Earlier today, I tweeted that I couldn’t recommend Braintree as a payment processor. It was a tweet born of frustration and would probably have better been kept to myself. But now several folks have asked for an explanation, so I’ll try to do so in a way that is fair to Braintree.
There are several good reasons to like Braintree as a processor for your site:
- They allow you to treat payment processing and merchant account handling (two separate things) as if they were one.
- They relieve you of the requirement to hold sensitive data (i.e. credit card numbers) in your database, thereby making PCI compliance much less of a headache than it need be
- They have a well documented and relatively simple API to develop to that is a piece of cake to integrate into a Rails app
- They have some folks on staff who are Columbus Ruby Brigade alumni
So, after a brief survey and at the suggestion of colleagues, we decided to use Braintree for our site. We’re not yet live on that site, so I’ll keep details of it somewhat private at this point. But you can think of the site as one that uses a model similar to StubHub or Glyde (sexy UI by the way fellas) but in the travel/vacation industry. Watch this space over the next couple weeks for more details.
At any rate, we first contacted Braintree about 2 months ago and began a dialog about engaging their services. This included a discussion of our business model, anticipated transaction volumes, revenue projections, and the like. Given that we were not yet done with development, we did not submit a formal application with them at that time. Instead, we continued work on the items we knew Braintree wanted to see (e.g. clear communication about pricing, customer support contacts, terms of service, etc.) as well as the more core features of the site. During this time, Braintree allowed us to develop against their development gateway and occasionally asked us if we had any questions (we did not – it all appeared straight forward to us).
This week, the time came to actually begin the formal application process. Which is when we ran into problems. As mentioned above, one of the things Braintree does for its customers is handle the merchant account setup. It turns out that this was a more significant step than I thought. Once the underwriters saw our site, they declared it a high risk site and refused to underwrite the creation of the merchant account for us. It’s not clear why we were considered high risk when other sites with essentially identical business models in different industries are allowed to proceed. The message given to us is that our customer guarantee (which currently looks SHOCKINGLY like StubHub as we refine it for our specific case) was something they didn’t want to cover. But, they let us know, they’d be happy to work with us if we changed our business model in fundamental ways.
So, I was frustrated with Braintree for a few reasons:
- The risk issue was not detected by them in a timely fashion.
- Resolution of the issue was poorly handled. For example, we didn’t get a chance to talk directly to the underwriter to make sure they were clear on the model and risks (or lack thereof in our case)
- The only suggested remediation was to fundamentally change our business model. I have to believe we could have perhaps explored intermediate options (e.g. holding some reserves in the merchant account) but Braintree did not make those available to us.
- In the end, I just believe that Braintree didn’t necessarily do a good job at being an advocate for us in one of their core value propositions (i.e. setting up the merchant account)
Of course, we’re not without blame in this too. One of the great things about working in a startup is that you learn things at such an insane pace. Here are my lessons learned, hoping the future entrepreneurs might avoid some of the mistakes we’ve made:
- Don’t under-estimate the merchant account creation process – especially in this economy with banks still being fairly risk averse
- Always have a backup plan. We didn’t in this case, and now we’re scrambling to get another solution in place
- Don’t let it get you down and tweet out of frustration. After all, a bad day at a startup is still better than most days in a big company.
So, I hope that didn’t come across as too whiny or unfair to Braintree. I definitely think they could have done better and hope they’ll do a better job with future customers. But I know too that most people who use them still think very highly of them. Sadly though, that won’t be with us.