5/9/2020 Update: We have lowered the standard race reserve to 5% from 10%. The Payment Account Reserve requirement has been lowered to 2.5% from 5%.
4/15/2020 Update: We have lowered the standard race reserve requirement from 20% to 10%. The Payment Account Reserve requirement has been lowered from 10% to 5%.
The Coronavirus is impacting us all. We did a webinar that explains chargeback liability as well as these new reserve and payment policies on Wednesday this past week. If you want to hear the logic behind all of this, please watch the webinar.
Before we go into the details, let me emphasize that these are not permanent % rates and delays and rules for delays. This is a fluid situation, and as we get more information and data we hope to improve these and hopefully someday return to something very close to where we had always been. We know the delayed payments are difficult for your operations, but as discussed in the webinar, all payment processors are required to protect the fundamental basis of the credit card network. To clarify that sentence, a race registration fee that you collect is actually a liability and not real revenue to you until the promised service is delivered – you are essentially borrowing money from the credit card holder until the event happens. Under normal circumstances the event is usually delivered, but the shut down of so many events means cardholders can often win chargebacks regardless of your no refund policy.
Also note that we are not alone in implementing these types of procedures. Eventbrite announced they are holding all funds until after an event successfully completes. We are trying to implement policies that allows cash to flow to event producers yet still uphold both our obligations and your obligations to credit card holders as a payment processor.
Pre-Race Reserve Requirements
- 20% on all Races
- 0% on Donations, Memberships and Invoices
- 10% on Payment Accounts
There is a requirement for both the 20% race reserve and the 10% payment account requirements to be met before additional funds are transitioned to your payment account. These also apply to virtual races as these traditionally have risk associated with them, and there is not a good way to track shipments and results. Let’s look at the various use cases:
Scenario 1: You list a new race, with a new payment account. In your first week, you collect $1,000 in race registrations and $500 in donations.
We will pay 80% of registration revenue and 100% of donations on the regular schedule. So, in your first week, you will be paid 80% of the race registrations ($800) plus all of your donations ($500) for a total of $1,300 transferred to you on Tuesday (for weekly payments). The 20% reserve will be paid according to the Post-Race Reserve Requirements below.
Scenario 2: You have a single existing race in your payment account that has $9,000 of registrations that have already been paid to you. The next week you collected $1,000 of registrations plus $500 of donations.
You have now collected a total of $10,000 of registrations with a reserve requirement of $2,000 – so we would hold the whole $1,500 to put into the reserve if it is a single payment account.
The next week, when another $1,000 of registrations plus $500 of donations are collected, then the total registration fees collected would be $11,000 and the reserve requirement would $2,200 (20% of $11,000). So we would hold $700 to meet the reserve requirement, and the remaining $300 plus the $500 donations would be paid on the next Tuesday. Moving forward, 20% of all registrations will be held in reserve each week.
Scenario 3: You have a multi-race payment account in which Race A has $10,000 of race fee and has a $2,000 reserve. Race B has $30,000 of race fees and a reserve of $1,000.
While Race A has met its reserve requirement and looks like it would only have 20% held moving forward, there is also an overall payment account requirement of 10%. For this account of two races ($10,000 + $30,000) = $4,000 reserve requirement. So if Race A gets $1,000 of registrations, it will not have the full 80% released because the $1,000 is needed to meet the overall payment account reserve of $4,000.
In the above example, if Race A instead collected $2,000 of registrations then then the payment account reserve requirement of 10% * $42,000 = $4,200. Since there is already a total reserve of $3,000, then only $1,200 would be held back to meet the total payment account reserve requirement and $800 would be paid to the race.
Again, we hope to lower both the race and the payment account %’s over the coming weeks and months as risk is reduced.
Post Race Payment Policy
- 20% reserve policy for the week after the race. This means that if a race was already at the 20% reserve and received registrations between Tuesday and Saturday then 80% of those fees would be paid on Tuesday after the race.
- Manual Review by RunSignup to set reserve requirements between 0-20% to go into effect 8 days after the race. For example, if a race happens like the normal days with 80% of participants showing in the checkin app, results posted, happy Facebook comments, etc. then the reserve would be reduced to 0% and all funds would be released on the Tuesday 8-9 days after your Saturday or Sunday race. The only delay would be triggered by chargebacks (see below). There are tiers between 0% and 20% depending on the verified success factors for the race.
- Three weeks after the 8 day hold, the balance would be paid. So even if your race stays at 20% because of these uncertain times, you will be paid. Again, this is subject to the chargeback trigger.
- If a chargeback is received for the race, during either the 8 day hold or the 3 week hold, then it triggers a further 3 week delay in payment from the date of the chargeback.
This new algorithm for post race will go into effect this coming week. This replaces the 30 day hold we announced earlier on payments.
We continue to iterate and account for nuances and corner cases. For example, we hope to add logic so that a very large race’s payment is not totally withheld for a single chargeback. If a large race has $100,000 in reserve we don’t necessarily want a single chargeback to trigger the 3-week hold. Instead, either some % of registrations as chargebacks should be used as the trigger, or a smaller reserve should be required if the % of chargebacks is below a certain threshold. Those changes are expected to be made in the next 2 weeks.
We also hope we can reduce both the % reserves and the holdback times. We do think the algorithms we have built will enable us to smoothly migrate to the new normal over the coming months and improve customer cash flow.