ReD Looks to Add on Payment Types to Build Online Business

PayPal isn't likely to be the last new payment channel Retail Decisions USA Inc. adds to its transaction products for online merchants. The Hazlet, New Jersey-based unit of Retail Decisions PLC in the U.K. announced earlier this month it was adding PayPal acceptance to its transaction-processing software, LiveProcessor, and its service gateway, ReD1, a move that has apparently met with approval among the company's 600 clients. “We've got a lot of people jumping up and down, saying, 'Me first,'” says Jeff Foster, executive vice president at Retail Decisions, known as ReD for short. “We did an informal poll of our merchant base and found a lot of enthusiasm for PayPal.” At the same time, ReD has cut a deal with Cleveland-based CardinalCommerce Corp., which produces online authentication systems based on so-called 3D Secure technology, to offer Verified by Visa and SecureCode to its merchants. ReD says such authentication has become increasingly popular with merchants now that Visa has offered a 5-basis-point reduction in interchange on VbyV transactions, on top of a shift in chargeback liability from merchant to issuer for authenticated payments. And Foster says more payment alternatives and technologies are likely to be coming at ReD, which two years ago was the first gateway provider to offer the Bill Me Later service from I4 Commerce Inc. Bill Me Later lets online merchants extend proprietary credit to customers, with billing handled by I4 Commerce (Digital Transactions News, March 31). “We want to give our customers access to leading-edge payment processing,” Foster says, and that could mean other payment channels later on. He says ReD will evaluate emerging payment methods, such as micropayment systems, carefully, but will want to incorporate them quickly when they show promise. Micropayment systems have emerged lately as the popularity of sub-$5 digital content, such as 99-cent songs, has soared. But a previous generation of payment systems aimed at handling such transactions failed in the late '90s. “You don't want to build an interface to all those [emerging systems] because 90% are going to go bust,” says Foster. “You need to be selective.” ReD, which built its reputation in the online fraud-management business, last year introduced in the U.S. a transaction gateway aimed at large-volume Web merchants to complement transaction software it had been selling since 2002. It has targeted blue-chip online merchants and service providers, signing some big names like Travelocity, Real Networks, and Netflix. “We're interested in bringing merchants in that are doing upwards of 100,000 transactions a month,” says Foster. Of ReD U.S.A.'s 600 clients, the majority are licensing LiveProcessor. Foster, though, says clients for ReD1 Gateway will likely exceed software clients within two to three years. ReD1 relies on the LiveProcessor engine to handle transactions for online merchants. The key to serving these big merchants, and to attracting more like them, is to add on more payment options. ReD estimates, for example, that PayPal will ultimately account for anywhere from 3% to 10% of sales for clients that accept it, some of which will be incremental sales. Each ReD merchant will be responsible for paying PayPal merchant fees directly to the San Jose, Calif.-based processor, a unit of Internet auctioneer eBay Inc. Some observers might contend ReD is late with its PayPal deal, especially given that competitor CyberSource Corp. made a like deal with PayPal last year. But Foster contends the timing is better now, given that PayPal has just emerged from months of heavy-duty technical work aimed at making its processing service suitable for online retailers, particularly those handling transaction volumes at a level ReD is targeting. “They've got a spec that can support big merchants, including reconciliation, reporting, and big volume [capacity],” he says. “They've done a nice job.” The competitive climate among the online gateways heated up even more last week when CyberSource, contending ReD had infringed its patent on fraud management for card-not-present transactions, sued the U.K company. Foster would not comment on the suit, though the company in a release said it was investigating CyberSource's claim and had no reason to believe it had merit. ReD controls 24% of the $42 million U.S. market for e-commerce fraud management, compared to 57% for CyberSource, according to data from Celent Communications.