19 February 2010

This could be the death knell for established news organizations. Having just renewed my subscription to the online Wall Street Journal last week, I was struck at how much of my news comes from informal social networks. I received a call today from a team investigating this space… quite frankly a fabulous payment idea: Paying the blogosphere.

Take a look at Flattr’s YouTube video to get the picture. [youtube=http://www.youtube.com/watch?v=kwvExIWf_Uc]

One of the many competing w/ Flattr is Kachingle (see patent application). My uninformed opinion is that services in this category can structure themselves as commercial services and avoid MTO regulatory burdens. Kachangle’s approach (described in patent app above) seems to be “billing as a service” … in essence users are buying a service for a fixed monthly subscription at $10/mo. Others “social payment providers” contemplating entry here should be very cautious to avoid used of “tokens” which can be “redeemed” (Big US issues here… See eGold and  US DOJ Final, US DOJ Indictment). The rule of thumb for operating in the US: regular payments for a commercial value added/reseller service.. Good.. flexible payments to anonymous end parties .. Bad.

Key payment considerations

• Where is NewCo legal entity and target customer base?
• Where is NewCo operating from?
• Where is NewCo’s bank account?
• Is it a commercial service or “money transfer”? You have a regulatory requirements with either, but money transfer services are much more burdensome. If commercial service, then commercial requirements typically dictate disbursement KYC as well as tax/revenue reporting.
• If service is money transfer, business will not only face regulatory hurdles, but also payment clearing hurdles associated with “payment aggregation”. Networks do not want intermediaries operating a payment network within their existing network as they loose their ability to manage regulatory control (ex. AML, sanctioned payments, …)
• How does NewCo move money in? Cross border? Who will bear regulatory risk? Clearing bank? Network? NewCo?
• Are there tokens or other stored units of value that can be exchanged?  

A great blog from a publishers perspective http://steveouting.com/2009/08/28/paycheckr-the-sharethis-for-donation-pay-options/