[Editor's note: This is a guest post by Moritz Koenigsbuescher, SoundCloud Product Manager of Payments.]
When I started working at SoundCloud in February 2012, I found a company that was growing quickly with users from around the globe. And while the technology and product are world class, SoundCloud’s billing and payment platform needed an overhaul. To start, it seemed logical to identify where the biggest problems were located – one of them being that the Payment Service Provider (PSP) at the time only processed VISA, MasterCard and PayPal. These payment methods may be sufficient if the majority of users are from North America, but alternative payment methods must not be ignored. For example, in the Netherlands, iDEAL has a 50+% market penetration for web based payments.
In order to provide local payment options we had to select a new PSP. With numerous companies offering payment services, SoundCloud used the following criteria to best suit our needs:
- Scalability and robustness of processing platform
- Overall track-record
- The number of payment methods offered worldwide
- Expertise in payments and fraud management
- The ease of adding additional payment methods to the existing ones
- The technological integration of our checkout process
- The cultural fit (i.e. technological approach, professionalism, creativity and mutual understanding of each other’s needs, ways of communicating, etc.)
In order to dive deeper into the criteria above, SoundCloud needed to figure out the knowledge base, technology, and diversity of potential PSP’s platforms.
So for starters, in order to find out about the potential company’s payments expertise and how quickly they integrate new payment options, we asked the PSPs whether they supported PayPal´s digital goods workflow in combination with PayPal’s reference payments. With answers to that question, SoundCloud could better assess the depth of what each PSP and if they were already supporting it or were planning to support it in the future. This in turn would show how fast the PSP would actually be able to implement changes or new technology.
For SEPA direct debits, SoundCloud needed to understand what was the PSP’s approach on mandate handling? Were they waiting for legislative changes or best practices or were they ready? Would they suggest a “wild” SEPA Direct Debit (like the German “ELV” on the web, without a written mandate)? Did they warn of the 5-day submission period prior to due date? Did they provide a warning for the 5-day period on automatically returning direct debits (due to insufficient funds or non-existing accounts)? These issues would make it hard to allow spontaneous purchases due to difficult fraud control. Would they discourage or encourage SEPA Direct Debits for SoundCloud?
In addition, we asked about foreign usage fee for customers from foreign countries ( i.e. a customer from the U.S. purchasing at a German merchant getting an extra charge from his bank for paying to a foreign merchant) because the answer to that question showed how well the future PSP understood the underlying mechanics of international (credit card) payments. That answer was used as an indicator on how well they would understand other aspects of international payments.
Other questions included the available reports, fraud management tools and also questions surrounding APIs and currently used technology. This was crucial because SoundCloud has a very tech-savvy and efficient engineering team who would refuse to work with a ten-year-old API design.
The time and detail level of answering the questionnaire also played a role. Not that we were overly focusing on the return time, but it showed us how keen the potential PSP were partnering with us. One question specifically tailored to our relationship with them was how high they would rate their attention towards SoundCloud on a scale from 1 to 10 (1 worst, 10 best). Most answered with a 10 (Thank you!), a few with 8 or 9 (Thanks for being realistic!) and one with an 11 (Thanks for being that enthusiastic!).
Once we received all the answers from questionnaire, we talked with all of them, and met with the most promising ones. In the end, the biggest factor influencing our decision was the payment methods offered internationally and the cultural fit with us in regards to sleek technology, their team, and an overall mutual understanding. The commercial terms were a factor too, but they did not overrule the other aspects.
Check out the embedded interview with Moritz to learn which PSP was selected by SoundCloud:
About SoundCloud: SoundCloud is the world’s leading social sound platform that lets anyone create, record, promote and share their sounds on the web. SoundCloud has a freemium model where users have up to 120 minutes of free sound with the option to upgrade to premium services. Currently, users pay via Visa, MasterCard and PayPal.