First, let me explain why drop-shipping is a popular vector for fraud. Drop-shipping means selling a product which you don't make or hold in stock; instead, when a purchase comes in you go and buy it somewhere else and have it shipped directly to the buyer. You can think of it as a form of arbitrage. They're remarkably efficient businesses: they need to have no assets or physical presence. The flip side of that is that if you were looking to create a legitimate-looking shell business to, say, cash in on stolen credit cards then drop-shipping would be a very plausible cover story. It's hard for us to disprove.
Since Stripe is on the hook if customers don't get their goods or services, we need to be able to ensure that the businesses are legitimate. It's hard for us to reliably do so with drop-shippers. While dropshipping is not Shopify's primary business, they are more specialized in ecommerce, they have more business-specific data, and there are a handful of other properties which let them support these businesses more readily.
The simple obvious first guess is, "Shopify makes a much larger margin, so there is more money available to pay for fraud detection"
Or maybe Shopify knows more about their clients or something like that. Regardless, the margins in Stripe's business are pretty thin, so they can't afford to either eat a lot of losses due to fraud or spend a lot of money on detection. It's totally possible that clients who drop-ship things are not profitable on average for Stripe, even if the vast majority of people drop-shipping things are totally legitimate.
> I know many who drop ship and are not money launders.
No one said that all drop shippers, or even the majority of drop shippers, are doing anything illegitimate.
Those who provide merchant accounts for credit card processing are the ones who assume the risk if one of their account holders is not able to cover chargebacks, and so from their point of view it doesn't matter that the vast majority of drop shippers are legitimate. What matters from their angle is how much they will be on the hook for because of the small fraction that are illegitimate. If that is too high, it can be better for them to just disallow the whole category.
> No one said that all drop shippers, or even the majority of drop shippers, are doing anything illegitimate.
Yes, but STRIPE are saying this. Because it's in their prohibitive items list and if you do it as part of your business, they will not do business with you. This is my whole point.
Other merchants will happily do business, so why not stripe? They have yet explained why...
The guy you are replying to is a co-founder of stripe. You are being downvoted for disagreeing with him. On Hacker News there are certain personalities that you must not debate.
I don't get the connection between drop shipping and money laundering either (As if money laundering was a crime as defined at the federal level- everyone is already guilty).
Nobody would use a credit card to launder money since it is tied to a bank, or in the case of a visa gift card, limited to such small denominations its impractical for money laundering.
That's neither true nor fair; downvotes are explained by the commenter clearly wanting to escalate the argument. collision said tends to, so the objection here is weak and certainly doesn't merit name-calling like "Laughable".
A better way to phrase something like this is as a question. For example: "Wouldn't these criteria apply to Shopify? If Shopify is a legitimate business, how can other legitimate businesses overcome the same hurdle?" Putting it that way would abide by the HN guidelines, would be more likely to get a substantive response, and would take the thread in a direction where we all learn something.
It's hard, of course, to keep one's poise in a discussion about one's business being rejected for an arguable reason, but the alternative is for people to yell at each other, which helps no one and degrades this site.