I am in the early stages of developing a site that tries to provide a direct way of rewarding photographers who provide good material. Its a small idea but I want to implement it and see how the users like it.
The approach I want to take is thus:
- A person signs up to my site
- They deposit money to their account (typically 10 $)
- Upon seeing something they like on the site they can reward the original creator with a donation (eg 20 cents)
- The original creator can then cash out, should they receive enough tips (eg they earn 10$ from 100 tips of 10 cent).
I would be using a eMoney payment provider like Paypal to handle all the deposit/Withdraw transactions but I would handle the donations.
My question is what are the legal implications for a system like this?
It has been suggested to me that I would have to be a financial institution to do this which is beyond my means and seems like overkill for such a small site. I guess the concern here is money laundering/illegal abuse but I think these concerns can be mitigated with good design.
Also, I am aware that Paypal can chargeback on any transaction. This would be really bad for me as I would have to ask for money back that has been donated or take the hit myself. I was going to implement a solution that required that any monies deposited must remain in the system for at least 45 days (the length of time for paypal requires) before it can be withdrawn. This adds inconvenience to my user base but would cover me from a malicious abuse of my system.
Can anyone offer me some wisdom here? Thanks guys.