Why I Love Balanced

By Chad Whitacre
December 5, 2012

I run a website called Gittip, which is a weekly gift exchange. The idea is that you set up a small gift—up to $100—to an open source programmer, a musician, an artist, etc., and every Thursday we collect and distribute the money. We launched five months ago, and we have about 550 active users exchanging $1,500 per week.

The Broken Road

Processing payments is complicated and fraught with regulations, so Gittip depends on a third party to actually charge credit cards and deposit funds into bank accounts. I launched using a service called Samurai from a company called FeeFighters. In week two of Gittip, FeeFighters dropped the ball, and when I went looking for support I found out they’d been acquired by GroupOn and had turned off all their support channels. Bad news! :-(

I regrouped and switched to Stripe, another credit card processing vendor. Stripe is gorgeous, really world class. If you can work with them, you should. Unfortunately, I couldn’t, because Gittip is a marketplace, and Stripe isn’t designed for marketplaces. If you’re an online store or non-profit you can use Stripe to collect credit card payments intended for you, but you’re not supposed to use Stripe to accept payments on behalf of someone else. And that’s what Gittip is all about. Stripe were very professional and gave me plenty of lead time, but they asked me to leave. :-(

[Update: Stripe has since rolled out limited support for marketplaces, though Gittip still falls outside the use cases.]

[Update 2: Stripe has now rolled out true payouts for marketplaces.]

At this point Gittip was only a few weeks old and I was already looking for my third payment processing vendor. I was in a conversation with Braintree, another credit card processor like Samurai and Stripe. They’re a going concern and they do work with marketplaces, notably Airbnb. However, being a marketplace, I was looking at either fudging my application or jumping through significant extra hoops to get going on their system. :-(

And that’s when Balanced showed up.

Engineering as Marketing

I first heard of Balanced when they were called PoundPay. Someone in the Gittip community put them on my radar and I started a ticket. I was wary because they didn’t seem to have much market traction, and I had already been burned by one startup, FeeFighters. But Balanced were hungry, and proactively pursued the relationship. CEO Matin Tamizi showed up on GitHub. Jareau Wade, co-founder in charge of sales and marketing, made his case in public. They showed up on IRC and Twitter. We hammered out the details of our relationship on an etherpad, with lots of community involvement via IRC. Then Balanced blew me away: one of their engineers, Marshall Jones, made a pull request integrating Gittip with their service. :-)

Balanced didn’t stop there. Designer Damon Chin contributed a comp for a new visual design. When Gittip started to get hit by fraudsters—I ended up calling it the Delpan Incident—risk officer Ganesh Venkataraman forked the Gittip repo to start work on fraud signaling, and ended up contributing a fraud analysis based on data already in Balanced. We’ve even had Tim Nguyen—their lawyer—show up on GitHub and participate in a discussion of the tax implications of Gittip. Let me say that again: the in-house general counsel for one of my business partners joined a public discussion of tax law on a social network for programmers. In the words of another lawyer friend of mine, “Gold fucking star!”

Challenges

Suffice it to say, Gittip and Balanced are close partners at this point. It’s a good thing, too, because we’re facing significant challenges together.

When Gittip’s first brush with fraud went down, former Balanced employee Shawnee Cook came out of the woodwork with some ugly accusations about Matin and Balanced. Factoring out the frustration, her story might still cast a shadow of a doubt on Balanced’s ability to contain fraud. Matin has addressed this briefly. To my mind, Balanced’s main value proposition is being able to programmatically verify identity and approve merchants. You feed a name, address, and date of birth to their API, and they give you an instant “yea” or “nay.” No days or hours of waiting, no redirects off my website. That’s new and exciting. It’s also really hard. Balanced is blazing a trail. I can understand some stolen credit cards leaking through, but, personally, I was kind of surprised to find people spoofing identity on the bank account side with such apparent ease. No one expects perfect, 100% fraud-free performance, and so far I’m trusting that Balanced is managing fraud well enough that this model is going to work. We’re in this together.

While I’m saying uncomfortable things, I’ll also say that, in terms of fit and finish, the Balanced API and dashboard is not as gorgeous as Stripe. But, then again, what is? Gittip is flimsy in comparison to both. More importantly, Balanced isn’t really a direct competitor to Stripe. Stripe is perfecting a well-understood problem, credit card payments. Balanced is innovating. Balanced handles credit card payments, and then adds something new and different: a merchant approval API. For Stripe, credit card payments are the product. For Balanced, they’re a feature. That said, Balanced’s API and UI execution is well above average, and they do respond promptly to feedback.

Open Partnership

Gittip and Balanced are in an open partnership. This means we’re not acting behind closed doors. I’ve had two cell phone calls with Matin, one when we were first getting to know one another, and a second after a downtime incident. I talked privately with Tim and Ganesh during Delpan. And I’ve had a few private IRC chats with Jareau. Only once has Jareau asked me for a marketing referral that I wasn’t comfortable giving; I told him as much and we got on with life. He approached me about writing this blog post, something I’d been thinking about doing anyway. I hope to visit with them next time I’m in Palo Alto. We are collaborating closely, and we’re doing it out in the open, mostly on GitHub, Twitter, Hacker News, and IRC.

Open partnership also means that others are welcome at the table. There’s a lively community growing up around Balanced. They have other clients, of course. But look also at Balanced’s welcoming attitude when I’ve invited other companies to join them at my table: Dwolla, SpreedlyCore, WePay. They’re committed to openness to the point of discussing partnership with seemingly direct competitors. Gold star.

Balance is not just practicing openness with Gittip, either. They’re really taking it on board as a company value—all the more remarkable because they’re in payments, which is pretty much the last place I expect to find openness. As Jareau says, “imagine if our nation’s biggest banks” were run openly. What does this look like? Balanced isn’t just reacting to market feedback on Twitter and StackOverflow. They’re not just open-sourcing parts of their infrastructure. Balanced is designing their product in public. They’re holding internal design discussions in public on GitHub. Even if no one external comments on this or that ticket, the whole thing is there for clients, potential clients—even competitors!—to see. That’s transparency. They even discuss pricing in public. Wow!

Openness is guaranteed to feel destabilizing and threatening at times, and unless it’s a core value, it can be hard to stick with it. Balanced “gets” openness.

Why I Love Balanced

Why do I like Balanced? I like Balanced because they offer a solid merchant approval API that, as far as I’m aware, isn’t available anywhere else. Why do I love Balanced? I love Balanced because they believe in transparency and openness, and they stop at nothing to help me succeed.

Want to build a marketplace? We’d love to have you in the Balanced community.