[yxre]

This is a regulatory problem not a business problem. Payment processors need to understand a client's risk profile and what business they do in order to prevent money laundering, and in practice, regulators only care about clients that have a certain volume.

Paypal, Stripe, and any other major payment processor have developed a strategy of letting users use the service with no restrictions until they hit that volume then they begin doing things like this.

Ultimately, this is caused by regulation and needs to be fixed by regulation, but it won't because practices like this are extremely lucrative.

[paddw]

The regulation will never change, but you get a huge advantage by working with smaller processors in terms of them being willing to work with you in a reasonable way.

There are 3 stages:

You are small: Stripe and the like work best because they are easy to set up and your small payments are low risk

Your are medium sized: You start to hit restrictions with these services but can not get any real support. You should work with a small indie processor.

You are big: You can get support (probably) so going with the big powerful solutions starts to make more sense again.

[csomar]

Does regulation requires them to "understand" the business model or withhold the funds? These are two different things. For $600K, Stripe could send one of its support agents (which doesn't exist now) to verify that OP has a legitimate business. Instead, it took the much easier option of withholding these funds (from their offices in Alto) and earning interest on it... for 9 months...

I'd say good for them. If you accept that kind of shit (in business or in a relationship) you deserve it.

[yxre]

Its not really well known what is the motivation for witholding funds, but in some cases, it has been shared that is stuff around AML and people have extrapolated.

Conventional payment processors like Wells Fargo, BoA, and others do the paperwork up front, and then give you access. They don't have the spiffy features that Stripe and Paypal has.

Ultimately, I think Paypal and Stripe could have a better system, but they profit immensely this way. Like you said, good for them, but sucks for the industry because it is one of the barriers to growth is getting hit like this as you are scaling is huge.