Service to liquidate VGCs
 

I am wondering if a service exists to liquidate VGCs. I know about the gift card trading portals that buy at around 92% of face value - I am not talking about those. I am thinking about something more sophisticated and targeted for MSers.

If not, I think I could start one. I have experience with payment processing and I think there is a market for this type of service - at least in the short term. Basically, a service (which you trust based on community feedback) where you can mail your VGCs with pins and they are liquidated electronically into a bank account in your name, at 98% of the value or better.

There'd be an approval process with tiered pricing (favoring the high-volume MS pros) and limits that scale up over time (to reduce fraud). Maybe hold on to a deposit as collateral. I'd also need to make sure I speak with an attorney/compliance expert to make sure it complies fully with anti money-laundering rules (I am not interested in helping terrorists, just MSers).

What do you guys think? If I could get the liquidation rate above 98% would you use it?

bad idea... oh, and we've seen few such offers already (atleast 2 in the last one month or so)

I started the last thread on this. It's probably not going to work. Not the way you described. You will get shut down real fast by Visa and/or acquiring bank even if you are the merchant processor yourself and even if you are wholesale and taking on 100% credit risk/fraud risk/chargeback risk. I spoke to a payments processing lawyer about this.

unless there are charge back, i dont see a reason why will the business shut down?

The merchant processor will be shut down for processing VGCs (lots of them, with a majority of transactions being gift cards), which are considered likely to be fraudulent or money laundering. Doesn't matter if you take on 100% of financial risk, Visa/Acquiring Bank will not want the reputation risk of being associated with it.

Best way to do this is to start your own payment network (like MC/Visa) and get your own acquiring bank. If you want to spend the millions (billions?) to start this, go ahead. Might still get investigated by government for AML reasons lol.

The likely way I could see this going out of business would be due to fraud. I think that could be mitigated by not advertising it to the public and keeping it invite-only among known FT members with a good reputation.

As for V shutting it down, I don't see why they'd be against it. They're still getting all their fees, so they wouldn't be losing any money.

so you are saying that if a merchant takes higher proportion of gift cards vs regular credit cards, the merchant will be shut down?

So it's just business processing a high percentage of VGCs that they care about?

Merchant processor will still get shut down by Visa and/or acquiring bank because of reputation risk and not wanting to be complicit in money laundering operations. There are no hard and fast rules, but a few things will definitely get you shut down:

1) Telling the acquiring bank your plan is to liquidate GCs.
2) Not telling the bank this is your plan, and then the bank/Visa seeing that this is what you are doing.
3) Trying to start a wholesale merchant processor without having lots of experience as a processor/ISO and without substantial capital

Again, I have received legal advice on this from a payments lawyer who works specifically with processors. Go ahead and try it though. It might work for you.

Doesn't matter that Visa makes money from these transactions. Money laundering is not a business issue, it is a government issue. Everyone can be making money doing something but it can still get shut down.

I can stop here ^

Well if they're determined to shut these types of businesses down then I guess there's no point in even trying.

You can already liquidate vgc for free with bluebird.

First of all, I'm not an authority on this but have spoken to one. You can maybe do this as a side project for an existing merchant processing business that has 98% of its actual transactions come from legitimate businesses. Maybe.

Or maybe if you go a different route somehow, but not the traditional merchant processing route.

Another idea I had was to maybe start up your own "pharmacy"/"office supplies"/"grocery" coded store. Then, sell GCs at a slight discount and get tons of buyers.

Yea... Not sure why anyone would want to pay anything higher than 70 cents/thousand...

That is an interesting idea, but what troubles me would be the constant worrying about whether I'm going to get shutdown by Visa. Even if I can get by the initial screening, like you said if they discover the actual intent of the business, they'd still shut it down. I only want to start legitimate businesses and not have to worry whether I'm going to wake up one day to a notice that all the hard work I've been doing has just gone down the drain.

I had another idea which might be more legitimate but would be much more difficult to start, which would be a service to connect GC holders with buyers at the online point of sale, preferably as a browser plugin. So for example, I have $100 on a Target card I need to unload, and I'm willing to part with it for $97. I post the numbers to the portal, which waits for users to need them. Then, when someone in the network is checking out at target.com for $106.50, the browser plugin would alert them that they can instantly get a $100 target GC applied to the purchase for $97, and save $3 instantly. This could obviously be applied to all major gift cards.