New entrants continue to flock to the
alternate online payments market in the US, the latest being Noca
and Mazooma. Robin
spoke to both start-ups to gain insight
into their game plans and to other industry participants and
analysts to obtain their views on the new entrants’ chances of

Expansion of the crowded US alternative
online payments market continues relentlessly with the launch of
new services from start-ups Noca and Mazooma. Adding to the
competitive landscape, Amazon has gone live with Amazon Flexible
Payments (FPS), a platform enabling online retailers to offer a
range of payment options.

In keeping with online payment giant PayPal,
these new services and other fledglings such as Moneta, eBillMe and
the National Automated Clearing House Association’s (NACHA) Secure
Vault Payments (SVP), offer consumers and online retailers payments
which don’t involve credit or debit cards.

Payments are made through a web-initiated
transfer direct from shoppers’ bank accounts to e-merchants via the
US automated clearing house (ACH) network, internet banking bill
payments or from an online stored-value account which can be topped
up with a debit/credit card or a bank account transfer. The
advantage is that, unlike with card payments, e-merchants never see
shoppers’ information.

Noca and Mazooma hope to take advantage of the
current economic climate in which US consumers are changing from
over-reliance on credit cards to a spend-what-you-have mentality.
While Noca has opted for web-initiated ACH transfers for its Secure
Check service, Mazooma (a US slang term for cash) gets shoppers to
make bill payments to merchants via their internet banking account.
Secure Check requires consumers to fill out the digital equivalent
of a paper cheque.

“We have been live with a small number of
merchants since mid-2008,” Mazooma president Sean Kelly told
EPI. “Merchants taking payment via Mazooma receive instant
notification of completed transactions. This allows them to fulfil
and ship orders immediately.”

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Mazooma is focusing on acquirers and payment
service providers that have existing relationships with thousands
of merchants, Kelly explained. The service is available on Cardinal
Commerce’s Cardinal Centinel processing platform, along with
MasterCard and Visa cards, PayPal, NACHA SVP, eBay’s transactional
credit provider BillMeLater and eCheck. According to Kelly,
Cardinal Centinel is used by 30,000 US e-merchants.

Noca, however, has yet to announce which
processing platforms it will be available on.

“Noca is hoping to act as its own acquirer,
rather than partnering with processors such as CardinalCommerce,”
George Peabody, director of emerging technology at Mercator
Advisory Group told EPI. “CardinalCommerce has done a good
job of aggregating multiple payment platforms for e-merchants, so
it can give customers a wide range of choices of how to pay.”

Big challenge ahead

Peabody said for Noca and Mazooma, the big
challenge will be getting merchants and shoppers to sign up. Taking
market share away from PayPal will be hard, he stressed.

Noca was founded by Pankaj Gupta, a long-time
Visa executive who most recently handled network security at Visa
USA. Distinguishing Noca’s offering is its ultra-low-cost fee
structure – a flat rate of 0.25 percent of transaction value.

Last year, Noca piloted its micro-payments
platform on two Facebook applications, OneClickPay and

“We started on Facebook as we wanted to get
some user experience feedback before we built the full version of
our system,” said Gupta. “We tested our system on micro-payments
because those are low risk.”

Gupta added that, following Noca’s launch in
February 2008, the number of merchants signed up for its platform
has risen from a double-digit number to triple-digits. Clients
include Klatcher, a digital content supplier, and clubsetup, a
young people’s sports website.

“We tell merchants that our fee is almost
zero, and there are no extra fees or start-up charges,” Gupta said.
“This really undercuts PayPal’s merchant pricing.”

The standard fee charged by US acquirers for
an e-merchant to accept credit cards is 2 to 3 percent of the
transactional value plus a $0.30 flat fee per transaction.

“Noca’s almost zero fee is definitely a strong
argument with merchants, and it warrants their consideration,”
commented Bruce Cundiff, director of payments research and
consulting at Javelin Strategy & Research. “It is not the only
merchant consideration, however. Merchants are most interested in
providing the type of payment consumers want to use, and they don’t
want the method of payment to in any way impede closing the

Adding competitive pressure, Amazon went live
with its Amazon FPS in February 2009. Amazon FPS, previously
available in beta form, allows e-commerce websites to offer a range
of payment methods on Amazon’s processing platform including
credit/debit cards, balance transfers from shoppers’ Amazon
Payments accounts and ACH debits from bank accounts. Amazon sees
micro-payments as an important FPS application.

With active account users approaching 90
million, Amazon has the advantage of size. Smaller players,
however, have a far tougher task ahead.

“Consumer buy-in will be hard to achieve for
[firms such as] Noca,” said Avivah Litan, a Gartner Research
analyst. “But right now there is a strong need for a viable,
low-cost payment mechanism in micro-payments. For example, the
newspaper business needs it [micro-payments] in order to survive!
So I think one or more of these firms has a shot if they can get a
few large electronic content or services businesses to adopt


How Noca’s Secure Check

On a Noca-enabled merchant’s
checkout page, the customer selects ‘bank account’ as the payment

While still at the merchant’s site, the
customer is presented with an online cheque with the payment amount

As well as completing the fields for name,
address and cheque number, the customer provides their email
address and the bank account and routing numbers found at the
bottom of a physical cheque issued by their bank;

After submitting the online cheque to complete
payment, Noca emails the customer with a link to a portal at Noca
to view transaction details.