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.

[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.

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.

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…

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…

PayPal Acquires Visual Credit Card Scanner card.io

PayPal has acquired card.io, a startup that enables developers to capture credit card data using the build-in camera of a smartphone. With card.io, customers don’t have to enter their card information manually; it is retrieved automatically when the customer holds its card in front of the phones camera. The companies already had a close relation before the acquisition, card.io’s technology is powering the new PayPal Here product. Read more…

MasterCard Launches MasterCard Business Network for Small and Mid-Size Business

MasterCard is partnering with Rearden Commerce to launch the MasterCard Business Network site, a platform that helps small and medium sized business to manage and record their expenses. The platform is powered by Rearden Commerce’s Deem network that connects buyers and sellers across various industries. The MasterCard Business Network service is currently in beta status, a mobile app for Android, iPhone or Blackberry devices will be released soon. Read more…

Gift Card Payment Network Openbucks Raises $4.8 Million

Openbucks has closed $4.8 million in a funding round led by Yahoo co-founder, Jerry Yang. The Openbucks gift-card payment network allows consumers who don’t have credit cards or a bank account (or who prefer to keep their banking details private) to buy goods and service online. The company will use the investment to support its growth plans and increase its acceptance network. Read more…

Payment Startup Stripe Gets $20M Funding

Online payment processing startup Stripe recently secured $20 million in a Series B round of funding led by General Catalyst. Stripe is based in California and provides a developer-friendly way for business to accept online payments. Read more… 

Telefonica and Visa Partner for Mobile Money Service in Europe

Visa Europe and Telefónica agreed a strategic partnership to unlock new business opportunities in mobile commerce in Europe. The two companies plan to launch several products and services such as a mobile wallet, NFC-based contactless payment services, and mobile point of sale solutions together. This is not the first partnership of a credit card company and a mobile carrier: Earlier this year Visa has teamed up with Vodafone and just recently Deutsche Telekom and MasterCard partnered for mobile payments. Read more…

UK Mobile Payment Joint Venture Project Oscar to Start Soon?

UK carrier mobile payment joint venture – formed by Orange, Deutsche Telekom, Vodafone and Telefonica – Project Oscar could get regulatory approval this summer. The operators want to create a platform that enables retailers and banks to offer a mobile payment solution to their customers. Read more…

Mobile POS Payment Service Streetpay Partners With E-Plus

German mobile payment company Streetpay joins forces with Germany mobile carrier E-Plus to promote and distribute its mobile POS payment service. Streetpay offers a Square-like mobile payment service in Germany. As of now, E-Plus will be offering a complete mobile POS package: the Streetpay card reader, the Streetpay App, and a tablet together with a data plan. The package is available for €15 per month and a one-time activation fee of €45. Streetpay charges 2.75% for each swiped transaction. Read more… (in German)

Telefonica Partners with Facebook, Google, Microsoft and RIM for Direct Carrier Billing

Telefonica has signed a deal with Facebook, Google, Microsoft and RIM to make it easier for its customers to buy digital goods and services via their mobile devices. The partnership enables Telefonica customers (O2 in Germany, Movistar in Spain) to charge purchases on Facebook, Google Play, Windows Phone Market or the BlackBerry App World directly to their mobile phone bill. Read more…

SponsorPay Reports 300% Growth in Mobile Business

SponsorPay, a cross-platform for mobile app monetization and user acquisition, has seen 300% growth in its mobile business since January 2012. SponsorPay has also rolled out a tablet-optimized version of their offer wall. Read more…

Dwolla Introduces Places

Peer-to-peer payment platform Dwolla has launched Places, a directory allowing users to find locations that use Dwolla. Read more…

Adyen Adds Access to Eastern Europe via TrustPay

Payment service provider Adyen is partnering with TrustPay, a payment processor in Central and Easetern Europe (CEE), to extend its international reach. The agreement enables Adyen and TrustPay to accept payments in 13 countries in 11 currencies in the CEE region.

American Express to Adopt EMV in the U.S.

American Express (AmEx) has released its roadmap to advance EMV chip-based contact, contactless and mobile payments in the U.S. EMV refers to a microchip that is embedded in the credit card. It was developed by Europay, MasterCard and Visa (EMV) to improve security against fraud and ensure global interoperability. By April next year, processors must be able to support American Express EMV chip-based contact, contactless and mobile transactions. Read more…

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.”

Another Mobile Wallet Emerges, Placecast Launches HTML5 ShopAlerts Wallet

Location-based marketing provider Placecast jumps on the mobile wallet bandwagon. The company just launched its new ShopAlerts Mobile Wallet that connects location-based offers with mobile payments. The mobile wallet is a while-label service for credit card companies, mobile carriers and retailers. Its build in HTML5 and will thus work on all smartphone platforms without the need to download a dedicated app. The combination of location-based offers and mobile payments is very promising but it remains to be seen how it competes with Apple’ native Passbook app or the Microsoft Phone 8 Wallet. Read more…

Mobile Payment Startup Kuapay Secures $4M Funding

US-based mobile payment company Kuapay has received a $4 million investment. The Kuapay wallet app allows customers to pay at any retail store that accepts credit cards. The card details are stored inside the app, to make a purchase the QR code displayed by the app has to be scanned at the point of sale – similar to how LevelUp works. The investment will help Kuapay to enhance its features and extend to other platforms. Read more…

American Express presents PAYVE, a Payment Solution for Corporate Payments

PAYVE is the new payment service from AmEx for business. It centralizes multiple types of payment methods (e.g. checks, ACH payments and international wire) into a single e-payment platform.

Digital River Widens Payment Options, Offers Cloud-based Subscription Billing

U.S. e-commerce service provider Digital River has integrated a cloud-based service for recurring payments in its World Payments solution. World Payments is a global payments solution for online merchants, available in more than 190 countries and 170 currencies.

Apple’s New iPhone to Support NFC-based Mobile Payments 

According to 9to5Mac the next generation iPhone prototype features a NFC chips and antenna that can be used for contactless payments. With a NFC-enabled phone, the recently announced Passbook app can become a full-blown mobile wallet including contactless payments. It looks like Apple is set to compete with Google Wallet and the new Windows Mobile Wallet service.

Swedish Operators Launch Mobile Payment Service MyWallet

The four major mobile operators in Sweden – Telia, Tele2, Telenor and 3 – have joined forces and launched MyWallet, a mobile payment service that is available to almost all mobile phone users in Sweden. MyWallet is the first mobile payment service of this kind in Sweden. With MyWallet users can initiate person-to-person transactions, top up their prepaid card, pay for online purchases and buy tickets for public transport.

B2B Online Payment Startup Traxpay Raises $4M    

Germany-based B2B payment provider Traxpay has received a $4 million investment led by Earlybird Venture Capital. Traxpay provides an real-time payment solutions for enterprises. The funding will enable Traxpay to continue its growth in Europe and prepare for its expansion into the United States. Jason Whitmire, Partner at Earlybird commented: “Online B2B payments represent a nearly $250 billion market with many inefficiencies, and we think it is a massive opportunity for innovation. Traxpay’s unique blend of enterprise software, payments and banking expertise will deliver one of the most disruptive technology solutions since Paypal reshaped the B2C payments market.”