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.

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!

Florian Swoboda, co-founder of Zerebro Internet

Berlin-based startup Bar zahlen recently announced to introduce the concept of online cash payments to Germany. Bar zahlen basically enables customers to pay for their online purchases at retail stores. We sat down with Florian Swoboda, co-founder of Zerebro Internet GmbH, the company behind Bar zahlen.

Payment Observer: Can you give us some background information on Zerebro Internet?

Florian Swoboda: Bar zahlen was founded by Achim Bönsch, Sebastian Seifert and myself, Florian Swoboda, in March 2011. Since then, our team has grown constantly and we have gathered a heavily IT-focused team of about 25 people around us in order to make online payments available for everyone – just like cash. The company is backed by renowned e-commerce investors and experts such as Florian Heinemann, Martin Sinner and Christian Weiss.

Payment Observer: Online cash payments – how does that work?

Florian Swoboda: The customer shops in an online shop of his choice. He selects Bar zahlen as the payment option. After completing the order, a PDF document with a bar code opens. The customer prints out this document and takes it to the next Bar zahlen partner store. There, the cashier scans the bar code and the customer pays his online order. The cash register system instantly sends the payment confirmation to the online shop which immediately sends out the product.

Bar zahlen's online cash payment solution

For users who do not own a printer, we also offer a mobile option that can be used with every phone and not only smartphones.

Payment Observer: How did you come up with the idea to start such a service?

Florian Swoboda: We simply saw a huge problem in e-commerce which is payment. Actually a third of all customers drop out of the order process when selecting the payment option. We were asking ourselves why payment has to be such a conversion killer and why the problem does not exist in stationary trade. So we figured: What’s missing online is the simplicity of cash. With 82% of transactions, cash is the most popular payment method in Germany. Cash is secure and accessible for everyone. You don’t have to register and you don’t have to reveal your financial data to a shop or to a third party payment provider where you can never really be sure how your data is stored.  People are experiencing the current online payment methods as being very complex and many customers are lacking a sense of security when providing their financial data online. That’s why we want to offer an easy and secure online payment option that is available for everyone.

Payment Observer: When are you planning to launch Bar zahlen?

Florian Swoboda: We will launch Bar zahlen in the third quarter of 2012.

Payment Observer: Can you already share with us who your retail partners are?

Florian Swoboda: I’d love to but unfortunately I can’t. What I can reveal is that we are cooperating with well known, nationally represented retail chains in order to provide convenience and a maximum of security to our customers. We will disclose the details right before our launch in the summer.

Bill Ready, CEO of Braintree

Have you wondered why so many web 2.0 companies such as OpenTable, Fab.com, and Airbnb choose Braintree to process their payments? We caught up with Braintree’s CEO Bill Ready and asked him this question.

Bill Ready has joined the company as CEO in October last year. He came from Accel Partners, where he was an executive in residence focusing on payments and financial technology.

Braintree provides an online payments platform that allows online businesses to process credit card payments. The company has recently released a set of tools for mobile app developers that enable merchants to accept payments within an app.

Payment Observer: Can you give us some background information and numbers on Braintree?

Bill Ready: Braintree helps online and mobile businesses process credit card payments by providing a merchant account, payment gateway, recurring billing and credit card storage. The company is disrupting the payments industry by providing elegant tools for developers coupled with white-glove support. Founded in 2007, Braintree works with the world’s most discerning online merchants, including LivingSocial, Airbnb, Uber, Hotel Tonight, 37signals, OpenTable and GitHub. The company is processing more than $4 billion in annual credit card volume from more than 2,000 merchants. Braintree was profitably bootstrapped for four years before accepting a $34 million investment from Accel Partners in 2011. Braintree ranked 47th in the 2011 Inc. 500.

Payment Observer: Why do so many web2.0 companies use Braintree?

Bill Ready: Our solutions are designed specifically for Web 2.0 and mobile companies to take the pain out of payment processing. Braintree’s focus has always been to make payment processing easy for developers so they can focus on their core business, not payments. Historically, developers were dissatisfied with PayPal, Authorize.net and other payment processing options. These solutions were dated and were not designed for developers. The industry had also been known for unscrupulous business practices, including hidden fees and holding merchants’ data hostage if they attempted to switch providers. With Braintree’s solutions, developers can integrate in minutes rather than months using Braintree’s client libraries in 7 different programming languages and 3 different mobile platforms.  They also have confidence that the solution will scale with their business, and the peace of mind that if they are ever less than satisfied they can easily take their data to another provider.

Payment Observer: What’s your opinion on m-commerce and mobile payments?

Braintree's Transparent Redirect API

Bill Ready: Mobile commerce growth will continue to outpace that of online as mobile usage has already exceeded online usage. Because mobile is becoming such an important channel for growth, it will be increasingly important for companies to focus on continually improving the user experience in completing a purchase on a mobile device. Companies can realize higher purchase volumes if they provide an easy checkout process that doesn’t require consumers to re-enter credit card information on a mobile device or leave the mobile site.

Braintree handles millions of dollars of mobile payments volume every month, and we recently released three new mobile client libraries that enable e-commerce merchants to easily and securely accept payments within a mobile app, rather than through a web browser. We wanted to help solve a problem for mobile app developers who want to provide a simple, elegant purchasing experience for their customers while remaining PCI compliant.

Payment Observer: How are mobile payments different from online payments?

Bill Ready: There are certainly similarities between the two, however, there are also important differences.  User experience is much more important in the mobile environment since the form factor makes it more difficult to enter card information.  If you can create cross-channel integration where the user’s card is already on file from their last visit to your website, you can significantly improve ease of use. The speed of the transaction also matters as bandwidth may be more limited, an issue exacerbated by some payment providers that rely on multiple trips across the mobile network to achieve a payment. Finally, security takes on new implications in the mobile environment.  Encrypting card data directly on the mobile device is important in order to deal with the additional data security risks inherent with mobile devices.  For these reasons, it is important to choose a payments provider that has tailored solutions specifically for the mobile environment.

Guido Mangiagalli - Head of Cashlog m-payments

M-commerce and mobile payments continue to be the hottest topics in the industry. Although the focus these days is mostly on new technologies, (such as NFC-based contactless payments and digital mobile wallets) traditional carrier billing is still one of the most commonly used mobile payment methods.

Recently, carrier billing provider Cashlog has extended its service to new countries and added HTML5 support. We had the chance to talk to Guido Mangiagalli (Head of Cashlog m-payments) about Cashlog and the company’s plans for the future. Cashlog is the mobile payments arm of Buongiorno, a mobile content provider headquartered and listed in Milan.

Guido Mangiagalli is responsible for product definition, go to market strategy, commercialization and communication of Cashlog. Prior to joining Buongiorno, Guido was Vice President Mobile Innovation at Visa Europe where he was in charge of defining Visa Europe mobile and contactless payment strategy.

Payment Observer: Can you provide some background information on the Buongiorno group and describe the role of Cashlog within the company?

Guido Mangiagalli: Buongiorno is known in the worldwide mobile commerce ecosystem for developing and managing paid apps and content that help consumers get greater enjoyment from mobile devices. With direct connections to more than 130 telecom operators in 25 countries, over 10 years’ experience and a team of 850 professionals, Buongiorno makes the mobile internet experience happen.

Cashlog is Buongiorno’s payment arm and thanks to Buongiorno’s expertise in data transactions and direct connections with operators can offer merchant a direct carrier billing experience, without aggregators’ intermediation. The service is currently available in Italy, Spain, Germany and France and a roll out in other European countries is forecasted in the next months. We support European merchants with an international presence who prefer to work with one partner in their existing territories. The platform also supports local companies aiming to expand their reach.

Payment Observer: Carrier billing is a highly competitive market, there are many providers offering similar services at competitive rates. Why did Buongiorno decided to enter the carrier billing market?

Guido Mangiagalli: The growth of mobile commerce makes mobile payments the next big thing replacing cash and credit cards transactions. In 2011, some 39% of mobile purchased items were paid directly to mobile phone bills. We acknowledge that there is competition in the market, but also that the market itself is growing at a very high speed, therefore we think that Cashlog has a competitive advantage thanks to direct connections with the operators.

Payment Observer: How does Cashlog differ from other carrier billing providers, what are the advantages of Cashlog?

Guido Mangiagalli: Cashlog leverages on Buongiorno’s direct operators connections, so not using aggregators which means a shorter value chain and higher payout for merchants.

Another main advantage is our local presence, with local offices and sales force in each country where we operate. We can provide merchants with a local real-time support in the local language.

Another differentiator is our passion for quality, Cashlog has been built with banking logic, we take very seriously our role of payment providers and for us reliability, security and quality of services are paramount. Consumers with Cashlog are always in-control, they can log in the platform and have a real time view of all their purchases and manage their account as they do today with their home banking service.

Payment Observer: What are the next steps for Cashlog?

Guido Mangiagalli: In addition to a roll out in other European Countries, Cashlog is now expanding in other regions such as South America and US. We are also adding support for the mobile channel providing mobile in-app purchase for HTML5 and Android. Merchants who sell digital goods such as virtual currency, videos, news and games through a mobile site will be able to offer an even faster and simpler mobile payment solution, in only 1 click.

How Cashlog works

Payment Observer: What are your main trends for mobile payments in 2012?

Guido Mangiagalli: Mobile payment was born for the gaming industry that has business models able to support  the high revenue shares required by the mobile operators. Telcos are now understanding the strategic importance of their billing capabilities and are looking to expand the usage of this easy charging mechanism to other industries such as music, video on demand e-books. They have overcome the fear of cannibalization for their services and are accepting the idea to provide higher revenue shares entering in direct competition, in the digital world, with other payments solutions as Paypal or Credit Cards.

Barbaros Özbugutu, VP Sales Germany at Klarna

Klarna provides a payment service that enables online merchants to offer their customers the option to pay by invoice or installments after the delivery of their goods. We had the chance to talk to Barbaros Özbugutu, Vice President Sales Germany of Klarna about Klarna and invoice-based payment services in e-commerce.

Payment Observer: Can you give us some background information and numbers on Klarna?

Barbaros Özbugutu: Klarna was founded in Sweden in 2005. Since then – with more than 14,000 online merchants and yearly transactions of currently EUR 1.9 billion – we have become the European leader for invoice-based payment solutions in the e-commerce market. Last year, we managed to double revenues company-wide. In Germany, where we launched in 2010, we grew by 1,100 percent.

Payment Observer: What services does Klarna provide?

Barbaros Özbugutu: At Klarna, we offer two secure and user-friendly payment solutions for online shopping, Klarna invoice and Klarna account. Klarna invoice allows customers to shop in a convenient way through a very simple concept: they don’t pay for the goods until after they have received them. With Klarna account, we extended our service by also offering the option to pay in a chosen amount of monthly installments. On top of that, if customers order a number of goods using Klarna account, we bundle everything into one monthly invoice, helping shoppers to keep track of their purchases.

Payment Observer: How does it work in detail, do you completely take the default risk?

Barbaros Özbugutu: Our goal is to enable a smooth shopping experience for both customers and merchants. So, as soon as a customer purchases an item in an online store through Klarna, we step in and take care of the rest of the payment process. For merchants, this means they can quickly dispatch the goods and focus on more important things than waiting for the payment to come in. We will pay them and assume all credit and fraud risk. Customers, on the other hand, actually receive their order before they have to pay. What’s equally important is that they only have to give out a minimal amount of personal information at checkout: there are no complicated forms to fill out nor login information to remember. All that we ask for is the customer’s name, date of birth and address.

Payment Observer: What was the motivation to start such services, how can online merchants profit?

Barbaros Özbugutu: Klarna’s services stem from the idea of making online payments safer, easier and more transparent. Before we began, we looked at a number of customer studies dealing with online shopping. Many of them asked: “How do you pay online?” The question much more relevant to us, however, was: “How would you like to pay?” We quickly realized that a great number of customers were not satisfied with the sometimes cumbersome payment processes. Particularly with regard to upfront payment, many shoppers are left feeling uneasy, afraid of falling victim to fraud. With Klarna invoice, customers pay after they receive and examine the goods they ordered. This way they can make sure they only end up paying for what they really want.

Klarna's Invoice-based Payment Solution

At the same time, we did not only have the customer’s needs in mind when we created our services; online sellers profit from integrating Klarna’s payment solutions just as well. A quick look at the numbers supports our approach to online payment: on average, sales increase by twenty percent after merchants start offering Klarna’s payment solutions. Compared to other methods, invoice payment offers the highest conversion rate.

Payment Observer: Klarna recently received a huge funding of $155M led by General Atlantic and DST Global – How did this come about?

Barbaros Özbugutu: Naturally, investors are always on the look-out for interesting trends and developments in the market. With DST Global and General Atlantic, we were fortunate enough to attract two top investors after already having received support for our growth through Sequoia Capital in 2010. Given their previous investments in internet start-ups like Twitter and Facebook, both investors have clearly demonstrated their expertise in this sector, so we are extremely pleased to gain their support as well.

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

Barbaros Özbugutu: We see a great amount of potential here in Germany. The success so far has confirmed our growth strategy, so we will continue to follow this path. At the moment, we are expanding our capacities with regard to staff as well as infrastructure. In Cologne, for example, we have recently set up another office in addition to our German headquarters in Nuremberg.

Payment Observer: What are your top e-commerce trends for 2012?

Barbaros Özbugutu: I believe that invoice payments will continue to be an important issue for online merchants. In our opinion, it will be crucial for online merchants to cater to the needs of their customers, as the fundamental rule here is quite simple: the easier the virtual payment, the higher the chances that a website visitor actually becomes a customer. For retailers, this means reducing the payment process ideally to just one click while, at the same time, asking for as little client information as possible. With that said, after delivery payment represents the ideal solution as it separates the payment process from the actual purchase, thereby requiring no more than the customer’s name, address and date of birth.

Our commitment to making online payment as simple and safe as possible is reflected in our “Zero Friction Vision”. In this vision, the relation between customer and merchant is shaped by mutual trust, allowing the e-commerce market to further expand and flourish. In 2012, e-commerce could take a significant step in that direction. At Klarna, we certainly will continue to work on making this vision become reality.

Rebekka Keough, Innovation Manager at Bankinter

Earlier this week, at the Finance Future Forum networking platform, we saw a very inspiring talk from Rebekka Keough of Bankinter. We had the chance to ask her a few question on Bankinter and banking innovation trends.

As Innovation Manager, Rebekka is responsible for the development of new digital channels and identifying innovation trends the financial services sector. Previously, Rebekka worked as a strategy consultant at McKinsey.

Payment Observer: Can you give us some background information on Bankinter?

Rebekka Keough: Bankinter is a medium-sized Spanish retail bank with a domestic focus. As a niche player focusing on affluent and mass affluent customers, Bankinter considers innovation and technology to be the main foundation for the creation of new products, services, and channels. Of our four strategic pillars- People, Technology, Innovation and Quality, the focus on Innovation in particular has allowed Bankinter, while not the biggest, to have a significant relevance in the domestic and international market. We are pioneers in Internet and Mobile banking (the first in Spain and in many cases in Europe to launch these multi-channel offers). Bankinter is different and our customers value this.

Payment Observer: How can banks benefit from technical innovations?

Rebekka Keough: Technical innovation is absolutely crucial in the banking industry and today is both a requirement and a significant point of differentiation. To be clear, technical innovation does not necessarily mean inventing the so-called wheel or taking out patents, but rather speedily identifying and implementing the latest developments emerging across sectors and geographies. The true innovation comes from adapting and implementing technology in such a way that both the bank and clients perceive value.

Technical innovations are allowing banks to better meet customer demands through a multi-channel offer that allows the bank to be when, where and how it is needed by its clients. Thanks to recent developments, entirely new offers and services are available- think of the rise of PFM (Personal Financial Management) tools, contextual mobile banking and new payment methods to name a few. Scale and efficiency that simultaneously improve quality are also positive outcomes of technological innovations.

Payment Observer: Can you provide more details on Bankinter’s mobile banking solution?

Rebekka Keough:Bankinter is a leader in mobile banking having begun our offer in 2001 with our proprietary multi-conversational SMS platform. Still an important channel, our clients can respond via SMS to cross sell offers, conduct operations such as contracting new products and blocking credit cards and also receive notifications and alerts. We have subsequently developed java brokerage applications and offered mobile internet banking to both our retail and corporate clients. Today the focus is on Smartphones: with the enhanced capabilities and flat data plans associated with Smartphones we are offering more multi-media content, contextual services, and innovative new functionalities such as augmented reality applications and biometric recognition.

Baninter's Mobile Banking Services

Bankinter, through our MVNO (Mobile Virtual Network Operator), also sells mobile telephone services to clients and non clients. We are also active in new mobile developments such as NFC mobile payments.

Payment Observer: What are the key factors which make a successful mobile banking services?

Rebekka Keough: Some of the key success factors for Bankinter, or any company thinking about how to develop their mobile offer, are first to develop a native design for mobile. That is, do not merely compress your online offer, but rather think about the particular limitations and advantages that a mobile offers, and build specifically for it. It is important to keep the client at the center of the design and experience. There is a tendency for a bank to want to offer every product and functionality in the catalogue to their mobile customer, but this will hinder more than help. It is better to work with the clients to determine which are the most frequent transactions, what do customers really want and need from their mobile and what type of experience are they accustomed to from their other (non-banking) applications.

At Bankinter we believe that any initiative should have a business plan- even in the case of the most innovative programs where it is hard to predict exact numbers, it is important to know what levers will be impacted and what success will look like. Finally, to develop a truly leading mobile offer, don’t think like a bank: that is, be open to functionalities and experiences derived from completely different industries and companies. Today the most exciting mobile innovations may come from a startup in Silicon Valley, South Africa or India.

Payment Observer: Several companies have launched services that compete with traditional bank services such as digital wallets and NFC-based payment services recently. What will be the role of a bank in the future?

Rebekka Keough: There is no doubt that there are a whole host of new players already competing or with the potential to encroach on the traditional banking model. As in any transforming industry, the incumbents need to evolve to compete. Banks have some distinct advantages such as experience in security and extensive relationships with their clients, but even the most confident bank today needs to be looking around at trends and tendencies- implementing innovations into their current model, partnering with new entrants and even striking out into completely new territory by defining new business models.

Holger Spielberg, Head of Mobile Payments and Innovation at PayPal Germany

We talked to Holger Spielberg, Head of Mobile Payments and Innovation at PayPal Germany, about the latest developments in mobile payment and PayPal’s vision of future shopping. Holger has been with PayPal since January 2011. He has more than fifteen years of experience in leading positions across a number of industries, from telematics and telecommunications to mobile services. He is also involved in startups, as founder, executive, angel and advisor.

Payment Observer: Can you give us some details on the mobile payment background of PayPal?

Holger Spielberg: PayPal is the leading electronic payment method and is mostly known for its activities in the e-commerce world. But PayPal was actually founded to transfer money between Palm Pilot PDAs back in 1998. When the founders recognized that they were really visionary with their idea they started to focus on the emerging market of electronic commerce on the internet. As you know, PayPal was acquired by eBay, and that helped to further the growth and to gain knowledge in how to operate a global payment system. PayPal’s DNA is mobile. Over the last 10 years the company learned how to process mobile payments, how do deal with customers. Now we are coming back to our own DNA, and have the possibility to offer mobile payments based on the operational excellence from online payments. As I always say: If you want to offer mobile payments you have to know payments first.

Payment Observer: Mobile payment is one of the hot topics these days. A lot of companies such as Visa, Google or ISIS are starting mobile payment and digital wallet services. How do you see the market?

Holger Spielberg: We see that the lines between e-commerce and commerce are blurring, at the end of the day it all becomes commerce. The channel through which the purchase is made becomes less and less a distinguishing factor.

With regard to mobile payments, we have to differ mainly two areas: one is payments through mobile web or mobile apps – in that area PayPal is definitely a leading player when it comes to number of transactions and transaction volume. The other area is payment at the point of sale featuring proximity technology (such as NFC, QR-Codes or Audio). This area is not fully evolved yet, there is no clear leader at this point. There are a number of big players trying to enter that market because it holds enormous potential and is ripe for innovation. Banks are playing a role, carriers are playing a role and obviously credit card companies have been a player in that space for a number of years. And, PayPal is clearly on a path also to be integrated at the point of sale.

Payment Observer: Is mobile payment a “must have” feature or just “nice to have”?

Holger Spielberg: I am convinced that for merchants it’s a must have to start dealing with mobile payments today. In the near future, the number of mobile devices will outstrip the number of PCs. We believe that half of the transactions in electronic commerce will be happening trough a mobile device in about 5 years. Merchants will have to deal with mobile payments because the number of mobile devices will be so significant they can’t deny it.

On the consumer side, I believe mobile payments are currently more a nice to have feature. But as more and more merchants are providing mobile payment options the ubiquity and availability will be much bigger. In a few years mobile payments will be a must have for consumers if they want to be able to make use of offers and deals only possible at specific times or locations.

Payment Observer: Can you give us some details on the role of mobile in PayPal’s vision of future shopping?

Holger Spielberg: Our vision is to enable payments anytime anyplace by any means. We see mobile payments as a catalyst for innovation. The broad features of mobile devices allow us to change the way people are shopping and how merchants interact with consumers. Our vision includes picking up the customers really early in the shopping experience by empowering them to find product information or deals, and providing them the flexibility to choose different payment methods.

Mobile payments is not only an additional payment channel but rather connecting different worlds. We see mobile payments as a combining catalyst of storefront, online, mobile and even purchasing on the go. We provide payment options and flexibility for merchants and consumers through all channels. We believe the combination of being a bank and an internet player provides us the flexibility to think innovative along the entire shopping process. Our aim is not just to exchange the POS terminal, but to change the whole end-to-end shopping experience.

Payment Observer: Can you give a real-world example of how mobile devices can be integrated into the shopping experience?

Holger Spielberg: Just recently, PayPal Germany announced the availability of the PayPal QR shopping solution. As a consumer, if you are interested in an item you scan the QR code and add it to a virtual shopping basket and in the end pay directly with PayPal. Merchants are starting to include QR codes on advertising and in stores. Some retailers also want to enable the purchase of items trough the shopping window. Basically they can enlarge their store virtually to create more revenues per floor space. PayPal is the enabler of such multi-channel solutions by providing a secure end-to-end platform.

Payment Observer: Is PayPal relying on QR solutions only or are you also looking at other technologies such as NFC?

Holger Spielberg: PayPal is agnostic towards technology, we include everything which makes sense to us to provide a secure and stable transaction service today. We are looking at any technology including NFC, we just believe it will take a while before market readiness. We bring out our solutions based on existing technologies, whenever it makes sense to us to add another technology we will certainly do that. I would predict that NFC is moving closer into focus in the year to come.

Payment Observer: Will PayPal continue to focus on processing transactions or will it venture into other services?

Holger Spielberg: We really believe in extending the value chain and also includes special offerings, deals and coupons. The pressure on the transaction price in retail is significant, and will even grow. PayPal clearly sees additional revenue potential beyond transactions in value added services such as couponing, deals, inventory availability and product information.

Payment Observer: Can you give us some numbers on how many mobile transactions have been processed by PayPal so far?

Holger Spielberg: Aggregated over the time period between March and November 2011 we processed $165 Million in Germany. In markets with higher penetration of smartphones the percentage is even higher, about 6-9% in the UK and above 10% in Australia. A significant part of our transaction volume already comes through mobile means and mobile payments. We expect these numbers to increase significantly over the next two to three years.

Lars Ketelsen, CMO of Atlas Interactive

In recent years, with growing e-commerce sales and trading of digital goods, the importance of efficient micro payment systems has increased. Micro payments are transactions of small sums of money mainly used online for the purchase of digital goods.

We had the chance to talk to Lars Ketelsen of Atlas Interactive on the latest trends in the micro payments industry. ATLAS Interactive Germany is based in Hamburg and provides a portfolio of access and micro billing solutions on a global level. Lars Ketelsen is Executive Director of Sales and Marketing at ATLAS Interactive. He has several years of experience in sales and direct marketing. Prior to Atlas he worked at Axel Springer’s daughter company asdirekt and NDR Media where he was responsible for the communication center.

Payment Observer: Everybody is talking about micro payment these days, how are they different to other transactions?

Lars Ketelsen: We have seen an increase in sales for digital goods like newspaper articles, music and paid content in online games and the need for a suitable payment solution. Traditional payment methods, such as credit card payment or direct debit are not suitable, as the costs for processing the transaction often exceed the value of the goods. Atlas handles transactions up to 15 €, for transactions with a higher volume other payment methods may be more cost-efficient.

Payment Observer: What micro payment solutions do you provide?

Lars Ketelsen: Our main product is kanzaloo, an all-in-one micro payment service for digital goods. It combines Premium SMS, Direct Carrier Billing and Premium Rate into one payment solution. Kanzaloo is available in 30 languages in over 85 countries worldwide and convinces with its easy integration on clients’ websites. Via kanzaloo companies are able to monetize anything from in-game items, online newspaper articles to digital goods such as music or software.

Payment Observer: What are the main benefits of kanzaloo compared to other payment solutions?

Lars Ketelsen: Kanzaloo offers customers the convenience of paying in small amounts, without registering information and disclosure of credit card data. It thus supports impulse buying much better than traditional payment methods. The integration of kanzaloo is simple and ATLAS Interactive will handle any administrative tasks including adaptation of tariffs and shortcodes as well as adherence to specific carrier regulations. Furthermore only kanzaloo combines several different micro payment solutions and lets the end-user decide how he wants to pay.

Payment Observer: Which markets are your main markets? Are you planning to expand to other industries?

Lars Ketelsen: So far, the gaming industry has been our strongest industry. There are, of course, other industries interested in micro payment solutions, such as social networks, the publishing industry, gambling, e-ticketing and many more. We see a strong future in micro payment solutions for all digital content industries.

For example we recently integrated kanzaloo with SPORT1, a German television channel and online platform. Consumers can now pay for SPORT1 live video streams without registering via our kanzaloo micropayment solution.

Payment Observer: What about security, is there a lot of fraud with micro payments?

Lars Ketelsen: In Western Europe we don’t see a lot of fraud, less than with other payment methods. There are strict regulations in the EU countries, mobile payments via Premium Rate and Premium SMS have to be confirmed by the end user and are limited to a certain transaction volume. Things are different outside of Europe. In some regions, like the MENA (Middle East and North Africa) area, we are experiencing a high fraud rate.

Recently, Payment Network AG launched Rechnung by Sofort, a payment service that enables online merchants to offer their customers the option to pay by invoice.

Munich-based Payment Network AG provides internet payment solutions. Its products are based on online banking; almost everyone with an online banking account can use the SOFORT products to pay on the internet. Besides its most known products sofortüberweisung and sofortbanking, Payment Network offers further online services such as sofortdauerauftrag for recurring payments and sofortident to verify the identity and age of a person.

We spoke to Georg Schardt, Chief Marketing Officer at Payment Network AG, about the company’s new service and the latest e-payment developments. He has more than 25 years of experience in the European mail-order and retail business. Before joining Payment Network AG, he worked on the management board of the online retailer Conrad Electronic where he was responsible for the online and mail-order distribution channel.

PaymentObserver: Could you give us some background information on Payment Network AG?

Georg Schardt: Payment Network AG has been providing secure payment solutions for online shopping since 2005. Our main product sofortbanking is a service that allows customers to instantly trigger a credit transfer during an online purchase with his or her online banking information. There is no need for an additional registration or a credit card. A transfer order is instantly confirmed to the merchant allowing an instant delivery of goods and services.

Among our partners are large international companies such as Hugo Boss, DELL, Skype, KLM Royal Dutch Airlines and Emirates. Last year the number of transactions increased by 60%, at this point we are processing more than 1,3M transactions per month.

PaymentObserver: Your services are very popular in Germany, are you planning to expand to other countries?

Georg Schardt: Currently our services are available in seven European countries. We have partnered directly with more than 20,000 online merchants and e-commerce solution providers in Germany, Austria, Switzerland, the Netherlands, Belgium, Italy and the UK. We are planning to expand to all relevant markets in Europe by 2013.

PaymentObserver: Let’s talk about your new product. Can you provide more details on Rechnung by Sofort?

Georg Schardt: For Rechnung by Sofort, a service offered by our partner Sofort bank, we are working together with arvato infoscore, a subsidiary of arvato Bertelsmann AG, to provide a solution for B-2-C online shops to offer a pay by invoice option to their customers. Our service is easy to integrate into existing e-commerce platforms and is offered at a very competitive rate. We charge 2,99% + 0,49 € for every successful purchase and guarantee 100% payout towards the merchant. Regardless whether the customer pays or not – the merchant will get the full invoiced amount within 27 days after the purchase is made. With Rechnung by Sofort an online retailer can increase its conversion rate and create liquidity without bearing the risk of nonpayment.

PaymentObserver: These days we see many companies starting similar services for online retailers, what are the advantages of payments on invoice?

Georg Schardt: To customers in most European countries, the option to pay on invoice is not new at all. Traditional mail-order companies have been offering this payment method to customers for decades. It is also one of the most popular payment methods for online purchases. According to a research study by EuPD in 2010, almost around 97 % of all users would like to pay on invoice when buying online. By implementing this payment option, online retailers can win customers that are not comfortable with using e-payment methods such as PayPal or credit card payments.

The main advantages for consumers is that he or she can try out the product before paying for it. Customers are more likely to order clothes or shoes online when they know that they can return the ones that don’t fit and only have to pay for the items they keep. Although this payment method leads to a higher return rate than other payment methods, this can be compensated by the higher conversion rate that merchants experience when offering payment on invoice.

PaymentObserver: How important is the selection of payment methods for online merchants?

Georg Schardt: In general it is true that more payment methods offered result in a higher conversation rate, as different customers prefer different payment methods. But not every payment method is suitable for all kinds of shops and branches. Choosing the right mix of payment options is one of the critical success factors for online shops.

Summary by Georg Schardt: To pay on invoice is still one of the most preferred solutions for online shopping. We see great potential for Rechnung by Sofort. Our customers can easily implement offering payment on invoice without having to deal with risk management and debt collection. Together with Sofort bank we offer standardized interfaces, so the integration in existing shop systems is simple and usually does not take longer than a few hours.