot of information up front, stymied efforts to sign up new accounts, and some parents found the checkout process confusing. The difficulties were enough that Mason decided to look for a payments processor that more closely aligned with his vision for SwimTopia as “the world’s friendliest swim team management platform.”

Mason wanted to help swim teams across the US manage not just their meet schedules but also to collect their membership dues and support their fundraising efforts by enabling them to sell branded merchandise, swimsuits and other gear online.  Above all, the user experience was top priority. He needed it to be as seamless as possible with every action from account setup to checkout taking place inside the SwimTopia application.

When Mason looked at WePay, it felt right.  

“SwimTopia is a platform and WePay really caters to developers building platforms,” he said.  “My customers can now setup a new WePay account right from within SwimTopia. By doing so, I was able to replace a page of step-by-step setup instructions and with a single button and a streamlined, integrated experience.”

  WePay enables the SwimTopia Online Team Store customer to:

Sell any item to their members without leaving the SwimTopia application;

Offer items for sale on any page of the web site;

Check out with most major credit cards;

Assign processing fees to be paid by each customer or team.

Additional Resources

WePay Ruby SDK

Online businesses in the US lose an estimated $3.5 billion to fraud every year. That number is only set to rise as long as we keep having security breaches like the Target hack, which put an estimated 40 million credit card numbers in the hands of fraudsters.

The payments industry has typically fought fraud by making merchants go through a lengthy and involved process to prove they aren’t risky before they accept their first cent from customers. Yet in today’s digital economy, that just doesn’t cut it anymore. The platform businesses that are the real drivers of growth in the new economy — things like crowdfunding sites, marketplaces, and small business software providers — need to sign on new merchants fast and start processing payments immediately. That requires a new kind of payments system — one that’s faster, more secure, more flexible and backed by more machine intelligence than ever before.

At WePay, we’re building that payments system. It’s a tough engineering challenge, something our VP of Risk John Canfield laid out recently for attendees to Q Conference in New York at his talk “Leveraging Big Data for Payment Risk Management.”

You can watch the whole talk here, but one of the more interesting bits was John’s take on what data to actually look at — a bigger problem than you might think. Machine intelligence approaches rely on having data points that are actually predictive; so choosing what to focus on is an important first step in creating a system for assessing payment risk.

Here are some of the data points that can help a payments company assess risk:

·    Know Your Customer, or KYC info: This is the classic information like name, address, date of birth, and social security number that is required by all banks to open a merchant account. Everyone requires this because it works — although fraudsters can gain this info too, so it can’t be the whole of a fraud assessment strategy. It’s good for a first pass —You can check it against records held by companies like Experian and Equifax to verify that a person by that name actually exists.

·    Traditional business credit reports: Assuming you can get a business credit report, this is a great source of insight into a potential merchant. The problem is that this isn’t usually available in the Bottom Up Economy, the fast-growing e-commerce space in which “merchants” are often individuals able to punch above their weight thanks to small business software, online marketplaces and crowdfunding. If a merchant isn’t a traditional business, then the credit reporting bureaus generally won’t have the same level of data about them.

·    Business License: Again, this isn’t going to be available for many payers. But if a business is registered, that’s a signifier that it might be legitimate.

·    Business Social Media: This varies from business to business because businesses use social media to greater or lesser extent. However, if a business has a social media profile, that can be a good thing to look at. It’s not a 100 percent signal, because it can be faked, but if a social profile has accumulated a great deal of likes or followers over a long period of time and sees regular engagement, that’s an excellent sign of legitimacy.

·    Editorial reviews and ratings: This can be even better than social media, because these are outsiders evaluating a business, and even businesses that aren’t especially active on the Internet might have garnered reviews or been mentioned in newspaper articles. The issue is that it can be a difficult process to gather this info, because it’s not usually packaged neatly into an API for you. Often, checking for this can be a very manual process, but parts of it can be automated as you get a better understanding of the sources for this data.

·    Street view addresses: Also a manual process that can be automated somewhat later on. Street view is useful because it allows a payment company to answer a simple question: does the building at the address the merchant has given me look like it matches the kind of business they’re representing themselves as? A word of warning, however: small businesses very often try to make themselves look larger than they are by doing things like giving a mail forwarding address that belongs to a large, professional looking building.

·    Personal Facebook pages: A person’s social media profile is an incredibly valuable source of data — it establishes their identity online in much the same way a drivers license does in the offline world. What’s more, it’s hard to fake. Even a person who doesn’t use Facebook much will look very different from a fraudster — they’ll likely have had the account for years and have many followers that have built up over time. This is doubly so if you can confirm the merchant has control of this account.

·    Device ID: These are newer technologies that try to tie a transaction to a specific device offered by companies like ThreatMetrix, Iovation and Experian/41st Parameter. This goes beyond just looking at the IP address — these technologies look at a variety of data points to establish a unique fingerprint for each device. And that’s useful because it lets one establish blacklists, allowing one to prevent further fraud from the same device once fraud is found.

·      Google: When you do a Google query for the name of the business or individual, does it return results? Is their website or social profile in those results? It’s a simple test, but still useful. Google search results provide 3rd party verification of the existence of a business or an individual, and they could lead to other potentially useful sources of data like reviews and blog posts about the business.

·      Control Verification: This requires users to take an additional step to sign into an account by entering a code sent to their cell phone. This protects against takeover attacks, because in order to takeover an account an attacker would have to have the victim’s cell phone in addition to their username and password. Passing a control verification is thus a very good sign, from a risk perspective.

·      Transaction History: Not all sources of data are external. If a merchant has been using your service for a decent period of time, then their transaction history is an excellent source of insight. Fraud might look very different than the baseline behavior you see from this merchant — think a Halloween store that normally does all of its business in October which suddenly sees a spike of transactions in March. It can also give you early warning that a merchant is starting to go down hill. If a usually good merchant starts generating an unusual number of chargebacks, that’s a sign that fraud or something like it is occurring.

·      Partner Data: It turns out that most platform companies actually have a lot of data about the people using their service that would be very helpful for a payments company trying to assess fraud risk — things like the kind of payment being made, what’s actually being bought, how the service will be delivered and 3rd party data that they’ve collected themselves. Yet tradition payments vendors have had no way to see this data, so they can’t use it.  

WePay’s answer to that problem is Veda Risk API, our patented method for collecting a range of data from our partner platforms easily, securely and without any impact on the user experience. Not to toot our own horn, but we think it’s pretty great. Obviously, the kinds of data varies a lot from platform to platform — a crowdfunding site knows different things about its users than a small business accounting software. That’s why we’ve built Veda to be extremely flexible. Here’s a sampling of some of the things Veda can look at:

We recently announced a new policy for how we collect information after processing a payment. In the interest of transparency, we thought it could use a little further explanation.

What You Need to Know

As of July 9th, all new merchants  will be required to either link a bank account or give us a place to settle money via recurring check within 30 days of accepting their first payment.  If a merchant does not do this in that time, then they will be unable to accept new payments until they do. Once the merchant gives us a way to settle funds, they’ll receive all the money  from the payments they’ve already accepted, and they’ll be able to accept new payments again as well.

This is actually more liberal than the policy we had originally considered, whereby we’d automatically refund all payments received by a merchant if they failed to link their bank account within 30 days. However, given the high potential for this policy to result in a poor user experience, we arrived at a compromise that would satisfy both WePay’s internal requirements and the needs of our customers.  

Even with the new change, WePay’s policies are still more user-friendly than those of most payments companies. Most require merchants to provide a ton of sensitive personal information before they can accept their first payment. WePay allows merchants to start accepting payments instantly, as long as they link their bank account within 30 days.

Why the Change

There’s some very good reasons why we’ve adopted this policy. To understand them, you have to realize that WePay is not a bank, and we’re not a digital wallet company. Rather, we’re a payment facilitator — we provide an easy way for money to get to from one person to another while minimizing fraud and regulatory risk for the platform that’s connecting those people.

Our mission is to allow the merchant to receive their payment as quickly as possible, and that includes settling the funds to the merchant’s bank account in a timely manner. Hence, the requirement that we have a bank account to settle to within 30 days.

By being laser-focused on that one goal, we can design without distraction — our focus is what allows us to create the best possible payments solution for platforms and their users. At the same time, we realize that providing a lot of information up front is hard for users and a major point of friction for our platform partners, who naturally want to design the most seamless user experience possible.

So that’s the compromise we hoped to strike with the new 30 day policy — it gets us the information we need in a timely manner, but it's still flexible enough to provide our partners with the streamlined checkout process they’ve come to love from us.

LabStar is a cloud-based software that dental laboratories use to run their businesses. The world of dental labs has recently become inordinately more complicated—with a host of technologies coming into their daily workflow. LabStar seeks to help labs simplify the running of their day-to-day business, with a simple pay-as-you-go model that helps labs handle everything from tracking orders to manufacturing, to HIPAA compliance, invoicing and customer support.

Because lab owners are artists and craftsmen, not technologists, LabStar puts incredible effort into making sure their software is intuitive and easy to use. They also offer the volume-based pricing in the industry with no click fees, license fees, upgrade fees, usage timers, or limitations on users.

When it came to choosing a payment partner, LabStar was understandably choosey. “We talked to over 20 companies. It was one of those projects we maybe got a little carried away with, but we’re glad we did,” said Jeff Noles, Founder and CEO of LabStar.

“There were numerous reason we chose WePay, but it ultimately came down to the fact that you were completely transparent about fees. With WePay, our customers know exactly what they will pay,” said Jeff Noles. These days, dental lab owners have a hypersensitivity to hidden fees. They’re stuck in a bit of a catch-22. The influx of technology into the dental lab industry has brought about a whole slew of solutions the lab owners have to use—that also have associated fees that aren’t either easy to understand or calculate. Like LabStar, WePay makes it easy and keeps it simple to understand the terms of a transaction. In addition, great service and ease of implementation factored into their choice of WePay.

If you’ve collected money from a group, you know it can be a bit like herding cats. Pay It Square is simplifying two particularly painful parts of the process: getting paid and keeping all the details organized.  Pay It Square helps any person collect money from any group for any purpose. While there are hundreds of scenarios the site helps to solve, there are three main focuses for those who use Pay It Square: fundraising, event registration, and the sharing of expenses like those for a class reunion or group trip.

Here’s how it works. An organizer creates a page with all the details and invites others to the page via email or sharing it on Facebook. By logging in to the back end, the organizer can easily see who has and hasn’t paid. What’s more, they can send out updates and reminders—and even coordinate logistics.

It’s really fast to get started. An organizer can get a page up within minutes. Thanks to the WePay API, they can start getting paid immediately as well. Those that owe money can enter their credit card, without needing to click a link or go to another page. For the organizer, WePay deposits funds directly and immediately into their account. No need to reach a minimum amount or wait for a batch of payments to process.

While getting a page up in minutes seems pretty quick, Pay it Square is relentless about continuously simplifying the customer experience. WePay is critical to their vision moving forward. Since adding WePay as a payment option, there’s been a “dramatic improvement,” said Brian Anderson, Co-Founder at Pay It Square. “We’ve found that the majority of the users already have PayPal accounts, but 65% pick WePay as their payment processor.”  There has also been a 30% increase in user pages created and a 20% increase in the transactions since the sites major upgrade released in early March 2014.

Pay It Square’s chose WePay for a few key reasons. The company felt WePay had the best onboarding process in the market—one that easily integrated into the Pay It Square site without redirecting users away. Ultimately, however, it came down to integrity.  “When WePay says it’s going to do something, they do it. We’ve experienced WePay to be open and honest and they follow through—and that means everything,” said Brian Anderson.

Read Brian Anderson's post on Pay It Square's experience and implementation process using WePay. 

FundRazr is a global crowdfunding platform that manages donations to over 40,000 campaigns, totaling over $50M to date. As they look to grow their business, they will continue to rely on payment providers to help them expand their offerings and simplify the user experience. In late 2013, WePay partnered with FundRazr to help improve payment processing across the platform. 

In the crowdfunding industry, growth increasingly means tailoring your site to the mobile audience. FundRazr is working to do just that from every angle. They have made improvements in their payment process and have put a serious focus on responsive design. However, the company credits WePay for the success of their mobile payments. The partnership with WePay drastically simplified the payment process on mobile devices, resulting in a 73% increase in successful mobile payments since launching WePay last year.  

“WePay has allowed us to significantly increase our conversion rates, simply by partnering with them,” said Bret Conkin, Chief Marketing Officer at FundRazr. “Our relationship with the WePay team has been vital thus far and we will continue to rely on them for campaign payment processing going forward.”

So far this year, WePay has 10% more successful payments than other payment providers on the FundRazr site. This is critical, particularly as FundRazr looks to break into the business crowdfunding landscape later this year with a suite of solutions designed for startup, idea-stage companies and others in the business community. The company is developing 'white-label crowdfunding' where FundRazr software can be integrated into other websites to turn them into a crowdfunding portal. And, they’re working towards partnering with corporations to provide them a platform to donate to campaigns of charities they support, start their own, or donate rewards or fees to existing campaigns. 

Today, I’m incredibly excited to announce that Steven Pellizzer has joined WePay as our Chief Financial Officer.

Previously, Steve was CFO at CyberSource, a publicly held provider of electronic payment and risk management solutions that pioneered eCommerce payment processing.

Under Steve's financial leadership, CyberSource grew revenue from $30 million to over $300 million, culminating in Visa’s acquisition of CyberSource for $2 billion in June 2010.  At the time, CyberSource was processing over 25% of all U.S. eCommerce.

I'm incredibly excited to partner with Steve through the next phase of WePay's growth.  His experience will be instrumental in helping us serve the most exciting segments of eCommerce today: platform businesses like marketplaces, crowdfunding sites and small business software.

I came to WePay because I wanted to make a difference. I know how that may sound a bit grandiose for a payments company, but hear me out.

You know what makes a really good payment experience? Not realizing that you’ve gone through it. Payment systems have become so good that they are approaching the point that they just happen. They are becoming invisible.

There was a time not very long ago where you had to pick up your paycheck from the payroll department, stand in line at the bank or ATM, and carry around wads of cash. That cash would pay for everything from bus fare and bridge tolls to groceries and hamburgers. You paid your bills with envelopes, checks and stamps. You knew what a “payment coupon” was.

All of these things represent friction in an economic system that we need to eliminate.

As example, for the past 3 weeks, I have had “Donate to UCPD” on my to do list. Unfortunately, one of our officers at the Union City Police Department is experiencing an unspeakable tragedy, and I have been overcome with the need to donate. I spoke with the president of the police officer’s association, committing to donate. However, I have run out of checks, and now I have to figure out what to do next since a paperless option is not part of the solution.

That is the worst kind of friction.

Payments are important and are the lifeblood of our economy, our communities, and therefore, our lives.  The more we make these payments invisible, the more we can free people to use their creativity to change the world.

Today, there are countless startups on kitchen tables and in garages. Some of them are going to change your lives in ways that you don't realize quite yet. Many will need a way to take or make a payment. WePay's got that all figured out for them.

I came to WePay after a long career with large, consumer-facing brands.  My opportunity and challenge is to apply lessons learned with consumer brands to the financial services realm.