I'm considering building a system that allows our users to purchase points, trade them between themselves, then cash them in for real currency.
The system will work like this:
For now, I'm thinking of using PayPal to facilitate the process, but I'm unsure as to the accounting and legal issues I need to take care of. Does anyone have any specific advice or pointers to the areas I need to cover?
We're based in the UK.
I toyed with an idea for an IOU management system a while back, that allowed you to pay friends with a credit card later. Here are a few of the ways we brainstormed getting money back to users:
On the points -> money side, credit card companies offer something called a stored value card. It's sort of like a debit card backed by a small account. At a previous company, we used these to pay customers an incentive bonus.
Worked great; we used a fulfillment company, who took care of everything. Just upload an order file to them periodically and they would send the cards, handle returns, etc.
On average, people don't use the full value of the card. So they end up costing you somewhat less than face value. For people who do use the card, it's very convenient -- accepted anyplace that accepts Visa/Mastercard.