Online Payment

• Online payment company Dwolla wins a Best of Show Award at FinovateSpring, a conference about innovative financial and banking technology. Dwolla is a web based payment platform that allows users to send, receive, and request money from other users. The service is free for micro-transactions, for transactions above $10 Dwolla charges a flat fee of $0.25. The company received the award for their new FISync technology that enables users to integrate their bank accounts directly with the Dwolla platform.

Mobile Payment

• Mobile wallet service ISIS, a joint venture between the U.S. carriers AT&T, T-Mobile and Verizon, add support for American Express cards. ISIS is a mobile wallet payment service based on NFC technology. Read more
• MasterCard starts its new PayPass Wallet service. Customers can store their payment credentials in the digital wallet and use the service to pay online and in stores. Tap-and-go in-store payments can be made using a NFC-enabled smartphone and the PayPass Wallet app. Read more

Cards

• Citi Ventures, Citi’s venture arm, invests $3.3M in online payment and ID verification company Jumio. Jumio’s Netswipe solution turns a webcam into a credit card scanner. The camera analyzes and verifies the physical credit card in real time. Card holders only have to approve the transaction by entering the security code number and the additional security and authentication mechanism 3-D Secure of Visa and MasterCard. The service supports Visa, MasterCard, JCB, Diners Club and American Express credit cards. Read more

Credit cards are the most popular payment method across the globe. This is also true for online payments; most online transactions are made using credit cards. Over the last few years a number of alternatives to credit card payments, especially designed for e-commerce (e.g. PayPal) have emerged. But there are also successful local online payment methods.

One of the most successful ones is the iDEAL. It is a real-time online payment method that is based on online banking in the Netherlands. It was launched in 2005 and has now become the most popular (currently has a 50%+ market share, accepted by 80%+ of online merchants) online payment method in the Netherlands.

How does it work?

With iDEAL customers can pay for online purchases directly from their bank account. All major banks in the Netherlands, such as ABN AMRO, Rabobank and ING Bank support iDEAL. The iDEAL service is operated by Currence, a bank association that coordinates the payment systems in the Netherlands. To accept iDEAL payments a merchant can sign up at a certified bank or payment service provider.

Acceptance and use of online payment methods (source: Currence iDEAL factsheet)

This is how iDEAL works:

• The customer selects that he wants to pay with iDEAL and selects his bank during the checkout.
• He is then redirected to his banks login page to authorize the payment using a TAN.
• The bank verifies the transaction and initiates the transfer to the merchant’s bank account.
• The customer is then redirected back to website and the shop will get a conformation of the payment.
• The merchant will receive the payment within 1-2 working days on his bank account.

Advantages

Compared to other payment methods iDEAL offers some advantages for merchants and customers. Millions of customers already use online banking and can use iDEAL without signing up or registering for third-party services. Also customers don’t have to share personal information such as account number with the online merchant. Merchants benefit from the real-time confirmed, guaranteed (by the customers bank) payments that cannot be reversed (no chargebacks).

The transaction fees depend on the size and sales volume of the merchant but are usually much lower (especially for larger transactions) than the fees for accepting credit card payments.

Limited to the Netherlands

iDEAL is based on the Dutch domestic transfer and is only available to customers of the participating banks in the Netherlands. There are planes to adapt iDEAL to the Single Euro Payments Area (SEPA) standard so it can be used also for cross border payments within the E.U. There are similar local direct online banking services in other countries such as Giropay in Germany, EPS in Austria and Secure Vault Payments in the U.S.

Online payment platform WePay just announced that the company has secured a $10 million investment by venture capital firm Ignition Partners. The fresh funds will be used to scale WePay’s workforce and technology. It is expected that the company will launch several improvements including a mobile application in 2012.

Who is the “PayPal-rival” that reported a 10x growth in 2011? WePay was founded in 2008 by Bill Clerico and Rich Aberman with the goal to create an easy to use payment collection platform. The company is now headquartered in Palo Alto, CA and has raised a total of $20 million in funding. Among their investors are well known names such as Y Combinator, YouTube founder Steve Chen, and PayPal co-founder Max Levchin.

WePay started as an online group payment for individuals. Over time, the product portfolio evolved and WePay is now offering a range of payment solutions: sell items and tickets online, send bills online and accept donations online to individuals, small and medium-sized businesses and large merchants. WePay charges a fee of 3.5% ($0.50 minimum) for receiving credit card payments and a flat fee of $0.50 for bank payments. Currently WePay’s services are only available for users in the United States.

Check out the embedded video to see how WePay works:

Visa Europe plans to launch a customer trial of V.me in the UK, France and Spain in autumn 2012. Visa has already launched a beta of V.me in the US and Canada last year and is now moving into the European market.

Similar to PayPal, V.me by Visa enables customers to store their credit card details into a digital wallet. Instead of entering their payment and shipping details every time they want to shop online, users can use V.me for the checkout process. The service is not limited to Visa cards; MasterCard, AmEx and Discovers cards are also supported. According to Visa, V.me will also provide features beyond payments such as transaction alerts, promotions and reward programs. “Our intention is that V.me will ultimately be able to incorporate any or all of our new payment technologies, allowing our members to deliver the best possible payments experience whether face-to-face, online or in a mobile environment,” said Mariano Dima, Executive VP of Product and Marketing Solutions at Visa Europe.

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.

Germany-based Otto Group, one of the world’s largest mail order companies, will launch an online payment services named Yapital. According to Otto, the digital wallet service will enable consumers to make payments across all sales channels. The commercial launch is scheduled for mid-2013.

At present there is little information available but the move looks like Otto is about to create a potential competitor for online payment services such as PayPal, Google Wallet or Amazon Payments. It’s not the first time Otto expands into financial services: big financial services companies like EOS, EOS Payment and Ratepay are part of the Otto Group. Jürgen Schulte-Laggenbeck, CFO of the Otto Group commented: “For the Otto Group, this is a logical continuation of other Group activities in the areas of Financial Services, Multichannel Retail and Service. We are convinced that this young marketplace is large enough for a strong European player.”

Fun fact: The name Yapital actually refers to Yap, a tiny island in the Pacific Ocean known for its stone money (even Milton Friedman wrote a paper on Yap’s monetary system). Having no access to metals, the people on Yap used huge, heavy, carved disks of limestone as money. Because moving the stones was really difficult, the islanders started to transfer the stones abstractly by just changing who owns the stone and thus created the first virtual currency. Digital wallets – the functional descendants of stone money

PayPal has revealed its new mobile payment solution for small business PayPal Here. Just like Jack Dorsey’s Square, PayPal Here enables small merchants to accept card payments. The service includes an app and a small card reader for smartphones and brings the online payments giant into local stores.

It is no surprise that PayPal is entering the mobile point of sale segment, the success of Square, Intuit GoPayment, and iZettle prove the increasing demand for such services. PayPal Here is part of PayPal’s multichannel strategy; the company is trying to provide payment solutions for online, offline and mobile business.

How does it work?

PayPal Here includes a small triangular card reader and a free app for iOS and Android devices, allowing merchants to accept payments by swiping cards. The card reader is full encrypted and PCI-compliant. The card information can also be manually entered into the app. Unlike its competitors PayPal Here also allows users to scan cards and checks using their phone cameras – a service provided by mobile payment startup card.io.

After signing up and downloading the PayPal Here app, merchants can immediately start accepting payments and receive funds directly into their PayPal account. Merchants pay a fee of 2.7% for each transaction. They will also receive a business debit card with 1 percent cash-back on eligible purchases, cutting the effective fees down to 1.7%. For comparison: Square’s merchant fee is 2.75% for each swiped transaction.

The PayPal Here card reader and merchant app will roll out in United States, Canada, Australia and Hong Kong within the next month (more countries to be announced soon).

Check out the embedded video to see how PayPal Here works:

Last week at FinovateEurope, 35 companies showcased their latest innovations in payment, financial, and banking technology. It was the second time that the show, a spin-off of the American Finovate conference series, took place in London. What makes the event really special is the format: all companies have only 7 minutes time on stage to demo their services and are not allowed to use slides. Among the companies have been startups as well as large and established players presenting their innovations.

Best of Show 2012

After the presentations, the event’s attendees could vote their favorite demos. This year’s best of show winners are:

• Cardlytics (together with Aimia) presented its transaction driven marketing platform that brings banks and merchants together to provide tailored rewards to their customers.
• Dynamics which demonstrated its Chip&Choice card, a battery-powered multiple application card featuring EMV-technology.
• eToro showed Guru Finder which allows users to find and implement personalized trading strategies on the company’s OpenBook trading platform.
• Nutmeg showed its customizable online investment management service.

Some companies launched new services at the event:

• Electronic payment innovator Ixaris, the company that developed EntroPay, launched Opn Cardworks, a payment application which enables businesses to quickly set up a personalized prepaid card solution.
• IND Group released its renewed Banking Front-Office product, with Gamification as the main idea. The goal is to make the banking processes more fun and motivate clients to use the bank’s online services more often.

Focus: Mobile

One of the main topics at this year’s FinovateEurope was mobile technology:

• US-based financial services systems giant Fiserv showed M-Cash, a white label mobile payment service.
• Mobile payment company Luup presented a mobile travel authorization and budget management service.
• Validsoft demoed its voice-based authentication technology for mobile and online banking.
• Handpoint showed an interesting white label mobile Chip&PIN payment solution.
• Finsphere presented its security solution that uses the location of the cardholder’s mobile phone relative to the location of the financial transaction.

Online payment service provider Ogone has recently opened an office in the US and appointed James Byler to the role of Regional Head of North America. With this expansion Ogone wants to open the European e-commerce markets to US companies and establish local partnerships to further Ogone’s distribution network.

The Belgium-based company is connected with more than 200 banks and acquirers to provide more than 80 international, alternative and prominent local payment methods in Europe, Asia, Latin America and the Middle East. Local payment methods include ELV and giropay in Germany, Carte Bleue in France, iDeal and Machtigingen in the Netherlands, and Bancontact/Mister Cash in Belgium.

As part of their expansion program Ogone acquired India’s second largest online payment provider E-Billing Solutions (EBS) in 2011. This was Ogone’s first acquisition and its first move outside the European market. According to the company, expanding to the US was the next logical step and will help to evolve from a European to a world player.