Everyone is learning that factoring is a very lucrative business. It's beautiful because 1.5% is an egregious rake that doesn't sound like much...until you do the math.
If you normally wait 30 days for your money, but you opt for next day pay for a 1.5% charge on your $100 dollars in receivables, what's the real cost? The provider earns $1.50 for 29 days worth of floating money on your behalf (you'd get in in 30, but you opt for it tomorrow for $1.50).
Now, let's say the company flips the same $98.50 12 times per year. That's earnings of $18 on $98.50, or 18.25% on the company's money...not bad. But wait. What if the company has a strong cash position and can finance the $98.50 at prime, at 90% of receivables (cause that or better is what strong companies can get). Well, then the company needs to borrow $88.65 for the year, at 3.5% per year (prime rate). The company pays $2.66 per year in interest, out of the $18, to earn $15.34 on their initial 10% of the $98.50. So, 1.5% quick pay actually yields the company 15.34 / 9.85 or 156% on their money.
I'm not sure I follow your example, but this isn't really comparable to factoring and Stripe doesn't get to pay out the same funds multiple times. We're shortening the time it takes a user to receive funds from a few days to a few minutes.
This has an even better "turn" on money. Basically, it's not getting money today that would take 30 days, it's really getting money today that might take another 5 days. That means there can be 73 turns per year vs. the 12 turns.
The merchant is still liable for chargebacks/fraud. So between future revenue, plus legal action if needed, Stripe can recover the money one way or another.
If you normally wait 30 days for your money, but you opt for next day pay for a 1.5% charge on your $100 dollars in receivables, what's the real cost? The provider earns $1.50 for 29 days worth of floating money on your behalf (you'd get in in 30, but you opt for it tomorrow for $1.50).
Now, let's say the company flips the same $98.50 12 times per year. That's earnings of $18 on $98.50, or 18.25% on the company's money...not bad. But wait. What if the company has a strong cash position and can finance the $98.50 at prime, at 90% of receivables (cause that or better is what strong companies can get). Well, then the company needs to borrow $88.65 for the year, at 3.5% per year (prime rate). The company pays $2.66 per year in interest, out of the $18, to earn $15.34 on their initial 10% of the $98.50. So, 1.5% quick pay actually yields the company 15.34 / 9.85 or 156% on their money.
156% isn't a bad ROI.