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Thread: Why hold cash rather than a standard checkout flow?

  1. #1
    Join Date
    Aug 2017

    Why hold cash rather than a standard checkout flow?

    I'm having a learning platform website designed right now and it was mentioned to me that holding a client's money is less common than a simple checkout flow. From my experience this is true. I mean it's often possible to have a credit at places, but it's rare that they require you to deposit the money in advance and don't distribute funds until the specified service is performed and both parties buy off on it. An example of this is upwork.

    Because my main competitor does this, I'm trying to think of the reasons why. Students are required to buy credits (1$ = 1 credit), and use credits to schedule classes. After the class, the student has to confirm the class took place as scheduled, and then the credits get transferred to the teacher. The teacher can cash in the credits.

    Here are the reasons I can think of for this , but this is just speculation:
    1) There are often conflicts that need to be resolved by both parties, so transferring cash to the teacher and then having to request it back could be costlier than running a cash-holding system
    2) Students can't refund their credits, so there will inevitably be some income gained by people not using them

    Do you know of other reasons why this is done?

  2. #2
    Join Date
    Mar 2007
    Quote Originally Posted by leosmith View Post
    Do you know of other reasons why this is done?
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  3. #3
    Join Date
    Aug 2017
    Quote Originally Posted by \\.\ View Post
    Could you please elaborate?

  4. #4
    Join Date
    Mar 2007
    I did.

    Further in depth analyses is really down to money.

    If you have a system where credits are not refundable and that these credits can only be spent, if someone pays you $100 and only spends $50, that person has either got to try spend that and buy more credits if they are short of credits to spend them or lose the.

    In reality, this is going to be the odd few $'s that are not spent which relates to more income for the company.

    So, do the math, how many customers paying a deposit to turn in to credits has your competitor got? Assume that each one pays $100 but spends $99 and doesn't return at a later date to spend that $1...

    Then you look at costs involved, it is costly to have someone employed to deal with refunds, a company I worked for had a very lengthy refund system, first they had to ensure that the money from the vendor had been received and that the clients payment to them had in fact been completed. Then it was a waiting game because the goods had to be faulty, so either the goods were tested on site, if they could be repaired then they were repaired, assuming that everything didn't work out, the engineer would sign off on the refund and the money would be sent via the banking system directly in to the clients bank account.

    It sounds costly to do the refund but in reality it is saving the company money because they are holding on to your money for as long as they can.

    I recently paid for a car via a bank payment, however the bank ****ed it all up... ended up paying a regional utility company the money, it took 6 weeks to get the money back as it was paid in error by the bank and I had to prove that the money was paid in error...

    SO they are all at it, big, small, public sector...

    so my answer may have seemed short, but thats the reality of it, it all boils down to... Money.
    --> JavaScript Frameworks like JQuery, Angular, Node <--
    ... and please remember to wrap code with forum BBCode tags:-

    [CODE]...[/CODE] [HTML]...[/HTML] [PHP]...[/PHP]

    If you can't think outside the box, you will be trapped forever with no escape...

  5. #5
    Join Date
    Aug 2017
    Thanks for your response. So most companies use a standard checkout flow because
    1) customers don't like to take the leap of faith required to deposit funds in advance
    2) there is a lower percentage of disputes
    Agreed, or can you think of other reasons?

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