Paymate Adds an Aussie Accent to Crowded Online Payments Market

The U.S. alternative-payments market has already attracted a slew of startups over the past few years, and now it's drawing even more competition from overseas. Paymate Global Inc., the U.S. arm of Australian processor Paymate Pty Ltd., earlier this month completed its integration with eBay Inc.'s checkout system and joins eBay's PayPal Inc. and ProPay Inc., an Orem, Utah-based merchant processor, as the only payment providers approved for use by eBay sellers following eBay's decision last year to adopt an all-electronic payments policy (Digital Transactions News, Sept. 16, 2008). Using eBay's massive online marketplace in the U.S. as a launching pad, Paymate plans to be processing transactions for e-commerce merchants on their own sites by the end of the year, Dilip Rao, who founded Paymate in 2000 and serves as managing director, tells Digital Transactions News. “Ebay is our entry strategy,” he says. “It gives us a marketplace and some credibility.” Handling e-commerce transactions off-eBay will “happen within months,” says Rao, who is already talking to interested merchants. Word of Paymate's pending availability on eBay only became available in January, but in the past six to seven weeks, says Rao, the service has signed up 600 users, most of whom are sellers. “This was when the service wasn't even available and the pricing not even announced,” he says. “That's given us some traction. We haven't done any advertising or marketing.” Paymate's entry into the U.S. market comes at a time of surging interest among merchants in alternatives to conventional general-purpose credit and debit cards. Much of this interest is driven by steadily increasing acceptance costs, but merchants are also seeking payment methods that serve customers who don't want to enter credit card details and that relieves sellers of the responsibility of storing such data. Paymate works like an independent sales organization by providing merchant accounts to sellers and then acting as processor for those merchants. In the U.S., it is focusing on credit and debit card transactions only, charging merchants a fee of 3% plus 50 cents per transaction. For this fee, Paymate runs risk-management calculations on each transaction, credits merchant accounts overnight, and handles all refunds and chargeback inquiries on behalf of merchants. “We're able to advocate on behalf of the seller,” says Rao. “Painless payments is what we're aiming for.” Customers are not required to register. Instead, on first use they enter their card details along with an e-mail address. Users who register with Paymate merely need to enter their e-mail addresses on subsequent use. None of this information reaches merchants. Paymate, which Rao says is compliant with the Payment Card Industry data-security standard, stores and manages all card data. Rao says Paymate's risk-management routines have held fraud losses down to 0.1% of sales volume in Australia. By contrast, PayPal's fraud losses generally range between 0.25% and 0.3%. For its off-eBay strategy, Paymate is wooing small businesses looking for add-on services, not large e-commerce shops that typically seek commodity transaction processiing. “We don't target the big end of town,” says Rao. In Australia, Paymate worked with eBay's local service until eBay bought PayPal in the fall of 2002. Then, last summer, eBay approached Paymate about becoming integrated into eBay's U.S. operation, Rao says. “Our position was we were just as good as PayPal,” he says, and work began on the integration process, which took six months to complete. Rao calls eBay's selection of Paymate for its new all-electronic program an “affirmation” of Paymate's service. “We might be a new kid on the block in the U.S., but we're not new when it comes to this business,” he says.