(August 25, 2009) Intuit Inc. has quietly introduced an online-payment product that may be aimed initially at small businesses looking for ways to let other businesses pay them electronically, but could move into consumer payments later on.

The new service, called Intuit PaymentNetwork, charges a flat 50 cents per transaction, with no set-up or other costs, and permits only payments to businesses, excluding, for example, person-to-person payments. Without the fanfare that usually accompanies such launches, Intuit last week started a pilot for the service, which relies on the automated clearing house to transfer funds. A spokesperson for the Mountain View, Calif.-based company, best known for its accounting software for homes and businesses, won’t say how many companies have signed up for the pilot so far or name any of the early users. “It’s just started, people are definitely signing up,” she tells Digital Transactions News. “They like the low cost and simplicity.” She says the pilot has no defined end date, and whether PaymentNetwork goes commercial will depend on “feedback” from users.

The product comes at a time when both startups and established companies are introducing services that act as alternatives to conventional bank-issued credit and debit cards for payment. As with PaymentNetwork, much of the appeal of these new services stems from their favorable cost to merchants, many of which have been vocal critics of bank card acceptance costs. Assuming a 2.5% discount fee for card acceptance, a merchant will pay less for a PaymentNetwork transaction if the sale is $20 or more.

PaymentNetwork is also another indication of the increasing importance of electronic payments at Intuit. The company in May introduced an application called GoPayment that lets mobile merchants accept cards on their handsets (Digital Transactions News, May 21). Earlier, it acquired Electronic Check Clearing House Inc., a processor with links to both card networks and the ACH, and Innovative Merchant Solutions, an independent sales organization. It has since reorganized Innovative as part of a new unit called the Intuit Payment Solutions Division. This unit gave rise to both GoPayment and PaymentNetwork.

Unlike GoPayment, which is integrated with Intuit’s popular QuickBooks accounting package for businesses, PaymentNetwork is not yet tied into either QuickBooks or Quicken, Intuit’s personal-finance product. But the spokesperson says the company sees an opportunity to sell the new service to clients of the Payment Solutions division, whether they are QuickBooks users or not. “We saw a void there, we thought an opportunity was there to offer a low-cost [payments] solution,” she says. “The small-business trust is already there.”

With PaymentNetwork, a supplier includes a link to a special PaymentNetwork URL on its invoice. Its customer uses the link to initiate a payment. On the first visit, the customer must create an account, filling in bank-account data and giving an e-mail address. Transactions settle through the ACH, with Intuit taking its fee only when the funds deposit into the supplier’s account, the spokesperson says.

Though intended at least initially for b-to-b transactions, PaymentNetwork could ultimately be used by consumers to pay merchants or other businesses online with whom they have billable relationships. The business “could include a link on its statements to consumers,” the spokesperson says. But here the service could face some imposing obstacles, including competition from established payments brands like PayPal, Visa Inc., and MasterCard Inc. “People already have debit cards in their wallets and they like them,” says Red Gillen, a payments analyst at Celent LLC, a Boston-based research firm. “That’s a pretty high hurdle.”

At the same time, the consumer market may prove limited. “How often do I get billed by a small business,” asks Pankaj Gupta, a former Visa manager who is chief executive of Noca Inc., a startup that also relies on the ACH to process transactions for online merchants (Digital Transactions News, Feb. 18). “That’s doable, [and] I think there’s a niche market for it, but I don’t think it’s the center of the e-commerce experience.”

Also based in Mountain View, Noca is already targeting consumer transactions at online merchants’ checkout pages. It charges 0.25% per transaction, which means it is cheaper for merchants than PaymentNetwork on any sale under $200. Since launching this winter, it has signed more than 200 merchants, with more than 100 activated, according to data from the company.