Why Doesn't Yours Use Stripe or PayPal?
Yours is like Medium with a pay wall. We spent over a year developing a micropayments layer on blockchain technology in order to enable very low cost transactions so that content worth as little as 1 cent can be purchased with almost zero fees. We often get asked: Why did you go out of your way to build micropayments technology? Why not just use Stripe or PayPal?
Stripe and PayPal are great for a lot of businesses, but not for a social product based on micropayments. First of all, their fees are too high, starting at about 30 cents per transaction. That means purchasing a piece of content worth 10 cents would cost 40 cents and 75% would go to Stripe or PayPal. That fee is far too high for our product. With micropayments on blockchain, we can reduce to fees to virtually zero. A 10 cent piece of content costs 10 cents. Our business takes 20% (to be lowered as we grow), which is far lower than the corresponding cost on Stripe or PayPal.
Secondly, using Stripe or PayPal would be cumbersome for our users. Although PayPal does have a micropayments service for businesses that reduces fees to 5 cents per transaction, that would require our users to sign up as business entities on PayPal. They would have to go through a painful KYC process just to start using the app. We would rather users can sign up instantly with a credit card. That is possible with cryptocurrency while retaining extremely low cost transactions.
Thirdly, if we used Stripe or PayPal, we would be at their whim to shut us down at any time for any reason. We have heard horror stories from many entrepreneurs that tried to use Stripe or PayPal for a novel product and because Stripe or PayPal didn't understand the nature of the business, they were shut down. It is much better for our business to built on cryptocurrency because no one can shut us down at a whim.
Fourthly, because our payment system is fully p2p, we are not a money transmitter. Our business writes software that our users use to send money directly to each other. Our business does not hold our users' funds and does not have access to it. We are just a software business, not a money transmitter. This significantly reduces the cost of regulatory compliance for us. We have heard other horror stories from entrepreneurs who had to hire people for the sole purpose of achieving regulatory compliance and spent millions of dollars on licenses and legal fees. We would rather not have to do that if we don't have to.
As a final note, for our Chinese users, China has two payment services that are in some ways better than Stripe or PayPal: WeChat and Alipay. These services allow very low cost transactions, but nonetheless have all the other problems of Stripe and PayPal. A fifth reason to not to use these services is that cryptocurrency micropayments are global. Users can send money across international borders with no problem. Anyone anywhere can use cryptocurrency. A Chinese user can easily pay an American user and vice versa.
The first episode of Yourscast covers this subject if you want to watch a video about why we don't use Stripe or PayPal :)
There is nothing behind the pay wall, but feel free to tip me 10 cents if you like this article :)
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