My Payment Network Looks for Big Growth from Niche Web Markets

An Internet payments processor founded early this year is looking to tap into underserved niche markets like schools, service companies, and other small businesses with what it bills as an inexpensive and easy-to-use application. My Payment Network Inc., Corte Madera, Calif., just began operation in August but hopes to be doing at least 1 million transactions annually a year from now, according to David Dunaway, a former Yodlee Inc. executive who is the startup's president and chief executive. Last week, the company launched its MyPayNet service for small businesses, complementing a similar online payment service for schools, called SchoolPay, that launched a few weeks earlier. Dunaway says niches like schools and service companies (think pest-control companies and the like) require Web-based payment capability but can't get it affordably and in an easy-to-implement form from payments processors and shopping-cart vendors. “Nobody has put together a solution that' s easy and inexpensive for small merchants,” he says. He and his staff?the privately funded company boasts a current head count of eight?worked on its solution for 18 months, leading up to the company's incorporation in February. My Payment Network's system allows clients to create payment pages on which customers can pay for specific products or pay bills, using credit cards, e-checks, or PayPal. The pages are hosted on My Payment Network's server but are linked to the client's Web site. For billers, the application e-mails invoices to customers that contain links recipients can use to return to the payment pages to make payment. Schools can use the pages to take payment for everything from fund-raiser items to lunch fees. Dunaway says the service is so new the company has only now begun marketing it and looking into re-seller agreements. It has recruited a group of parents to market the service to schools, and is also relying on Electracash Inc., a Signal Hill, Calif.-based processor of e-checks, to re-sell the service to small businesses. Electracash serves as the company's e-check processor, while ProPay USA Inc., Orem, Utah, fulfills the same role for credit card processing. So far, Dunaway says, a “handful” of schools have signed on, while a small group of businesses are emerging from a beta test of MyPayNet. Nonetheless, he says that within a year My Payment Network could be handling 1 million or more transactions on an annual run rate across all segments. “That would be a tall order but not unrealistic,” he says. “That's the kind of growth we think we need to have.” My Payment Network charges merchants 65 cents per check, while credit card payments carry a fee of 2.6% plus 30 cents. PayPal transactions cost 2.9% plus 30 cents. Businesses pay a $150 setup fee, which is waived for schools. “The whole idea is that a merchant now has his own payment network and didn't pay an arm and a leg for it,” Dunaway says. Chargebacks, a scourge for mainline Internet merchants, haven't been a problem, Dunaway says, nor does he expect them to become one, given the special nature of his target client base. “It's not gaming or entertainment,” he says. “Not too many people are trying to get out of paying a pest-control bill.” The company expects most clients will require customer enrollment, which will also discourage fraud and chargebacks. “It's built so it's hard to dispute,” Dunaway says. Next up could be churches and nonprofit groups, Dunaway says. He also hints the company could ultimately move into physical-world payments processing. “That's something we are seriously examining,” he says. Currently the company allows a virtual terminal arrangement in which merchants enter transactions taken over the phone into their payment pages.