(June 15, 2010) It started out as a way to pay other people through the wildly popular Twitter social network, but now a recapitalized and re-energized Twitpay Inc. is concentrating on much narrower niches where it sees greater potential. In March, using a homegrown, in-house platform, it started processing charitable donations, and in a matter of weeks it expects to leverage that platform to introduce processing for political contributions. Next up after that will be payments for online social games, says Michael Ivey, a serial entrepreneur who co-founded Atlanta-based Twitpay in November 2008 and serves as its president.

Ivey tells Digital Transactions News he’s particularly excited about handling online payments for political campaigns, a service that could prove especially timely with Congressional elections coming up in November. “I see tremendous potential for political donations,” he says.

Though less than two years old, Twitpay has already executed some major changes in its business model. It concluded soon after it started out that person-to-person payments, even between and among Twitter users and followers, would be a long, hard slog. “We learned a lot but we didn’t get a lot of adoption,” says Ivey.

In February, an investor group that included Ashish Bahl, chief executive of Atlanta-based Acculynk Inc., which processes PIN debit payments for online merchants, poured about $1 million into Twitpay, leaving Ivey and co-founder Don Brown with a minority stake. Bahl says he liked what he saw when Ivey and Brown, who serves as chief operating officer, approached him. Twitpay “could potentially be a game-changer,” says Bahl, who says his group brought payments expertise to a management team that knows social networking.

After recapitalizing, Twitpay didn’t give up on general P2P payments. But it quickly built its proprietary platform and started focusing on the much narrower, but underserved, market for donations. Just a month earlier a massive earthquake in Haiti had evoked a flood of electronically processed donations, particularly over mobile devices, which most Twitter uses rely on. “Haiti showed us there’s a great ability to raise lots and lots of money over the cell phone,” says Bahl.

In contrast with its P2P service, where it funnels all transactions to PayPal, the new platform lets Twitpay act as a front end, tracking transaction data and managing e-wallets. For the donation service, dubbed RT2Give, Twitpay handles credit and debit card transactions as well as payments on the automated clearing house, with U.S. Bancorp’s Elavon as its back-end processor. Before, “they were just a gateway between PayPal and Twitter, so they weren’t adding much value,” notes Bahl. “[We saw that] if they owned a payment system, had their own wallet, they could really have something.”

To streamline transactions, the company also introduced a one-click payment method on its platform. By this method, a charity seeks donations by tweeting a request specially formatted for RT2Give. A Twitter account holder who wants to donate can do so by retweeting the request to his followers, who can also donate. In this way, Twitpay not only processes payments but also exploits the viral nature of social networks, where users want to broadcast the charity—and their own generosity—to their friends. “This is also lead generation,” says Ivey.

Twitpay may be starting to gain the traction that eluded it in P2P payments. “They’re on a tear,” says Bahl. Organizations such as Malaria No More, the Literary Freedom Project, and Waterkeepers Alliance, which is active in protecting marshlands and other waterways in the Gulf after the BP oil spill, are using RT2Give. The service’s standard fee to nonprofits is 7% plus 20 cents per transaction, which is higher than ordinary card discount rates but compares favorably with bill-to-carrier rates typically used with text messaging, a frequently used alternative for mobile payments. Ivey and Bahl say most organizations see enough value in Twitpay’s system to justify the fee. “It’s an easy sell to charities,” says Bahl. “You’ve got a process by which you attract individuals who are going to contribute.”

Now Ivey hopes to carry this momentum into political giving and, soon after, social gaming. Twitpay is already in early conversations with some political campaigns, he says. As for P2P, the future may be hazy, at least at Twitpay. “I am personally really skeptical of P2P in the U.S.,” Ivey says. “There are so many established ways to give someone $10. It’s really a struggle.”