[Obi_Juan_Kenobi]

You do not understand what happened.

They did aggregate up until this point, at least for most patrons and creators. If you did a regular pledge with a monthly charge, you only made one transaction a month. Similarly, each creator got paid once a month with one transaction. The exception was per-post patronages, which do indeed have more fees and are less suited to the micro-payment model. That is NOT what this was about, though.

The real motivation was to support gated content.

They want to bring creators into their subscription system, where you pay a fee to access content. They had a problem, though, in that people could pledge, access content, and then simply cancel their pledge before getting charged. To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion about when people get charged (do you pro-rate the first charge, with or without the next month, etc.) because people would pledge a certain amount and see a different amount charged. The alternative is to have people on their own billing cycles, which is much less confusing for customers, but eliminates the possibility of aggregation.

Basically, they want to abandon the goodwill/patronage model and become a subscription service, likely because the latter model is far more lucrative.

[eridius]

You're ignoring the fact that increasing the number of distinct fees charged to Patrons translates directly to more money for Patreon (because Patreon was charging a much higher fee to Patrons than they themselves are actually paying on the transaction). Their public explanation was that a traditional subscription model is simpler, but it's obviously worse for users and the only reason to do that instead of the alternatives (such as the wallet approach) is so Patreon can get their cut of those extra fees.

[chipotle_coyote]

As Wikipedia would say, "[citation needed]". The transaction fees to patrons that Patreon proposed of 35¢ plus 2.9% are real familiar to anyone who's worked on a payment processor. Patreon was essentially passing the transaction fees they would have paid onto patrons, and they would not have been making a material amount of extra money for themselves if they'd stuck with the new system.

[eridius]

That’s a rate that a brand new company just starting out might get. For that to be the actual rate Patreon is paying they’d have to be extremely incompetent.

For comparison, both Square (which is not known to provide the best rates) and Stripe advertise better than 2.9% + 35¢, and that’s the rate you’d get without any negotiation at all.

[richardknop]

35¢ plus 2.9% is for average e-commerce and small business clients. A company like Patreon that does large volume of transactions will almost always be able to negotiate a much lower transaction fees with payment processors.

[radix07]

I don't see how a 'wallet' doesn't handle the CUF... Patreon should already have the money in what is basically a pre-paid account. You just have a minimum amount that can be paid into the wallet. There should also be pay in/out schedules so things are aggregated/automated on both sides. They could even make interest off of the floating money and work a bit like a bank. This should be their bread and butter, optimizing transaction cost. Plenty of other sites do this sort of thing for real businesses, I don't see why it is so complex...

[mratzloff]

It really does seem incredibly straightforward. A patron adds $20 to a wallet and pays a low transaction fee. Can even configure their account to automatically add $20 whenever funds are low. Money stays in Patreon's bank account. Patron can't get their money back once it's in the wallet. Every month Patreon charges a percentage to disburse all money to the creator's bank account.

What am I missing?

[xocyabencl]

It's simple to explain in the context of this discussion. But probably doesn't seem as simple to the average user, who wants to donate $1 to a creator, and will feel like some kind of scam is going on if they are asked to add $10 to their Patreon balance first.

[xocyabencl]

Thinking about it some more, Patreon may end up eating the additional fees for the first payment (for CUF posts), increasing their cut a bit on other posts to make up for that, then aggregating the recurring charges.

[radix07]

I am guessing they can make more off of an increased number of credit card transactions with some sort of deal with Stripe or whomever. It also allows them to obscure when and how much they are getting paid when it really doesn't need to be that complicated.

[hobarrera]

If I want to donate $1 per month to somebody, cashing out $20 in advance is quite a bit -- it'd probably discourage a lot of people, since the initial investment is too much.

[mratzloff]

It was just an example. It could be whatever the user wants to pay; since they're paying the fees for each transaction, it makes sense to keep some money in a wallet.

[simonh]

> A patron adds $20 to a wallet and pays a low transaction fee.

I wonder if they have problems with anti money laundering regulations? Financial transactions are supposed to clearly indicate the beneficiary. If you're paying into a wallet that gets divvied up later, that's not possible so showing the paper trail of who benefits gets difficult.

[jdmichal]

How do those look now? I imagine the beneficiary of the transaction is clearly Patreon. The fact that they happen to have another transaction that pays money to someone else is fine. I mean, we don't expect to have to write several checks to various patients and families when we give money to St Jude. Or, more interestingly, look at how escrow works in a real estate deal, where the buyer and seller transactions go to the escrow company, which is then responsible for distributing it to the various parties.

Now, since it's basically acting as an escrow payment, Patreon might have some laws restricting what it can do with that money while it's holding it. For instance, they likely cannot legally earn interest on that money. Similar to how the security deposit held for a rental cannot yield interest unless that interest is paid to the renter.

[jdmichal]

Automated road tolling systems have the exact same economic problems as Patreon. And the pre-charged wallet with $xx minimum fillups is exactly the model they chose. Judging by the longevity of their systems, it seems to work fine.

[xfkechyk]

as was mentioned below, you don't really have a choice with road tolling systems. i don't like having to pre-load $xx, but it's better then the only alternative. people can stop interacting with Patreon, but you can't really avoid toll roads very easily.

[james-skemp]

At least in the Illinois Tollway you do: pay more by stopping at each toll.

That's sort of the same thing here, right? Prefill a wallet and you don't have to pay extra for processing fees (equating to convenience going back to tollways).

[chii]

you have no choice with road toll. unless you plan on teleporting or walking.

[amckenna]

You could just take a different route

[Dylan16807]

> To avoid this, they needed to do Charge Up Front (CUF) to ensure that any access to gated content was paid for. But that creates some confusion

But if you actually ask people whether they want the first couple charges to have weird timing, or whether they want to pay significantly more in credit card fees that don't go to the creator...

[sgdread]

> They did aggregate up until this point

Still an issue if most people support 1-2 creators with $1-2 pledges.

[Kurtz79]

I really don't get the motivation of the change, aside from basic greed.

I mean, it seems like a dream business model, you basically channel donations to content creators taking a cut, collecting goodwill along the way.

Their service cannot be more than a (refined and well designed as you want) CRUD app with payment processing, it's hard to imagine having such high costs that is not profitable.