Merchant account providers are not in the insurance business.
Really? I think there's a good argument that insurance is exactly the business they are in.
The fundamental difficulty here is that money you think you have as a merchant can be taken away again retrospectively, and the merchant account provider is on the hook for it if the merchant disappears. The merchant account provider accepts that risk, but takes steps such as retaining partial funds that will normally be sufficient to mitigate it. Every now and then they'll take a big hit when there's a spectacular failure and whatever guarantees the merchant account provider thought they had turn out not to be worth enough to cover the loss. Most of the time, however, things will go fine and the merchant account provider will make a tidy margin.
How is this not an insurance model?
If you're starting a business and worried that your own product failures are going to bankrupt you, pay for insurance.
I'm not worried about my product failures, I'm worried about fraud due to a combination of their insufficient security and their rather generous waiting periods for customer complaints, or simply due to a mistake on their part.
Really? I think there's a good argument that insurance is exactly the business they are in.
The fundamental difficulty here is that money you think you have as a merchant can be taken away again retrospectively, and the merchant account provider is on the hook for it if the merchant disappears. The merchant account provider accepts that risk, but takes steps such as retaining partial funds that will normally be sufficient to mitigate it. Every now and then they'll take a big hit when there's a spectacular failure and whatever guarantees the merchant account provider thought they had turn out not to be worth enough to cover the loss. Most of the time, however, things will go fine and the merchant account provider will make a tidy margin.
How is this not an insurance model?
If you're starting a business and worried that your own product failures are going to bankrupt you, pay for insurance.
I'm not worried about my product failures, I'm worried about fraud due to a combination of their insufficient security and their rather generous waiting periods for customer complaints, or simply due to a mistake on their part.