A French Processor Sets Its Sights on U.S. Micropayments

The explosive growth of social networks and online games in the U.S., which in the past year or so has drawn the attention of a number of micropayments startups, has now attracted a foreign processor with deep pockets and the ability to offer a wide array of payment options. France's Hi-media Group Inc., a major processor of micropayments in Europe and Latin America, last week set up an office in San Francisco for its U.S. unit, Hi-media USA. The new office will service online merchants in the U.S. using Hi-media's micropayments engine, called Allopass, which processes between 7 million and 8 million transactions monthly for more than 300,000 merchants overseas. Pooj Preena, chief executive of Hi-media USA, won't break out Allopass's U.S. activity but tells Digital Transactions News the runup in traffic on social-network and gaming sites led to the decision to run operations locally. “Our focus is to provide more direct support in a local time zone,” he says. Given up as moribund as recently as two years ago, micropayments has enjoyed a renaissance with the popularity of such sites as Facebook and MySpace, which offer merchants selling small-ticket digital goods a ready-made market attracting hundreds of millions of potential customers. But while most micropayments entrants so far have relied on billing through wireless carriers, a convenient but expensive channel for merchants, Allopass in the U.S. will shortly offer multiple payment options, ranging from mobile-phone, landline, and ISP billing to credit, prepaid, and debit cards. “A lot of companies coming into this space have focused on one payment method that has a very low value proposition [to the merchant],” says Preena. “They either need to adapt what they are doing or move out of the business.” More payment options, Preena argues, mean higher conversion rates and less churn for merchants. Allopass also settles with merchants in seven to 10 days, faster than the weeks of settlement time carrier billing can entail. Preena says Hi-media leverages its cash reserves to compensate merchants while waiting for reimbursement from carriers. “We're a public company so we're able to fund it out of cash on hand,” he says. Allopass's fee is a percentage “in the single digits,” says Preena, without being more specific. This is on top of fees levied by the billing authorities. In the case of carriers, these can range from 30% to 40%. Since users need not register to use Allopass, Hi-media has no count of how many consumers are using its service. In a release last week announcing its new U.S. office, Hi-media listed 14 U.S. merchants, including Artix Entertainment, Boomerang Networks, and Gambit. Merchant integration for Allopass ranges from a day to a day and a half, Preena says, for a social network or game site. The average ticket is three to five units of currency in any particular market, Preena says, in line with the sub-$5 threshold for micropayments. Micropayments have struggled historically because the very low tickets have left little or no profit for sellers after accounting for transaction costs. Credit card fees, in particular, with their fixed-fee component often running 20 cents or more, have been problematic. Meanwhile, hefty charges from mobile carriers for billing services have also been a hurdle for some merchants. Hi-media's payments unit is one of three businesses the 14-year-old, Paris-based company operates. It also runs a an online display-advertising business and a publishing division.