While looking at a recent bank statement, a foreign currency exchange fee of $.08 screamed for attention. I haven’t left the country for more than a year, so it was probably not related to any of my recent purchases.

Being somewhat of a pessimist, the first move was to call the bank to track down the corresponding charge. When the “investigator” returned my call, she suggested the transfer fee was related to a Skype credit purchase I had made a few days earlier. The immediate sense of relief was followed by increasing curiosity. Why was Skype handling it’s credit card transactions outside of the United States?

A little investigation turned up this page. So apparently Skype was founded in Luxembourg, by Niklas Zennstrom and Janus Friis, and purchased by eBay, who apparently later sold a large portion of their stake. I wonder if the same currency transaction charges were occurring when people purchased Skype credit under eBay ownership? Considering the paypal integration potential, domestic US credit card processing was available, and presumably for a reduced rate, so it wouldn’t make much sense. Did that option get pulled when eBay sold it’s stake?

Maybe the credit purchases are a small portion of Skype’s usage? After reading this article, one might assume around 10% of Skype users pay for credit (see here), which is obviously a substantial amount and must represent a large portion of their revenue.

So it must be a cost issue. Someone at Skype must be aware of setting up an LLC in the US with a registered agent to get a merchant account and access to credit card processing. I would think any bank would dive at the opportunity to service that many transactions. By not doing so, Skype must encounter hundreds of customers confused and alarmed by the “foreign exchange fees”. There must be a considerable discount in transaction fee percentage to offset that risk. According to this article, large discounts are probably not as accessible in Europe. European banks are in a less competitive environment than their US counterparts. And I’m sure Skype could negotiate something in the US for that much volume.

So, the only conclusion I can fathom, is that this is a mistake on Skype’s part. What am I missing?

We have been researching payment accounts, trying to determine the best option for a non-profit that needs to bill a small number of relatively small value (<$25) transactions. Unfortunately there are multiple receiving bank accounts to be configured and the monthly costs and setup fees almost outweigh the value of the transactions.

It appears there are two types of approaches in the payment account world: direct credit card billing, in which the user submits credit card information, and third-party authorization. In the "third-party" scenario, the billing account details are managed by the service, reducing the potential for fraud. When the user is prepared to complete a transaction, they are redirected to the third-party website. This does present a problem for organizations that would prefer to hide the details of the billing transaction. It also requires a payer to sign up for an account with the service. Amazon FPS and Google Checkout seem to fall in this category.

There is one other component to direct credit card billing, the merchant account. This is a bank account that allows credit card deposits. Read this for a detailed example.

Unfortunately, there doesn’t seem to be a good side-by-side comparison of the various offerings, so here’s a list of what we’ve found so far:

If something is incorrect or we are missing anything important, please post an update.

If you’ve had problems compiling the PayPal NVP DSK for older versions of java (i.e. I’m working on OS X and the downloadable binaries are compiled for java 1.6), you might need a copy of the files ErrorParameterType.java, SeverityCodeType.java, and ErrorType.java. Unfortunately, they are no where to be found on the paypal site. I’ve decompiled some copies, but haven’t tested them with the SOAP interface. Use at your own risk.