We are going to introduce a “BYO” Merchant Account capability in the fall of 2020. Right now, we process all transactions as a Payment Facilitator, where we create sub-merchant accounts on your behalf and are responsible for underwriting each of our customers and determining payment flows and reserves (as we have all painfully learned the past 2 months).
This new capability will enable a customer to go to another merchant bank and get an account to bring to RunSignup and “plug in” allowing transactions to be processed by that merchant bank. Settlements and processing and credit card interchange fees would go directly to the customer’s bank account by way of their merchant bank. If you have kept up with the blog, you know that many other payment processors are placing various reserve requirements on events for the same reasons we did, but this gives customers who find payment processors willing to process their money on more favorable terms the ability to do so. This also helps make it clear that RunSignup is a technology vendor.
With BYO, all of the money will flow directly through your merchant bank into the customer’s bank account and RunSignup will have very little control.
- A customer goes to Stripe and gets a direct merchant account.
- When a transaction happens, the entire amount of that transaction goes to the merchant account and Stripe moves it to the customer’s regular bank account.
- A typical $25 transaction with a $2.50 processing fee will put the whole $27.50 (less their merchant fees) into your account.
How will RunSignup collect our processing fee? The details are not yet finalized, but it will be something along these lines:
- The customer will be required to have a credit card on file with us, as well as ACH authorization to pull funds from your account to pay the processing fee.
- Fees will be paid on an advance basis.
- For example, there would be an account balance minimum of $500. When that’s reached, we automatically withdraw $500 via ACH to rebuild the balance to $1,000.
- We are developing policies for issues like a balance that runs to $0, or what happens on a big sell-out or opening day, etc., when the processing fees for some large races could be $10,000+.
There are a couple of downsides to this from a process perspective for current customers. One is that when refunds are issued, we do not know if there is money in your merchant account so the refund may fail and we may not be able to know that. Second, is you will have to process chargebacks on your own, or possibly your merchant provider will do that for you. Third, reconciliation will be difficult. We will be reporting by the time of transaction, and as you will discover if you have your own merchant account, the processing of funds is much less regular. Also, for things like correlating transaction items like transfer fees or refund fees you will have difficulty tying a transaction in your merchant account reporting to reports in RunSignup. Finally, we will likely not be able to easily split transactions like we do today (for example paying a nonprofit associated with your race directly), or the advanced transaction splits we intend to add with new payment facilitator capabilities we will be introducing.
We will be looking for early customers of this, so if you are interested let your sales rep or account manager know.