A new online payment service is hoping to
disrupt the dominance enjoyed by the major card networks when it
comes to online card-not-present transactions. As Charles
reports, Mpayy could prove to be a tangible threat as
not only is it reaching out to small merchants, but it also has the
backing of a major US bank.
An alternative payments entrant backed by US
Bancorp hopes an easy-to-use platform will help it take a chunk out
of the credit card associations’ dominance in card-not-present
Mpayy, a Chicago-based firm that uses the
automated clearing house (ACH) network to switch person-to-person
and retail payments, recently received a second round of funding
and used the occasion to publicly launch the system, which had been
in beta testing.
Conrad Sheehan, Mpayy’s founder and chief
executive, said US Bancorp is one of the firm’s principle funders
and the bank had also led an earlier funding round last year.
Sheehan said Mpayy had been keeping its existence pretty close to
its chest as it completed beta testing and prepared for a
promotional launch.
Now, having tested its internet and mobile
commerce technology since early this year, and having made major
enhancements to its initial offering, Sheehan said Mpayy is now
ready to begin promoting actively online and in some limited
offline promotions as well.
“We will be really stepping up the marketing
effort now, and we have some things in the works online in
conjunction with the football season and the back-to-school
season,” Sheehan said.

Unique value proposition

Mac McCullough, an executive vice-president at US Bank and a
director on Mpayy’s board, said in the processor’s press release
that the banking company was “very pleased to continue with our
role in Mpayy and continue to view it as an attractively positioned
player in alternative payments with a compelling and unique value

Sheehan said the backing of US Bancorp means a
great deal to a relatively new entrant in the red-hot alternative
payments market.
“They are a huge name in payments, of course,
and that just raises our profile,” he said. “They are great bankers
with a great reputation, and that helps us a great deal.”
Sheehan said US Bancorp is hosting Mpayy’s
applications in its data centres. Mpayy is marketing the service as
a lower-cost alternative to credit cards for online merchants,
using the ACH system as a way to beat payment card interchange
expenses, and as an easy, debt-free payment form for

Multi-platform approach

It is also a multi-platform approach, serving as the equivalent of
an e-cheque for bank customers while also offering a stored-value
option for the unbanked. Sheehan said he hopes the versatility of
Mpayy appeals to all kinds of consumers, banked and unbanked,
looking for a secure, easy way to pay.

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“US Bank serves as an enhanced security
presence, and it will serve as our bridge for unbanked Mpayy
accountholders, who could see their relationship grow with the
bank,” he said.
Initial customers include Alliance for Lupus
Research, which is using an Mpayy application known as a ‘widget’
to add a payment system to social networking sites. The widget can
be dropped into a blog, or linked in a web site, and it allows the
site owner to preset the payment amount or leave the payment amount
up to the payer.
This has tremendous potential for non-profit
organisations like the Alliance for Lupus Research, which has
installed the widget on its site along with a plea for donations. A
donor can simply enter an amount, obtain a password and use Mpayy
to make a donation. Sheehan said that Mpayy can even embed video
within the widget.
The widget is also now embedded in the popular
social networking site MySpace, making it easy for any MySpace user
to drag a Mpayy widget onto their site.
Sheehan said Mpayy is aggressively promoting
the service to a wide array of commercial users such as taxi
drivers, online merchants, flea market sellers, and multi-level
marketers who sell using the home party method, touting as much as
a 50 percent saving over credit card transactions as well as free
person-to-person transfers.
“In today’s economy, 100 basis points for a
small merchant can make all the difference, and we can offer them
400 and 500 basis point savings,” he said. “Accounts can be opened
instantly and merchants can track them in real time, to see who is
buying what, and we will move the money so much cheaper.”

Alternative payments pick up speed

Mpayy joins a host of players entering the alternative payment
market, including Bank of America, which recently acquired an
equity stake in mFoundry, a developer of mobile banking and
payments software, and Citigroup, which is testing mobile phone
payments with technology from Obopay. Citi also formed a joint
venture with the South Korean wireless carrier SK Telecom to
develop mobile technology.

In addition to market leader PayPal, the other
leading players in online payments are Bill Me Later, Google
Checkout and Amazon.com’s Amazon Flexible Payments Service.
In the gaming space, Silicon Valley-based
PlaySpan recently acquired PayByCash, the leading alternative
payment system for online games, virtual worlds and social
Then there’s NACHA, the US electronic payments
association, which manages the development, administration and
governance of the ACH system. NACHA’S Secure Vault Payments option,
which went live in May, enables consumers to pay bills and make
internet purchases online.
What Mpayy brings to the table, Sheehan said,
is its multi-platform approach as well as the ability to integrate
with US Bank’s merchant services business.
“We can offer a full merchant experience, as
well as a robust and incredibly easy consumer experience, and we
are on every platform that consumers and merchants do business on,”
he said.
Credit cards still account for the lion’s share
of all internet payments, but Javelin Strategy & Research
predicts alternative payments will comprise 30 percent of US online
payments by 2012, when US internet commerce will reach $355
billion, up from 14 percent of $150 billion last year. By 2012,
Javelin says, credit cards’ share of online payments may shrink to
44 percent, with consumers using debit cards to pay for more than a
quarter of online transactions.