Stripe Connect And Refunds Initiated by Connected Standard Accounts

We are using Stripe Connect to handle our payments.  Our sellers (kitchens) have standard accounts, which means they have full access to the Stripe dashboard (I believe these used to be referred to as ‘standalone accounts’).  We are using destination charges so charges run against the platform account and are then immediately transferred to the kitchens, less any application fees (this is not entirely accurate, but good enough for this post).  All well and good.

Some of the kitchens noticed they could refund a charge via their Stripe dashboard.  Refunds happen for a lot of reasons–maybe the food business was inadvertently charged or they had some issues in the kitchen.  So, the kitchens refunded, and the food businesses waited.  And waited.

Meanwhile, when The Food Corridor ran numbers looking at revenue, we saw aberrations.  There was extra money in our bank account.  Now, every business wants more revenue, but they tend to like to know the source.  So, we wanted to figure out where the extra revenue was coming from.

I looked into this and, after some investigation and emails with Stripe support, determined that the kitchens were refunding money to us.  However, it wasn’t flowing through to to the food business from whence it came.

Here is the flow of funds when a charge happens:

food business -> platform -> kitchen

When a refund happens, if initiated by the platform:

kitchen -> platform -> food business

When a refund happens, initiated by the kitchen

kitchen -> platform

Tracking down exactly which charges were being refunded by a kitchen was tedious, but easy to do if we knew which kitchen had performed the refund.  If we didn’t know that, we’d have to search through all the connected accounts for the matching charge.  It was far easier to contact Stripe directly and ask them to hunt it down with some internal tools.  Providing the date of the transfer, the amount and the id was helpful to Stripe support.

After we knew which kitchen had performed the refund, it was easy enough to find the charge, and then refund it to the customer, completing the loop.  Here’s the flow of funds for that:

platform -> food business

If you are using Stripe Connect and are using the destination charge method, and your sellers have standalone accounts, make sure they know they can’t issue refunds from their Stripe dashboards.


Things I wish I knew about Stripe

Caterpillar

Striped, but not charging your credit card

So, at The Food Corridor, we’ve been using Stripe happily since we launched in June of 2016.  As a developer, I’d used Stripe before in a couple of different ways, but this has definitely been my most sustained use of the payment service.  (If you don’t know what Stripe is, it is an API that makes charging customers as easy as an API call.  More here.)

I wanted to outline some of the things I’ve learned from months of using Stripe.

  • Stripe supports pulling money directly from bank accounts, via ACH, but it really isn’t the same ACH as your bank lets you do.  This is because Stripe isn’t a bank.  The biggest thing to be aware of here is that Stripe ACH takes 7 days to arrive in your bank account.  Another issue is that you have to do verification.  They have two ways of doing verification–micro deposits and Plaid.  Plaid is instant, but only supports major banks, which was a non starter for us (updated 9/8: Plaid supports around 1000 banks now).  The code for micro deposits is straightforward, but be prepared for some customer support issues.  Stripe deposits two amounts and withdraws just one amount, which was confusing for some of our users.  It also takes a couple of days, so if your users are hot to spend money, Stripe ACH may not be a fit.  The win?  Definitely cheaper.  (And I didn’t find any other service that would support both credit card and ACH transactions that was developer friendly.)
  • Don’t forget to set up your webhooks out of the gate.  Stripe mentions this, but I glossed over it in the early days, and missed some events that were important.  (The most relevant is that ACH is asynchronous, so when an ACH transfer fails, it is reported via webhook.  If bank account verification doesn’t work, you’ll get a different kind of webhook.  Review the docs and set up webhooks for all the ACH events.)  If you don’t have time for a full featured webhook processing implementation, Zapier can just send the webhook data to your email. This can be a great stopgap solution.  Or you can use stripe_event.
  • Per support, if a webhook post fails (because your app is down, for example), they are retried once an hour for 72 hours.
  • Speaking of stopgap solutions, the Stripe Dashboard is fantastic for manual processes.  Just because you can automate everything via an API, doesn’t mean you should.  There can be some complicated edge cases with payment processing, especially around refunds, but they can easily be handled with a google doc of instructions and the Stripe Dashboard.  I have found only one use case that the API can handle that the dashboard cannot (a partial refund of an ACH transaction).
  • I have found Stripe support to be excellent, quick and knowledgeable.
  • Occasionally customer charges will be declined because of bank fraud triggers.  Expect to occasionally ask your customers to call their bank.  (I think this has happend about once every third month).
  • Disputes are a total pain, because the process is opaque and slow (expect a resolution in about two months and know you are not in possession of the payment during that time).
  • Make sure to capture the payment id anytime you charge a card or run ACH.  It will make future automation a lot easier.
  • Monthly plans are complicated, so if you can lean on Stripe for management, even if you are doing manual plan management (applying coupons, adding, or removing users from plans via the dashboard), do that.
  • The first payment you charge takes 7 days to move from stripe to your​ bank account.  This is for fraud protection.  Payments thereafter typically take 2 days (but it depends on your country and industry).

And here are some special tips if you are using Stripe Connect (their marketplace product).

  • Read the docs!
  • Remember that first payment timeline?  It applies to every one of the connected accounts.  Think about charging your own credit card as soon as you connect an account to help with customer cash flow.
  • Consider whether you want to use managed vs standalone accounts.  Managed accounts are a lot more work but allow you to have a seamless UX that you control.  Standalone accounts, which we use, are far quicker to setup.  I think this depends on the number of sellers you have in your marketplace.
  • You also want to think about whether to place the charges on the platform account or on the connected accounts.  A major factor there is who bears the Stripe fees, the platform or the sellers.  We charged on the platform account because we wanted all our data in one place.  If you are selling plans, you can’t charge on the platform and use Stripe plans.
  • If you are charging on the platform account, and are using standalone accounts (where the sellers have to set up a stripe account) your sellers won’t see charge descriptions unless you manually copy the description over.  The code looks like:

# this will let the sellers know what invoice the charge was for
transfer_id = charge.transfer
transfer = Stripe::Transfer.retrieve(transfer_id, expand: ['destination_
payment'])
payment_id = transfer.destination_payment
payment = Stripe::Charge.retrieve(payment_id, {stripe_account: destinati
on_account_id})
payment.description = description
payment.save

Happy charging!



Updating Stripe bank accounts: “A bank account with that routing number and account number already exists for this customer.”

So, if you want to handle ACH transactions with Stripe, you can. Some limits to include the length of time for the transaction (5 business days on top of stripes 2 business day transfer duration) and support only for US accounts, but the API is nice and the price is pretty nice too (0.8% up to $5).

But if you are trying to do recurring billing with Stripe and ACH and you want to let your customer change their default charge source between credit card and bank accounts as a payment source (or even two different bank accounts), you’re going to run into a roadblock. While Stripe will happily accept new credit information with the exact same card number, expiration date and CVC code, and just create a new source for each entry, it is not so forgiving with bank accounts. Instead, you’ll get this error message: "A bank account with that routing number and account number already exists for this customer." if you try to change the default source to an existing bank account record in Stripe.

I found some code with this error message, but it actually isn’t complete. It’s not best to examine the error message and switch on that, but I didn’t see a specific exception class for this type of exception.

For a complete solution, you need to check the stripe tokens routing number and last 4 digits of the account number. If a user has two different bank accounts that match both in the last 4 of the account number and the routing number, well then, I think you are out of luck.

Here’s the complete ruby code, making sure to match the current request’s routing id number just in case your user wants to switch between multiple bank accounts for their default charge.


    def update_customer_from_token(customer,stripe_token)
      # takes the stripe customer object and the new token 
      # from the stripe indicating the changed payment method

      success = false
      Stripe.api_key = ENV["stripe_secret_key"]
      begin
        new_pmt_obj = customer.sources.create({:source => stripe_token})

        customer.default_source = new_pmt_obj.id
        customer.save
        success = true
      rescue Stripe::InvalidRequestError => e
        # special case where the bank account already exists, let's use that.
        if e.message == 'A bank account with that routing number and account number already exists for this customer.'
          tokobj = Stripe::Token.retrieve(stripe_token)
          customer.sources.each do | src |
            begin
              if src.object == 'bank_account' && src.routing_number == tokobj.bank_account.routing_number && src.last4 == tokobj.bank_account.last
                customer.default_source = src.id
                customer.save
                success = true
                break
              end
            rescue => e
              Rails.logger.error(STRIPE_ERROR_PREFIX+" 4 unable to update customer for "+customer.inspect+", "+e.inspect)
            end
          end
        else
          Rails.logger.error(STRIPE_ERROR_PREFIX+" 3 unable to update customer for "+customer.inspect+", "+e.inspect)
        end
      rescue Stripe::CardError => e
        Rails.logger.error(STRIPE_ERROR_PREFIX+" 1 unable to update customer for "+customer.inspect+", "+e.inspect)
      rescue => e
        Rails.logger.error(STRIPE_ERROR_PREFIX+" 2 unable to update customer for "+customer.inspect+", "+e.inspect)
      end
      success
    end

Or, you could just let the user choose from a drop down list of their existing sources which one they want to be the default. That might be a cleaner solution.


Presenting on Stripe tomorrow

Excited to say that I’ll be presenting on my company’s use of Stripe at Boulder.rb tomorrow.  Working title of my talk: “Do you like Money?”.

What I’ll cover:  an overview of the service, real code, testing, operational practices, and gotchas.  This will be based on my experience at The Food Corridor, where we’ve processed over $250k of transactions through Stripe.

Hope to see you there!


Early Product Lessons

fence-238475_640I wanted to jot down some lessons I’ve learned being an early stage technical founder of an unfunded startup, from no product or revenue -> product and revenue. (Of The Food Corridor, if you’re interested in the startup.) I had the luxury of a co-founder who had spent years immersed in the problem space and months researching the niche. If you can find that, it really really helps in product development.

That said, here are some other lessons. For an idea of our timeline, we did a build or buy or both evaluation in March, started building in April, did beta testing in May and launched June 1.

 

Determine features through demand/pull, rather than push

Once you have a product that you can show users, show it to them!

It will be embarrassing.  Record all their feedback and note patterns (we did a month of beta testing, as noted above). Then, let the user requests pull features from you, rather than push features to them. This serves a couple of purposes:

  • people will know that you are hearing them, and will be more forgiving of inevitable issues
  • you will build features that people want to use
  • you’ll develop a sense of users needs
  • you’ll learn to politely say no to requests that are off base/only useful to one user

Everything is broken

Everything is borked, all the time. At an early stage startup you just don’t have time to do everything right (nor should you, because the wrong thing perfectly engineered is a waste). So there will be features that are half done, or edge cases unhandled, or undocumented build systems. Do the best you can, and realize that it gets better, but make your priority getting something out that users can give feedback from. “Usage is like oxygen for ideas.” – Matt Mullenweg

You have to walk a fine line between building something quickly and building something that you can build on later.  Get used to ambiguity and brokenness and apologizing to the customer.  (But not too used to the apologies!)

UX/UI polish is relative

Our app is a number of open source gems smashed together with some scaffolded ruby code.  The underlying framework had a decent look and feel, but there are definitely some UI and UX holes.  I thought I’d have to spend some time working on those, but our customers thought the product was beautiful and useful.  My standards were different than their standards.

That doesn’t mean that the app can look horrible, but a plain old bootstrap theme or one of the other common CSS themes is ok. You need to know your audience–many people are stuck using a mix of software and are used to navigating clunky user interfaces. If your interface is just decent, but still solves the problem, you’ll be OK.  Of course, you’ll want to solve gross UX issues eventually, but a startup is all about balance.  A friend of mine gave me the advice: “don’t allow your users to make any mistakes”.

Favor manual process for complex edge cases

There have been a couple of situations during the build where a lot of work was needed to handle an edge case. For example, prorating monthly plans. Once you start thinking about prorating in depth, it turns out to be a really interesting problem with a lot of edge cases. But guess what?  For your startup, edge cases can be a wild goose chase.

When an edge case rears its head, you should consider the following options (in preferential order).

  • can you outsource the complexity (Stripe handles proration, for example, and I guarantee you they handle edge cases you don’t).
  • can you make it a manual process? If it doesn’t happen that often and/or a real time response is unneeded, you can often get by with a manual solution. This may be partly automated, for example, an SQL query that generates an email to a human who can handle the exceptional situation.
  • if neither of the above apply, can you defer it? Maybe for a few months, maybe for just a few weeks. But sometimes requirements change and you learn things from users that may make this edge case less important.
  • if all of the above don’t apply, you may need to bite the bullet and write code.

Back end and front end development doesn’t have to be synchronized

Most users equate the front end with the complete product. Most developers know that, just like an iceberg, there’s a lot of back end processing hidden in any project. But guess what? When you are getting feedback from users, some of the backend processes need to work, but many don’t. For example, we had a billing system that handled monthly invoices. We didn’t need to build the billing system while we were getting feedback from users on what type of charges they needed to handle. We did, however, need to know that we could build it. So make sure you can build the backend system to support your front end system, perhaps by building one path through, but defer the full build-out until you have to.

What about you?  Any tips for early stage product engineering?


The single biggest obstacle to running self hosted Sharetribe

dollar-1362244_640So, you checked out Can I customize Sharetribe? and determined you need a backend programmer? And that you’re going to self host, whether on Heroku or elsewhere? That’s great!

Let me let you in on the single biggest obstacle to running Sharetribe self hosted. (It’s not the biggest obstacle to building a successful marketplace–that is building the community and getting liquidity–but it is a big one.)

There’s no great option for taking payments on self hosted Sharetribe.

Braintree has limitations and can only support companies in the USA (I believe).

Paypal isn’t supported with the open source version.

No other payment processors are supported ‘out of the box’.

So, if you are charging nothing for your marketplace, or if you monetize your site in some other way such as a listing fee or using the marketplace as a captive market, you’re fine with the self hosted version.

Otherwise you are going to have to pay a developer to integrate with a payment processor. Here is what to think about when you are evaluating payment processors:

  • Do they support the currency I need to support? (Sharetribe only supports one currency per marketplace at this time).
  • Do they handle splitting payments?  That is, if someone pays $100, and the marketplace commission is 10%, $10 goes to the marketplace and $90 to the seller.  How is that handled–many payment processors don’t support splitting payments in the manner.
    • If you aren’t splitting payments, how are you going to get your money and make sure the seller gets theirs?
  • If I need payment escrow, do they support that?
  • Are there legal ramifications (taxes, fees, etc) that my marketplace has to handle with regards to taking money?

It’s worth looking at these:

And if you are interested in having Stripe connect in your system, I’m working on such an integration.  Please sign up for the list to be notified when it is ready to go.



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