“Before I threw my life into this project, I wanted to know why this payment system didn’t exist already,” he says. “And I wanted to know why the likes of Worldpay and PayPal couldn't do it.”
Regulatory barrier
Janes discovered that PayPal don't ever touch the funds, they just act as a transfer messaging system between the consumer and the vendor, but when you are handling larger sums between unknown parties the system needs to act as a trustee, and hold the funds, which means the regulatory requirements are significant.
PayPal and its competitors are regulated with an e-money transmitter licence. This means that Shieldpay would need a payment institution license, which took 17 months to acquire. On the upside, the regulatory moat around Shieldpay today is significant.
“PayPal has been regulated a certain way for 15 years, so for them to create an escrow service, they'd have to re-regulate the whole of the company in order to do that,” comments Janes. “And obviously, when you're a multi-billion-dollar company, the risk of getting re-regulated and changing everything about how you operate is a pretty onerous task.
“It was interesting to see that process and go through that regulatory rigour. We're in a good place now because even if they wanted to, would consumers be prepared to buy a house using PayPal?
“We're really fortunate that we kind of found a very large niche within a very large payment ecosystem.”
For Janes, even with the planning it was a step into the unknown: “When you start out and you go down a particular path, there's nothing to copy. There's no blueprint, there's not an entity in the United States, for example, that we could see how they did it and then mirror it. We had to build everything from scratch.