PaymentObserverPayment Observer

The Latest News, Industry Insights and Research Findings on Global Payment Markets


Interview with Miriam Wohlfarth of RatePAY

By Martin Schuppelius
Miriam Wohlfarth, co-founder & managing director of RatePAY

RatePAY is the payment service provider for a successful e-commerce business. With RatePAY online merchants can offer instalment payments, open invoice and direct debit to their customers without bearing the full risk of default payments. The company was founded in 2009 by a group of internet and payment experts and is headquartered in Berlin. We sat down with Miriam Wohlfarth, co-founder and managing director of RatePAY.

Payment Observer: You are one of the founders of RatePAY. How did you come up with the idea for RatePAY?

Miriam Wohlfarth: Before founding RatePAY, I headed up the German branch of Ogone, an international payment service provider. I quickly realized that open invoicing was hardly offered for online merchants in Germany, even though studies have shown time and time again that German internet shoppers still prefer to pay by invoice. Payment by installments also remains largely unknown in the world of internet shopping.

Merchants shy away from letting their customers pay by invoices, because the risk is too high. If the consumer is not liquid, the merchant can get stuck with the receivables. The risk of invoices going unpaid is high for both small and large shops.

One of RatePAY’s most important jobs is to raise awareness about invoices and installments among online shops and explain to them that these payment methods lead to considerable increases in sales.

Payment Observer: RatePAY is part of the EOS Group, a company in the Otto Group, the world’s largest mail order company. What are the advantages of being part of such a big international company?

Miriam Wohlfarth: RatePAY is partnered with the specialists at Otto. Otto has years of experience in the mail order business we can benefit from. That helps us optimize our processes to meet the needs of e-commerce companies and mail order merchants and to further improve our risk management and fraud control.

Payment Observer: Can you give us some details about the services that RatePAY provides?

Miriam Wohlfarth: RatePAY offers online retailers e-commerce solutions for offer instalment payments, open invoice and direct debit. There is no site change for the consumer during the payment process. He or she remains on the shop’s own webpage.

For merchants, RatePAY takes on the full risk of defaults. We credit the store owner for the full amount of the payment directly, minus the RatePAY markdown. What’s more, we handle all the processes related to payment, i.e., the whole process and the invoicing. Upon request, we also monitor incoming payments and issue overdue payment reminders.

The advantage for merchants is that fewer visitors to their website cancel their purchases, because they are able to use their desired payment option. It has been shown that this increases the average cart size of existing customers, who end up buying more. The dealer also gains new customers who would not have bought before.

This increases both revenues and customer loyalty. At the same time, store owners have fewer expenses and do not have to assume the risk of a default. They always receive their money, even if the customer doesn’t pay the bill.

Payment Observer: You enable online merchants to offer their customers the option to pay by invoice without taking the default risk. How does that work?

Miriam Wohlfarth: As the customer is placing his or her order online, a multi-level point system is already calculating the risk of default. This process is called real-time scoring. The merchant can help determine which parameters should be looked at and how narrow the grid ultimately is. For risk management, RatePAY works closely with major vendors like Schufa, Bürgel, Infoscore and Creditreform.

Payment Observer: Travel Overland, a large online travel agency in Germany, recently integrated RatePAY. How can a travel agency benefit from offering deferred payments to its customers?

Miriam Wohlfarth: A large number of trips are now booked online. Travel Overland set up its own online booking platform all the way back in 1996 and is one of the pioneers in the field. When customers also have the option to pay for travel by invoice or instalments online, suppliers can bring in new clients. That also applies here, of course. Fewer cancelled purchases mean higher sales for the merchant.

Payment Observer: What are RatePAY’s plans for the future?

Miriam Wohlfarth: We are constantly developing our products and features. Also, we are already working hard to develop new, innovative variations. Our goal is optimize our products to meet the requirements of merchants and users. Because we have very high quality standards, over the long term, we would of course like to become Germany’s market leader in the type of e-payment solutions that we provide and that are most widely used in the online retail business.


Interview with Iain McConnon of BoxPAY on the Evolution of Mobile Phone Billing

By Martin Schuppelius

Over the last years, carrier billing became a mainstream payment method for all kinds of digital goods and services. We talked to Iain McConnon of mobile payment company boxPAY about the evolution of mobile phone billing. Iain co-founded boxPAY together with his brother Gavin McConnon in early 2011. BoxPAY provides a mobile payment platform that allows online merchants and app developers to bill their customers through their mobile operators in over 60 countries.

Payment Observer: First of all, can you give us some Background Information on boxPAY?

Iain McConnon: I founded boxPAY together with my brother Gavin, after the experiences gained from Global Billing Solutions, a direct-to-consumer mobile content company. We had developed billing relationships with mobile operators in many countries, so creating a carrier billing company was a natural next step.  An important part of our business model is continued global reach, constantly integrating new countries and carriers, now available in 62 countries, and adding more every day. Recently opened an office in SF earlier this year.

Payment Observer: What are the advantages of carrier billing compared with other payment methods?

Iain McConnon: Carrier billing allows merchants to charge their customers for digital content via their phone bill. The main advantages of carrier billing are:

  • Global Reach:  5 billion mobile phones vs. 3 billion credit cards
  • Convenience: it only takes seconds, especially useful for small transactions where the consumer is looking to make a quick purchase and doesn’t want to fill out lengthy forms
  • Security: people are reluctant to provide their payment details like their credit card number online

Payment Observer: How did phone billing evolve over the last years?

Iain McConnon: Phone billing was mainly Premium SMS (PSMS) for ringtones and wallpapers over the last 10 years. Over the last 18 months, carrier billing became a mainstream payment method not only for mobile content, but also for other verticals such as newspapers, dating and gaming.

More and more direct carrier billing relationships (where the content is billed directly to the phone bill without PSMS or premium numbers) are being established. This is a new level of payment integration that provides merchants with more price point flexibility and higher payouts. The end customer won’t see a big difference in their user experience, but for merchants it’s a big deal.

Payment Observer: There is a lot of competition in the carrier billing space. What makes boxPAY stand out from its competitors?

Iain McConnon: BoxPAY’s advantages:

  • Experience from Global Billing, tested reliable platform with extensive real-time reporting
  • Self-service for smaller merchants, much like the Google AdWords sevice
  • Subscription billing and recurring payments are often requested by merchants
  • In-app purchases on Android
  • Service available also in emerging market where it’s a very appealing way to monetize users that don’t have credit cards. Recently went to India and Asia

Check out more about boxPAY’s Features here.

Payment Observer: What will be the next for phone billing?

Iain McConnon: Carriers will increasingly become aware of the revenue potential of carrier billing, and more direct carrier billing integrations will become available. boxPAY just released our billing option for Smart TV, so look for carrier billing options on new devices too!


MasterCard Partners With Everything Everywhere for Mobile Payments in the UK

By Martin Schuppelius

MasterCard announced a partnership with Everything Everywhere, the UK’s largest mobile network operator, to develop leading mobile and digital payment solutions for Everything Everywhere’s customers. Everything Everywhere is a joint venture between Deutsche Telekom and France Télécom. The company operates the under the Orange and T-Mobile brands and has currently around 27 million customers in the UK.

Over the course of the partnership, MasterCard and Everything Everywhere want to introduce new payment solutions and accelerate the adoption of mobile payments. One of the first products to launch will be a NFC-based mobile payment services that allows Everything Everywhere’s customers to make contactless payments at more than 100,000 retailers in the UK.

MasterCard and Everything Everywhere have already worked together to provide the Orange QuickTap service, a NFC-payment service in the UK. MasterCard is continuing to focus on mobile payments, just recently the credit card giant signed a deal with Deutsche Telekom for mobile payments in Germany.


PayPal Teams Up With Discover to Push PayPal to US Retail Stores

By Gary Merrett

PayPal is extending its retail presence: The online payment giant partners with credit card brand Discover, one of the larges card issues in the US, to bring PayPal to more than 7 million retail locations in the United States. Under the agreement, Discover enables participating merchants to accept PayPal via their existing relationship with Discover. To offer PayPal, merchants won’t have to upgrade existing point of sale hardware or software. Starting in 2013, the relationship will extend PayPal’s reach to millions of merchants across the US.

“This initiative will result in real change and innovation for the industry by bringing new technologies to the point of sale that benefit merchants and PayPal customers,” commented Diane Offereins, President of Discover Payment Services.


Payment News – August 21, 2012: iZettle, PayPal, Barclays Pingit

By Martin Schuppelius

iZettle Launches Mobile Payment App for Android

After one month of beta testing, iZettle is now rolling out the commercial version of its mobile payment app for Android devices in Sweden. iZettle currently supports the Samsung Galaxy S II, S III and Note models, and is working to support more Android devices in the future. Read more…

McDonald’s Tests Mobile Payments via PayPal in France

McDonald’s is testing mobile payments via PayPal in 30 restaurants in France. During the trial, customers can order via their smartphone, pay with PayPal and pick up their food at a separate line. Read more…

Barclays to Launch Mobile Payment Service Pingit in Kenya

Barclays Pingit goes international – Barclays is extending its mobile payment service Pingit to Kenya. Pingit is a mobile person-to-person (p2p) payment service that allows users to receive and send money using their mobile phones. Read more…


Payment News – August 17, 2012: Square, MCX, Wirecard

By Martin Schuppelius

Square Introduces Simple Monthly Pricing Option

US mobile card payment pioneer Square debuts a new pricing option for small merchants. From now on Square offers small merchants (merchants that process less than $250,000 per year) a flat monthly rate, at $274/month, with no charge per swipe. Read more…

Square Simple Payment Options

US Retailer Alliance MCX Announce Mobile Wallet

Leading US retailers announced a partnership and form the Merchant Customer Exchange (MCX), a new company that will offer a mobile wallet and mobile payment solution that will be accepted at its members retail locations. The initiative includes merchants such as: 7-Eleven, Inc., Best Buy, and Wal-Mart, among many others. Combined, these initial members account for approximately $1 trillion in annual sales. Read more…

Wirecard Debuts Mobile Card Reader Solution

Germany-based payment service provider Wirecard launched a white-label card reader solution for smartphones. According to the company the reader supports both the EMV standard as well as magnetic stripe based cards. Read more… 


Guest Post: How to Choose Your Payment Service Provider

By Martin Schuppelius

[Editor's note: This is a guest post by Moritz Koenigsbuescher, SoundCloud Product Manager of Payments.]

When I started working at SoundCloud in February 2012, I found a company that was growing quickly with users from around the globe. And while the technology and product are world class, SoundCloud’s billing and payment platform needed an overhaul. To start, it seemed logical to identify where the biggest problems were located – one of them being that the Payment Service Provider (PSP) at the time only processed VISA, MasterCard and PayPal. These payment methods may be sufficient if the majority of users are from North America, but alternative payment methods must not be ignored. For example, in the Netherlands, iDEAL has a 50+% market penetration for web based payments.

In order to provide local payment options we had to select a new PSP. With numerous companies offering payment services, SoundCloud used the following criteria to best suit our needs:

  • Scalability and robustness of processing platform
  • Overall track-record
  • The number of payment methods offered worldwide
  • Expertise in payments and fraud management
  • The ease of adding additional payment methods to the existing ones
  • The technological integration of our checkout process
  • The cultural fit (i.e. technological approach, professionalism, creativity and mutual understanding of each other’s needs, ways of communicating, etc.)

In order to dive deeper into the criteria above, SoundCloud needed to figure out the knowledge base, technology, and diversity of potential PSP’s platforms.
So for starters, in order to find out about the potential company’s payments expertise and how quickly they integrate new payment options, we asked the PSPs whether they supported PayPal´s digital goods workflow in combination with PayPal’s reference payments. With answers to that question, SoundCloud could better assess the depth of what each PSP and if they were already supporting it or were planning to support it in the future. This in turn would show how fast the PSP would actually be able to implement changes or new technology.

For SEPA direct debits, SoundCloud needed to understand what was the PSP’s approach on mandate handling? Were they waiting for legislative changes or best practices or were they ready? Would they suggest a “wild” SEPA Direct Debit (like the German “ELV” on the web, without a written mandate)? Did they warn of the 5-day submission period prior to due date? Did they provide a warning for the 5-day period on automatically returning direct debits (due to insufficient funds or non-existing accounts)? These issues would make it hard to allow spontaneous purchases due to difficult fraud control. Would they discourage or encourage SEPA Direct Debits for SoundCloud?
In addition, we asked about foreign usage fee for customers from foreign countries ( i.e. a customer from the U.S. purchasing at a German merchant getting an extra charge from his bank for paying to a foreign merchant) because the answer to that question showed how well the future PSP understood the underlying mechanics of international (credit card) payments. That answer was used as an indicator on how well they would understand other aspects of international payments.

SoundCloud Payment Page

The new SoundCloud payment page (click to enlarge)

Other questions included the available reports, fraud management tools and also questions surrounding APIs and currently used technology. This was crucial because SoundCloud has a very tech-savvy and efficient engineering team who would refuse to work with a ten-year-old API design.

The time and detail level of answering the questionnaire also played a role. Not that we were overly focusing on the return time, but it showed us how keen the potential PSP were partnering with us. One question specifically tailored to our relationship with them was how high they would rate their attention towards SoundCloud on a scale from 1 to 10 (1 worst, 10 best). Most answered with a 10 (Thank you!), a few with 8 or 9 (Thanks for being realistic!) and one with an 11 (Thanks for being that enthusiastic!).

Once we received all the answers from questionnaire, we talked with all of them, and met with the most promising ones. In the end, the biggest factor influencing our decision was the payment methods offered internationally and the cultural fit with us in regards to sleek technology, their team, and an overall mutual understanding. The commercial terms were a factor too, but they did not overrule the other aspects.

Check out the embedded interview with Moritz to learn which PSP was selected by SoundCloud:

About SoundCloud: SoundCloud is the world’s leading social sound platform that lets anyone create, record, promote and share their sounds on the web. SoundCloud has a freemium model where users have up to 120 minutes of free sound with the option to upgrade to premium services. Currently, users pay via Visa, MasterCard and PayPal.


Payment News – August 14, 2012: Deutsche Telekom, Wirecard, WePay

By Gary Merrett

Deutsche Telekom and Wirecard Team up for Mobile Payments

Deutsche Telekom is working together with payment service provider Wirecard for the launch of the Telekom MasterCard. Furthermore the partnership also covers the planned launch of Deutsche Telekom’s Mobile Wallet in 2013. Deutsche Telekom is focusing on mobile payments, just recently it announced a strategic partnership with MasterCard to bring NFC-based mobile payment services its mobile subscribers in Europe. Read more…

PayPal Competitor WePay Introduces New API, Drops Prices

US-based online payment startup WePay has lowered its prices and is introducing a new API. WePay, often referred as a PayPal competitor, has recently secured $10 million funding. The new API features tokenization so that partners can use their own payment forms and completely control the payment experience (without iFrames or redirects). Furthermore WePay lowers its rates from 3,5% to 2,9% + 0.30 USD per transaction. Read more…


Payment News – August 13, 2012: TapPay, TapWallet, Xsolla, Openbucks, Mobile Payment Commitee

By Martin Schuppelius

TapBase Introduces TapPay and TapWallet Mobile

Mobile payment startup TapBase has released two mobile payment applications for the iPhone: TapPay and TapWallet. The TapPay app enables merchants to accept credit card payments with their smartphone. Just like Square, there is an optional magnetic-stripe reader that connects to the iPhone via the headphone jack. Instead of swiping their card customers can also pay using the TapWallet app that can store credit card information as well as membership and loyalty cards. Read more…

Xsolla Partners With Openbucks for new Online Games Payment Option

Online games payment service provider Xsolla has partnered with Openbucks to integrate their Gift Card Payment Network to provide a new payment option for online games. The partnership allows users in the United States and Canada to spend money from gift cards of trusted retail brands (such as Subway, Burger King, Circle K, CITGO, and CVS/Pharmacy) for online games in-game items, subscriptions and more.

ETA Launches Mobile Payment Committee

The Electronic Transactions Association (ETA), an international trade association of the payments industry, launched its new Mobile Payments Committee to develop and implement industry-wide mobile payment solutions. All four big US mobile network operators – AT&T, Sprint, T-Mobile, and Verizon – joined the ETA to participate in the Mobile Payment Committee. Other companies participating in the committee include American Express, Discover, MasterCard, Visa, Google, Capital One, PayPal, VeriFone, Intuit and First Data. Read more… 


Payment News – August 8, 2012: Facebook Subscriptions, Starbucks, Square

By Martin Schuppelius

Facebook Subscriptions Now Available

Facebook has rolled out subscriptions to all app developers on the social network. The subscriptions feature allows local currencies, different subscription plans and free trial periods. Customers can pay with their credit card or PayPal account. Facebook subscription payments look nice way for developers to monetize their apps on Facebook. Read more…

Starbucks, Square Partner for Mobile Payments

Coffee company Starbucks will partner with Mobile card payment startup Square. Starbucks will furthermore invest $25 million in Square and Starbucks CEO Howard Schultz will join the board. Starting later this fall, Starbucks customers will be able to use to pay with Square at Starbucks stores across the US. Read more…