Making Your Own Merchant Service Provider

Original Article ↗ Hacker News Discussion ↗

Difficulty of Building a Payment Processor / PayFac

  • Several comments stress that building a true payment processor or PayFac is brutally hard: fraud, regulation, card-network rules, PCI-DSS, and banking relationships are the main hurdles.
  • Stripe’s success is attributed to years of prep, a very narrow initial product, early customers they personally knew (minimizing fraud), and weak incumbents.
  • Even if Valve or Itch built PayFac capabilities, their upstream acquirers and card networks would still impose the same risk rules and content bans; control doesn’t move that far upstream.
  • PCI-DSS alone can overwhelm tiny teams like Itch; Valve is big enough to handle it technically, but only if they truly want to shoulder that scope and audits.

Crypto as a Proposed Alternative

  • Some see crypto (especially stablecoins) as a natural bypass for card networks and chargebacks, particularly for low-value, one-off game purchases.
  • Others push back:
    • Historical Steam Bitcoin experience is cited: high fraud rates via 0-conf double-spends and money-laundering concerns.
    • Irreversibility, scams, and laundering (e.g., ransomware → games → resale) are seen as fundamental issues without strong regulation.
    • Volatility and weak fiat on/off-ramps make it unattractive for mainstream commerce.
  • There’s disagreement over how much of this is “solved in 2025” with faster chains and Lightning vs. basic incentive and compliance problems remaining.

Censorship, Risk, and Regulation

  • Many comments frame the problem as moralistic or risk-averse intermediaries (banks, card schemes, processors) deciding which legal industries (especially NSFW) may transact.
  • Examples: adult content creators, niche fetishes, “high-risk” geographies being blanket-banned, Patreon vs. OnlyFans, and porn-focused billing companies.
  • Proposed fixes:
    • Laws requiring “transaction neutrality” for lawful goods/services.
    • Treat payment rails as essential infrastructure with mandated non-discrimination.
    • Use state actors (e.g., postal services, central banks) for digital cash–like systems.
  • Counterpoint: processors legitimately avoid segments with high fraud/chargebacks and reputational risk; forcing them to serve everything could socialize those costs onto everyone.

Public or Bank-Led Alternatives (Pix, UPI, etc.)

  • Enthusiasm for central-bank or consortium systems (Pix in Brazil, UPI in India, Interac in Canada, Faster Payments/Swish/SEPA in Europe) as cheaper, more neutral rails than Visa/Mastercard.
  • Others note these still rely on banks and can inherit the same “moralizing” behavior.
  • Detailed debate on US vs. EU systems:
    • US wires/ACH are expensive, slow, and risky (ACH pulls, limited reversals); credit cards persist because they bundle consumer protection, credit, and rewards.
    • FedNow and Zelle are emerging but fragmented, and chargeback/consumer-protection models differ.
    • In Europe, instant bank transfers are cheap or free, but not always suitable as a universal card replacement (delays, weak integration with online checkout, lack of protections).

Capitalism, Banks, and Rent-Seeking

  • Some blame “capitalism” and card networks for rent extraction (2–3% fees, rewards funded by merchants, captured unbanked markets via Western Union/MoneyGram).
  • Others argue banks are the real bottleneck, with incentives to protect interchange revenue and delay true instant/cheap alternatives.
  • There’s general agreement that payment rails have become a powerful chokepoint for both economic access and de facto content regulation.

Anecdotes from the Trenches

  • People who’ve built PayFacs or payment companies describe:
    • Upstream processors unilaterally banning entire categories or regions (e.g., Puerto Rico).
    • A diffusion-image site kicked off Stripe with large potential fines and moved to crypto, losing most revenue.
    • “High-risk” in-person industries forced into creative workarounds: reverse ATMs, cash-to-crypto, barter.
  • One long-time payments founder emphasizes that deep, continuous domain expertise and regulatory navigation matter more than the code itself.