Glitches Afflicting Payments on Etsy Stretch on for Days

(Bloomberg) -- Etsy Inc. has had significant difficulty processing some transactions over the past five days due to a glitch in its third-party payments operator, leading to an outpouring of angst from merchants.

The bug in the processing system, maintained by Worldpay Group Plc, began last Friday, just before the long July Fourth holiday weekend in the U.S. when merchants were hoping to sell homemade patriotic goods for picnics and parties. Some sellers began posting on Etsy's Bugs forum about problems with orders taking several hours, or even days, to process. It was still unclear Wednesday when it would be fixed or how many customers were affected.

Bill Massie, an engineer on the Etsy Payments Team, posted updates to try to assuage merchants, many of whom depend on sales from the site as a major source of income. The thread continued over days with Massie unable to say when the system would be back to normal.

The problem could be due to delays with the process Worldpay uses to settle payments after authorization and fraud checks are conducted, Massie said, adding that Etsy was working to process the backlog of payments. Orders placed with PayPal encountered no problems, according to postings on the Bugs blog by some merchants.

“Etsy has promised it's been fixed, and it keeps on happening,” TheBouillonQueen wrote on the community board Reddit on July 2. “What's worse, is I'm the one getting yelled at, scolded, and losing money because of this mistake. They did not issue an email out to buyers to explain the situation, nor did they tell the sellers what was going on. I had to find out about this when I had 3 people tell me they couldn't get their orders."

Brooklyn, New York-based Etsy said in a statement Wednesday that it's “working with our partner to resolve this issue as quickly as possible.”

Worldpay, based in London, said it's “aware of an isolated issue on one of our gateways, resulting in a delay to settlement for a small number of customers. We are working to resolve this issue urgently and we have proactively communicated with all affected customers.”

The outage was earlier reported by TechCrunch.

It's not the first time Etsy has had issues with payments processing from Worldpay. Etsy users reported similar delays with payment disbursements in February, around St. Valentine's Day. The incidents prompted some merchants to question Etsy's payment processing efficiency.

“How about Etsy just gets a new "third party" processor, hmm?” posted Deb Turcio in Etsy's consumer support page. “Obviously somebody keeps dropping the ball. Twice in 5 months.”

Etsy already faces a skeptical investor community that's concerned about the company's long-term strategy, slowing growth and difficulties to attract new sellers, even after the company posted it's first quarterly profit since becoming a public company in May.

Etsy fell 3.5 percent to $9.13 at 3:33 p.m. in New York. The stock was up 15 percent this year through Tuesday.

“I have several orders pending from July 1st and 3 pending today,” wrote WELOVELILLY on Etsy's Bugs forum on July 6. “I am so surprised that it is taking 5 days or more to clear payments?”

To contact the reporter on this story: Nicole Piper in New York at npiper@bloomberg.net. To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Alistair Barr