Tag Archives: ecommerce

Verifone seems to be having issues processing UK payments

An ‘unfinished’ transaction is when an order ‘has incomplete/delayed/invalid payment details’. For example a payment not completed after being flagged (correctly or incorrectly) as fradulent will be marked ‘unfinished’. Recently I have been getting a lot more ‘unfinished’ transactions than usual through my main payment processor, Verifone[1]. This seemed to be particularly for people ordering from the UK.

I dug down into my table planning software sales data using my own data munging software. Here is what I found looking through data since 2017:

(April results are for half the month. There were fewer transaction during 2020 and 2021 as not much table planning was happening during the pandemic!)

The brown bars show the ‘unfinished’ transaction rate for all countries. The blue bars show the ‘unfinished’ transaction rate for the UK. So my suspicions were correct – there has been a huge jump in ‘unfinished’ UK transactions. In March and April the number of unfinished transaction is about 10x what I would expect historically.

Some of these lost sales I am able to recover by emailing them and sending a Stripe payment link. But it isn’t ideal, as it is a hassle for me, and the customer and Stripe doesn’t handle the tax. But many of these sales are just lost for good.

I emailed some of the prospective customers with unfinished transactions. Here are a couple of responses I got:

“Hi my bank tell me that you are not set up with the new security banking system. That is why my payment is not going through.”

“I was told to ring my bank to ask why the payment was denied. I spent ages waiting for [my bank] to answer the phone and had to answer goodness knows how many security questions before they were able to tell me that the payment company had not updated their software to be on Visa’s list of acceptable people to pay. Something to do with preventing fraud.”

What is going on Verifone? Why has my ‘unfinished’ rate for UK customers sky rocketed? Is it going to be fixed soon? This is costing me time and money. Quite a lot of money. Is anyone else seeing the same thing?

I emailed Verifone on the 11th of March to ask what is going on. I am still awaiting a substantive reponse from Verifone, over a month later. It isn’t the first time I’ve had to send several follow-up emails and wait weeks for a response. Verifone support response times are glacial. Unfortunately great little payment processing companies frequently get bought and become not-so great large payment processing companies. Back when they were Avangate, you would often get a reponse on the same day. I miss those days.

** Update 10-Jun-2022 **

Things got even worse in May, with some 30% of UK customer transactions failings. I kept on at Verifone and I finally got an email on 23-May-2022:

“Thank you for the patience you have shown us during the investigation. Our development team has resolved the described issue and released the fix into the production environment. We have tested it and confirm that the fix is working as intended.”

The rejection rate then went very quickly back to normal. When I asked what the problem had been I was told:

“There was a setup issue with the GBP payment terminal. Our engineers identified and fixed it.”

So I am glad it is fixed. But it took from 11-Mar, when I first reported it, to 23-May, when it was reported fixed. It cost me a lot of time and and money. It must have cost Verifone a *lot* more, Possibly millions in commission for an operation of their scale. You would think they would have spotted and fixed something like this very quickly. But apparently not.

[1] I was originally with Avangate, who merged with 2Checkout and then were bought by Verifone.

VAT basics for software vendors

The dreaded VAT. Ugh. Value Added Tax (VAT) is the European equivalent of sales tax and it is a Royal Pain In The Arse. However, if you are running a business that makes sales in Europe you need to understand VAT. In particular it has important implications for your choice of payment processor, even if you are based outside the EU or below VAT registration thresholds. I have put together a few pointers here in the hope that it will help someone grappling with the complexities of VAT. But please note:

I am not an accountant. If you need proper advice, talk to a proper accountant.
The VAT rules are complex and may be interpreted differently by different people.
The rules may be different in different countries.
The rules change over time.

Only VAT registered businesses have to charge VAT. You have to register for VAT once your sales reach a certain threshold. At the time of writing, UK-based businesses have to register for VAT if their EU sales exceed £77k in a 12 month period (technically it is UK sales, but the ‘place of supply’ for EU consumers is classified as the country of the seller). You can also choose to register for VAT before you reach the threshold. But it usually isn’t worth it, unless perhaps you think having a VAT number is essential for your credibility. Personally I waited until I couldn’t avoid it any longer.

Even if your business is not based in the EU, the EU still expect you to pay VAT on any sales inside the EU once you reach a threshold. This is controversial and it isn’t clear to me exactly what the EU can do to enforce this if you are based outside the EU. Talk to your accountant.

The VAT rate varies between countries. At the time of writing it is 20% in the UK and 19% in the Netherlands. It also varies over time, it used to be 17.5% in the UK.

The UK also has a simplified flat rate VAT scheme with a lower VAT rate. But you can’t claim back VAT on purchases. Worse still, it appears that you will effectively be paying VAT on sales outside the EU. So that doesn’t seem at all attractive.

The VAT rules are complex and depend on:

where you are based
where your customer is based
whether your customer is a business or a consumer
whether you are selling goods or services

Technically you do not have to charge VAT to an EU business, even if they aren’t registered for VAT. Apparently they are then responsible for “self-charging” the VAT. However the burden of proof is on you to show that the customer is a business. So most vendors require a VAT number as proof of business status.

There also seem to be disagreements over whether software is goods or services. What if you ship a CD?

Here is a simplified summary in pseudo-code of whether a seller needs to charge VAT on software as I understand it:

paysVAT()
{
    if ( seller registered for VAT)
       if ( customer in EU )
           if ( customer is a business )
               if ( customer in same country as you )
                   return TRUE;
               else
                   return FALSE;
           else
               return TRUE;
       else
           return FALSE;
   else
       return FALSE;
}

Except that people in Norway and Switzerland (which aren’t in the EU) pay VAT in some circumstances. Don’t ask me why. Also you don’t pay VAT on some items, e.g. postage. And outside the scope of VAT (O), not rated for VAT (N) and zero rated for VAT (Z) are all different VAT codes meaning no VAT is payable. As I said, it’s complicated. Not complicated and interesting like quantum mechanics or the love lives of celebrities. Just complicated.

The only upside of being registered for VAT is that you can claim back the VAT you pay on any purchases you have made (make sure you get a VAT receipt). Or, if you are buying from another EU country, you can tell them your VAT ID and they shouldn’t charge VAT (see above). So any equipment you buy in the EU is now 20% cheaper. This is small recompense for the giving 20% of your sales in the EU to the VAT man. Try not to think about that. Instead give yourself a pat on the back for having reached the VAT threshold. A lot of businesses never do.

Note that when you register for VAT you may be able to claim back the VAT of products purchased before you registered. When I registered I could claim back VAT paid on goods purchased within the last 3 years and services purchases within the last 6 months. So keep your VAT receipts.

Congratulations on making it this far. Here is the important bit. How you process payments has important implications for VAT. When someone pays you via a payment processor, such as PayPal, legally they are buying from you and the payment processor is just handling the payment on your behalf (like a bank cashing a cheque). So you are responsible for collecting what VAT is due and paying it to the appropriate government. This can be a major headache if you are selling hundreds or thousands of licences per month.

When you use a reseller, such as Avangate or Fastspring, legally you are selling your licence to the reseller and the reseller is then reselling it to the customer. The reseller is then responsible for deciding what VAT is due, collecting the VAT and doing the paperwork. They then pay you net of the VAT and their commission. Leaving you to sort out the VAT for their one payment to you per month.

Using a reseller is a big win if you are registered for VAT. I am registered for VAT and use Avangate as my payment processor. They do the heavy lifting in terms of calculating, collecting and paying the VAT on my sales. But if you aren’t registered for VAT be wary of using a VAT registered reseller – approximately 20% of your sales will be disappearing in VAT (which the VAT registered reseller has to charge) which you could be keeping if the customer bought from you direct. So if you aren’t registered for VAT, a reseller such as Avangate or Fastspring may not be the best solution for you. Check out e-junkie.

VAT admin is fairly straightforward. To keep the VAT man happy I have to file:

an EC sales list every month
a VAT return every quarter

My Quickbooks accounting package generates the numbers for these. It only takes a few minutes to file reports online once all the transactions and VAT codes are entered correctly into QuickBooks. The VAT man then debits (or credits) the appropriate amount from my business account each quarter. It is not too bad, as long as I don’t think about the wheelbarrow loads of cash Avangate keeps to pay the VAT man. Maybe they roll around naked in it on the last day of every quarter. I probably would.

When I first registered for VAT I tried adding the VAT onto my existing prices. But I found that sales dropped more than 20%. So I ended up keeping the gross price (including VAT) the same, whether the customer pays VAT or not (Avangate gives you this option). Whatever you do, make sure it is clear whether any prices you quote include VAT. EU consumer expect to be quoted prices inclusive of VAT and won’t appreciate it if you try to sneak on an extra 20% at the end of the purchase process. You may be legally required to quote the price including VAT in some countries.

A final note of warning. The VAT man has a lot of powers. I understand the UK VAT man can kick your door in and seize your equipment without needing even a warrant. He might not be impressed to find out that the computer you reclaimed the VAT for is an XBox. Do not mess with the VAT man.

If I have made any mistakes, missed anything out or if the rules are substantially different in your country, please add a comment.

** Please note that this article was written in 2012. It doesn’t cover changes since then, notably ‘VAT MOSS’. **

Thanks to Marcus Tettmar of Macro Scheduler automation software for checking this through and advising me on some of the finer points.

A survey of ecommerce providers for software vendors

Overview

The choice of ecommerce provider is probably one of the more important ones you make as a software vendor. It isn’t too hard to compare providers by feature set or price. But what about other vital attributes, such as support, reliability, ease of set-up and how they treat your customers? It isn’t realistic to try every provider, so this major decision is often made on the basis of haphazard anecdotal evidence from forums. I created a survey in an attempt to gather some systematic data on the ecommerce providers most commonly used by small software vendors. I present the results below without fear or favour. Skip ahead to ‘Overall ranking’ if you are in a hurry.

Methodology

I posted a request for survey responses on this blog and on a few forums frequented by microISVs and small software companies. Any vendor of software (desktop or web based) not directly affiliated with an ecommerce provider was eligible to take part. Software vendors were invited to fill out a survey form on wufoo.com for each ecommerce provider they had used in the last 2 years. They had to supply their product URL and an email address from the same domain so that I could verify their identity. They also had to check a box proclaiming:

I am a software vendor and I have used this Ecommerce provider in the last 2 years. I have no commercial interest beyond being a customer. (If you have affiliate links to the Ecommerce provider, that isn’t a problem.)

They then had to reply to an automated email from wufoo to the email supplied confirming it was them that had completed the form. If they didn’t reply to the automated email I followed up with a few more emails. Although tedious for me, I felt this was an important safeguard to avoid any possibility of fraudulent entries. I also checked for duplicate entries, duplicate IP addresses and other suspicious patterns. The survey was open from the 5th to the 8th October. Any responses not validated by 10th October were removed from the data.

The data

202 survey responses were received from 166 different software vendors. 9 responses were rejected as I could not verify their identity (they didn’t respond to several emails). 1 response was rejected due to a possible conflict of interest raised by the software vendor (they had done paid work for one of the providers). This left 192 valid responses. I saw no evidence of any attempt to rig the results.

You can download the raw data. It has been stripped of any personal identifying information. Feel free to do your own analysis or check my results.

Providers

The survey listed 14 of the major ecommerce providers, plus an ‘other’ box for providers not listed. Valid responses were received for 25 different ecommerce providers, as shown below:

Note that ‘e-junkie+PayPal/GoogleCheckout/2Checkout’ has been shortened to ‘e-junkie’ for brevity.

Questions

Below I show the average (mean) score per ecommerce provider by survey question. The providers are sorted by score. Providers with less than 3 responses weren’t considered statistically valid and are not shown here (see the raw data for all responses).

Features

“How do you rate the range of features offered, e.g. coupons, support for multiple currencies, CD shipping, affiliate tracking, handling of tax etc.”