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.

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Source: BigCommerce Blog

E-commerce solution provider Digital River has created an infographic that highlights their latest survey of global e-commerce professionals. The survey asked 250 companies about their plans for expanding into new online channels and their expectations for revenue growth. The survey shows the that m-commerce is a huge focus for e-commerce companies; over the next two years 46% of the respondents plan to extend their mobile commerce channel.

In the next two years, respondents expect to generate nearly 20 % of revenue from the mobile channel and 17% from app stores.

Source: Digital River Infographic

Cashlog Launches Android In-App Payment Solution

Mobile payment company Cashlog has released a Software Development Kit (SDK) for Android, which enables developers and digital merchants to integrate 1 click in-app purchases.

The SDK features an automatic number recognition and works for any SIM-based device not only in the 3G network but also via Wi-Fi. Cashlog is available Italy, Spain, Germany and France and processed more than 1.7million transactions in May 2012. Read more…

Ogone Adds Mobile Payment Solution to its Portfolio

Payment service provider Ogone has launched an in-app payment library for Android and iOS devices. The new service completes Ogone’s existing online payment services. When integrated into the app, Ogone’s payment library enables purchases within the app without redirecting the user to the phone’s mobile browser.

Klarna Enters Austrian Market

Sweden-based payment service provider Klarna is expanding into Austria. Klarna will be commercially available in Austria in fall this year. Klarna offers a e-commerce payment service, with Klarna, online merchants can offer their customers the option to pay after the delivery of the goods. Currently Klarna handles transactions worth €2.3 billion through 15,000 connected e-stores annually. Austria will be the seventh country in Europe where Klarna’s is available.

Skrill (formally known as Moneybookers), one of Europe’s largest online payment service and digital providers, today announced to take over prepaid voucher provider paysafecard. The total consideration for the acquisition is up to €140 million – this makes it Skrill’s biggest acquisition to date.

Paysafecard was founded in 2000 in Austria and Germany and has established as one of leading provider for prepaid payment solutions in Europe. Paysafecard provides a prepaid electronic payment method for online purchases. The service is available in 31 countries worldwide and available at more than 450,000 outlets across Europe and America.

The combined group will have more than 27 million end-users and almost 130,000 merchant clients. Siegfried Heimgaertner, Skrill CEO, commented: “This acquisition will add significant scale to the Skrill Group in terms of payment volume, customers and merchants and will increase our overall market share. The combined entity will offer a unique proposition in the payments market combining our leading digital wallet with the sophisticated POS and cash network of paysafecard.”

Subscription business models for web-based service are gaining popularity. But building an own recurring payment service is complex and costly. Fortunately there are some innovative companies that provide full service recurring billing solutions. One of our favorite solutions is Recurly. Other popular services are: Aria, Chargify, CheddarGetter, Sassy, Spreedly and Zuora.

Recurly’s features

Recurly provides a complete SaaS (Software as a Service) solution for the management of recurring payments so that the merchant can focus on their business. The core features include automated recurring billing, handling of expired or declined credit cards, customer upgrades and downgrades, and all customer communication. On top of the basic functionality, Recurly provides some advanced features such as: multiple subscriptions, trial periods, coupons, discounts and one-time payments. Recurly can connect to Salesforce, MailChimp, and QuickBooks and integrate into the customer’s workflow. Recurly stores and transmits credit card data PCI-DSS compliant, so merchants only have to complete a simplified process to ensure PCI compliance. Last but not least Recurly’s backend interface is really nice designed and lets users easily set up new subscription plans, update customer information and monitor transactions.

Pricing and availability

Recurly charges a monthly fee of $68 plus 1.25% +$0.1 for each successful transaction. The merchant also has to pay for a dedicated merchant account and the payment gateway or payment service provider. Depending on the type of business and country this roughly adds another $50 per month plus 2%-4% per transaction. Recurly supports most of the popular gateways in the U.S. (e.g. Authorize.net Braintree, Beanstream, Chase Paymentech, Cybersource, Litle&Co., PayPal PayFlow and WebSite Payments) and throughout Europe (e.g. Ogone, PayPal, SagePay, and Wirecard). Unfortunately Recurly charges $200 per month for the multi-currency add-on that enables merchants to accept multiple currencies within one account. It’s worth mentioning that Recurly natively supports V.A.T. for European companies.

Wrap-up

Recurly provides a convenient and easy to set up service to accept subscription based payments. What makes Recurly stand out from its competitors is it comfortable interface and support for international payment gateways and currencies.

Over the years, credit cards have become the most popular payment methods for online purchases worldwide. Although new payment solutions like PayPal or Dwolla and alternative payment methods such as Bitcoin are gaining traction, credit cards have established as default e-commerce payment method. This is particularly the case for international transactions – there is almost no way around credit cards for online merchants that want to sell international. In this article we take a closer look at the credit card payment ecosystem. The next article will focus on how to choose a merchant account and payment service provider.

How credit card processing works

Credit card processing involves several parties, the customer, the bank that issues the credit card to the customer (issuing bank), the merchant, the merchant bank (acquirer bank) and last but not least the credit card network (e.g. Visa, MasterCard or American Express). In most cases online merchants also use a 3^rd party payment service provider (PSP) that bundles a variety of payment methods and acts as a gateway that can connect to multiple acquiring banks and credit card associations. Furthermore a PSP can offer additional services such as risk management, reporting, fraud protection and multi-currency support.

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[Editor's note: This is a guest post by Magnus Fredin, Vice President Sales Europe of Klarna. In this article Magnus takes a closer look on how online shops can increase their conversion rate by offering the right payment methods.]

Advertising campaigns, tweaking of product prices or displays, or even complete website re-launches are all measures commonly taken by online merchants to increase sales. When thoughtfully applied, these actions are likely to prove effective. However, there are faster and cheaper ways to increase your sales. The number one e-commerce metric is a site’s conversion rate. Increasing the rate of visitors that leave your shop as actual customers will decrease the cost of acquiring customers and boost your sales.

Offering the right payment methods is crucial. If you were to ask online shoppers throughout Europe, they would to a great extent say that invoice after delivery is how they would like to pay for ordered goods. In Germany, Europe’s largest e-commerce market generating 21 billion Euros in 2011, as many as six out of ten consumers would choose this payment method, before all others. However, merchants hesitate to offer invoice because of the potential credit and fraud losses it entails. Meanwhile companies such as Klarna cover these risks. They enable even smaller merchants that do not have the resources for internal invoicing, to offer their customers their preferred method of payment.

Another basic requirement for a satisfying conversion rate is having an intuitive and simple checkout. According to a study conducted by TNS Germany on behalf of Klarna, apart from feeling uncomfortable disclosing sensitive information (68%), the second most frequent reason for dropping out of a shop is a complicated checkout (60%). So, a rule of thumb regarding the checkout: “as simple as possible, asking only for the most necessary information”. Looking back at the invoice, this underlines its power as a conversion tool. Instead of bank account and credit card numbers, the customer only discloses name, address and birthdate – informations customers know right off the top of their heads. Safe, fast and simple.

Avoiding hurdles
Trust is key. Requiring a registration in your online shop is an impediment for the shopper. Registration takes time, and let’s be honest: your potential customer doesn’t only shop at your website. Being the shop that doesn’t require registration and remembering passwords might just give you that head start you need to become the customer’s preferred choice.
Customer data use and protection is a sensitive topic. Being absolutely clear about this will gain your customers’ trust and save you unnecessary trouble. A dedicated page with information about data protection compliance and policy will help you climb a notch on the cautious customer’s list and might save you some customer service errands.
Simplicity and safety aren’t mutually exclusive. Filling in your forms should be as easy as possible for the consumer. Mark the fields where information needs to be entered clearly, e.g. “Street name and number” instead of just “address”. Also, in case customers miss a field, show them exactly where, what needs to be filled in. The easier and more understandable the checkout process, the greater the probability that the visitor becomes a customer; especially during those last steps until the finish line.

Eight tips for an optimal payment process

• Ask only for the most necessary customer information, as easy in the process as possible
• Logical flow: Let customers choose payment method, and then fill in personal information
• Let go of mandatory customer registration
• Explain how you treat consumer data in an understandable way
• Have visible contact information
• Mark information fields clearly
• Show the customer where what information is missing or if the disclosed data is incorrect

About Klarna: Klarna provides a payment service for e-commerce. With Klarna, online merchants can offer their customers the option to pay after the delivery of the goods. Klarna assumes all credit and fraud risk so that sellers will always receive their money.

Web application performance monitoring company New Relic has published an interesting infographic on payment gateway performance. New Relic pulled the data from all their customers that called an external payment gateway during the 20^th of April 2012. The data derived from more than 100,000 total gateway calls. In New Relic’s sample PayPal was the most popular provider, accounting for nearly 60% of all transactions followed by Authorize.Net, USA ePay and Stripe. Google Checkout came in 5^th but turned out to being the fastest gateway. Enjoy!

Dwolla is an online payment platform that allows users to send and receive funds directly from other users. The startup was founded in 2008 in Des Moines, the capital of the U.S. state of Iowa, by Ben Milne and Shane Neuerberg with the idea to move funds cheap and directly between users. In June 2011 Dwolla passed the $1 million in transactions per week milestone and is now processing more than $1 million per day. The company raised a $5 million Series B round of financing led by Union Square Ventures in February this year and most recently won Ashton Kutcher as investor.

The name Dwolla is a conjunction of “Dollar” and “web”; a good description of what Dwolla is: an online, cash-based payment method.

How does it work?

Dwolla is not a bank or credit card processor. The company provides a digital wallet and payment network much like PayPal. Transactions are made directly and instantaneous between Dwolla accounts, without using the credit card or ACH (=Automated Clearing House, the electronic network for financial transactions in the U.S.) infrastructure. Dwolla is partnering with U.S. bank Veridian Credit Union to securely deposit the funds of their users.

To use the service, customers have to sign up for a free Dwolla account that can be linked with a U.S. bank account for money deposits and withdrawals (takes 2-4 business days). Once the funds are transferred to their Dwolla account, users can send money to other Dwolla users or their social media contacts (non-Dwolla users have to sign up to claim the money).

Fees

Unlike credit cards and PayPal, which usually charge 3%-5% for each transaction, Dwolla charges a flat fee of just $0.25. Micro-transactions less than $10 are free. By default the recipient is responsible for paying the fee, but there is also the option that the sender takes over the fee (e.g. for charity donations). There are no additional fees, even for merchant accounts.

Merchant Features

Business can sign up for a merchant account to accept payments through the Dwolla network based on their Dwolla ID or email address. Dwolla provides innovative solutions for retail merchants as well as for online shops. Users can locate nearby retail stores that accept Dwolla via Dwolla Spots or Proxi. To verify the incoming transactions Dwolla provides a web-based Dwolla Kiosk App. Check out the embedded video to see how Dwolla Spots work:

For online merchants Dwolla offers plugins for all main e-commerce shopping platforms and an API to their payment gateway.

The downside is that Dwolla is only available within the U.S. The company is focusing on national expansion and has currently no plans to expand internationally.