Intermediaries – The Silent Tax Collectors

Small businesses have to accept multiple payment methods. This allows them to serve the needs of their customers more efficiently. Otherwise, the customers would end up having serious restrictions in terms of what they can actually buy.

One issue with this is the fact that while most business owners remember the day they signed up for a credit card payment system, it usually takes time for them to realise that they end up losing 3% on every transaction. That day is what we like to call “bittersweet”. Let’s dive into it.

Understanding Intermediaries 

An intermediary is an entity that essentially fills the role of the middleman between two parties in a transaction. Think along the lines of a door to door insurance salesman, a payment service provider, or even a cryptocurrency exchange. 

Intermediaries should offer several benefits, such as product knowledge, a broad network of industry contacts, understanding of local specifics, as well as liquidity and safety. They sometimes offer the benefit of pooling risk, which can reduce costs, and provide economies of scale.

Some intermediaries offer great value to the customer journey. A local real estate agent inherently understands the local property market, and can give unparalleled advice about property values in a particular area. A credit card processor allows online businesses to avail of mainstream credit and debit cards when it is time to pay. However other intermediaries place themselves right in the middle of the critical path for every customer interaction, while adding almost nothing to the experience. With negative interest rates from many European banks at the moment, customers end up actually paying to have banks store their funds, while the banks are free to invest those funds as they wish. This type of intrusion with no added benefit can almost be considered an unofficial yet unavoidable tax.

The Problem

Very tight margin businesses often end up offering incentives for customers to pay through whatever is the cheapest for them to process. This is not necessarily best for the consumer.

Furthermore, banks charge for lodging cheques or for receiving funds into your account. Direct debits are great for a recurring payment, however, a payment service provider with links to the banking network will, at all times, take a cut. This is the business model intermediaries have, and they have to get a cut to remain profitable.

Intermediaries essentially put buyers as well as sellers together without taking ownership of a product, service or property, and fill the role of the go-betweens. They are not wholesalers or distributors that buy products and resell them. They are paid on a percentage of the total transaction once it occurs, and this is the case for each and every transaction. This means that they are in a way, the silent tax collectors. 

The Solution

By enabling a virtual partnership between the product provider, and the financial institution in question, Verso can allow both parties to focus on providing the perfect product to their customer without needing to consider the processing and transaction costs, cuts, and losses.

Verso Finance achieves this by building a decentralised market place for the financial services industry that is community-governed by the participants using proprietary smart contracts. By enabling direct interaction between the product provider, and the financial institution that holds the customers account, payment can eventually be made in whatever form is most beneficial to all of the parties involved. Traditional salesmen can be replaced with personalised placement of products in the consumers regular local wallet app. Payment intermediaries can be bypassed thanks to the trusted relationship between the parties involved. Collections and payouts can be automated through product specific smart contracts. A decentralised marketplace benefits everyone who adds value, while cutting out the virtual taxes imposed by invisible silent intermediaries.

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