Ok, here's some really bad news. I'd like to have the input from the community on this.
I'm not the most active on this forum, but I've been a user here since early 2011, and I do believe in bitcoin.
At the same time we also want to make business, meaning we want a profit from our services. Unfortunately,
as we've registered the domain names, done the development and testing, we're still in the red. This was to
be expected however, as it always takes quite some time to build any substantial volume in sales for any
There's been complaints in this thread that the markup is too high for our service. Most fees are extracted
from the fees charged by mobile operators and payment processors. Lately another issue has come to our
attention that might explain the high fees of other similar services, like dialcoin.
When first starting to make the mobile payment feature, we noticed this on Impulsepay.co.uk's website:
What if a consumer doesn't pay their bill?
The network operators allocated money from their fees to cover bad debts. Therefore, every successfully billed transaction we tell you about, you get paid for.
So we were under the impression that we would not have any liability. This was wrong. In retrospect, we should've checked this more closely earlier on. Anyway, we
just learned today that payments are not processed from the mobile companies to our payment processor until 45 days after the purchase was done. So basically,
from the time of sale, until we actually receive the funds from the purchase, 45 days goes by. Since our cut of the fees are not very high, we would have to have a
lot of legit sales just to cover a single fraudulent purchase.
At the moment we're sitting with a too big liability as we have no idea whether sales done so far will actually be paid or not. Esp. if numerous sales are done to a single
handset, we have no way of knowing whether we will receive money from these sales until 45 days have gone by.
There's two vectors for fraud as I understand it.
1. Someone fills up credit on a handset with a stolen credit card.
2. Someone steals a handset outright and uses it to buy bitcoins.
In both cases, the bitcoins the fraudster gets is non-reversible unless he willingly pays them back.
So I've temporarily suspended our Mobile Payment solution. I don't really know if we can continue it at this point. Impulsepay suggested limiting monthly sales for each phone,
but as you see, when we need several sales to cover a single fraud, this is not a business model that will work.
In an ideal world, there would be very low fees from the mobile providers and payment processors, and the legal owner of every handset would be liable for all expenses initiated
from that handset, stolen or not.
The situation is that the liability is with us. I've received some tips that we should increase the commission, thus needing to have fewer legit sales to cover a fraudulent one, and/or
starting to require identification papers from users. However, identification papers could also possibly be stolen or faked (although it would lower the amount of fraud). And I certainly
don't think any user would be interested in waiting 45 days for getting their bitcoins. It was also suggested to me that we hold onto the BTC until we're sure that payment has been
Another solution would be to only permit users that we somehow validate to be legit users, but this is also hard to do properly. At the moment it looks like that anyone could just
steal a mobile phone, then go to our site and buy 'free bitcoins'. That's why we've shut down the service at the moment.
We'd basically want to offer to purchase bitcoins with mobile payment (SMS), but it seems like this is very difficult to do as there's so many hurdles. Textcoin.co.uk also take a
very high premium at the moment, and I'm starting to understand why this is necessary.
If there's anyone of you that think this service is worth operating, and have any ideas as to how we could do it to remove or reduce our possible liability, I would be very interested
in hearing about your opinions.
It would be a shame to shut down the service, as there's a decent amount of resources used for developing the service, and it's not the intention of ours to flee the users, and our
cut of the pie have been pretty low for the time we've been operating.
Thanks in advance for everyone that chimes in.