Take the 2-minute tour ×
Webmasters Stack Exchange is a question and answer site for pro webmasters. It's 100% free, no registration required.

We are building a platform for a client, developed in Yii, where users can top up their account on the platform with money from PayPal. Users can upload files and buy access to each other's files. Users can also gift other users with money.

I was thinking that when users top up their account, the money goes from their PayPal to the merchant account of the website. So all users' money goes to one merchant account. Then, any transactions on the platform are simply recorded on the platform and each user's balance is the maximum amount they can withdraw from the merchant account.

Is this the right approach? Legally, are there any problems?

share|improve this question

1 Answer 1

Is this the right approach?

I assume gifting someone one else money is only good to be used on the site. Then yes that is one way to go about it. Except maybe not using paypal.

Using paypal to send money into my account on your site is fine but as for using it for your site's merchant account/business I wouldn't do that. PayPal is a monster which has gobbled up other's money in the past or held it for long periods of time. They hold a rolling reserve in case of chargebacks as well. I wouldn't use them unless I was selling tangible physical goods. Look into alternative payment/merchant solutions. Speak with a real bank also helps as a lot of them provide internet services too.

Legally, are there any problems?

There may be depending on your site, physical location, business model and/or merchant account. Read all the policies, terms of service and disclaimer docs on paypal (or similar merchant account), read them all. Search the net for similar businesses who take money and hold it (flattr and kickstarter comes to mind) and see if you can figure out how they do it. Try finding some free info or stories about what they went through and why they made their choices and it should steer you in the right direction. THEN when your feeling like you got enough free information call and speak with a lawyer and get legal advice specific to your location and business.

share|improve this answer
    
Yes I find paypal difficult and expensive, but the client specifically requested this (users feel comfortable with paypal etc). Thanks for you help –  user1716672 Oct 8 '12 at 16:13

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.