[jongjong]

I cannot comprehend why there are so few companies dominating the payments sector. It doesn't seem competitive. Anyone can build a payment processor, nobody can get regulatory approval.

I also don't understand the fear around SaaS recently... People believe some weird narrative about AI replacing SaaS apps... Oh boy, people actually think that building the thing is the hard part. The entire software industry is pure crony-play; the people who run the big corporations own shares of their SaaS providers so they have no incentive to cut those contracts. Same with payment processors. I can't believe people still think we have a free market.

You can point to any company that's successful and there will be conflicts of interest all over the place. It doesn't even matter what the company does TBH. It's irrelevant.

People are just competing on who can make the money move around in circles within their group the fastest. Money certainly seems a lot more abundant when it passes through many hands and people are just buying stuff from each other.

[rprend]

I built a payment processor and failed. Regulations aren’t the issue. The issue is customer psychology: once a customer has solved their problem, they never switch. The biggest misconception I had is that it’s a viable business model to start a business to “compete” with an existing one (cheaper, better tech, better UI, etc). That never works.

You have to either 1. Solve the problem for a new customer who hasn’t solved this problem. 2. Solve a totally different problem than your competition. or 3. Invent a completely different paradigm for approaching solving that problem.

A good case study is search. Nobody could compete with Google, until ChatGPT. Note that ChatGPT is not just “Google but better”, but instead does (3): it’s a different paradigm for answering your questions. Even though it’s much better at solving this problem, people still don’t switch from Google. Most of ChatGPT growth comes from (1): new customers, because ChatGPT usage is highest among young people who haven’t already solved their problem and aren’t sticky with Google.

You underestimate how sticky customers are out of habit. Cable news is now an inferior product for information retrieval, but it’s sticky because it’s already there, solving the problem, for that generation.

[alexmorley]

> "anyone can build a payment processor, nobody can get regulatory approval."

If you want to become a bank regulatory approval is hard. If you don't then its necessary but not the biggest barrier by far. Building trust with card networks, merchants & banks, interfacing with card networks, optimizing acceptance rates to a high level against the black box of card networks etc.

And then you still wouldn't make any money because the margins are extremely low on processing payments themselves - so either you have to have massive scale or have a bunch of value added services that you charge more for. For which you also need a serious commercial engine to be able to sell to either loads of enterprises or some very large ones (who will rarely sign exclusive deals - they will just give you a share of wallet so they can transfer traffic over at will).

Card networks are another story...

[DaedalusII]

good question

i list for you the main problems with entering this space:

criminal liability for mistakes (AML rules), you have to manage fraud, the banks which are your custody providers will constantly try and shut you down, clients expect your service on day one to be equal to mastercard, your margins are almost nothing, it is one of the most competitive industries in the world, you need to go through central bank regulations/SEC equivalent every time you enter a new market, governments in countries like Vietnam or Bangladesh or China are actively hostile to your business model, and it is HYPER competitive. anything you do well, stripe/airwallex/etc will clone immediately

Airwallex is one of the most powerful stripe competitors and the CEO is a psychopath that seems like a tv parody of a silicon valley CEO. he has to be though because so many governments, banks, competitors etc are trying to crush him constantly.

note that stripe differentiates itself heavily on checkout technology, basically making the experience of paying for things easier for the consumer.