PayPal may appear to have the online payments market sewn up, but WePay believes there is space for another player. The firm’s founder, Bill Clerico, spoke to StrategyEye about WePay’s effort to take on PayPal.
How do you compete with PayPal?
We have about 1,000 merchants a week accept their first payment on WePay. The majority of those are not PayPal users. We are cannibalising some of their business. We do have people defecting from PayPal because of a bad experience or because they found PayPal too complicated or it didn’t offer what they wanted. But we’re really marketed to small business owners that want to start accepting payments online for the first time.
For a very long time we have positioned ourselves against PayPal by talking about doing a better job underwriting small business owners that don’t really fit within the PayPal box. But the one thing that we’ve never competed with PayPal on is the ability for people to accept payments on their own websites. One of the reasons for that is we wanted to make sure that we looked at what PayPal did right, but also what it did wrong. Our goal is to make it as easy as embedding a YouTube video for people to accept payments on their own websites.
How are your payment buttons different from PayPal’s?
If you go through the forums, people’s number one frustration is that unless you’re paying a monthly fee you’re required to redirect to PayPal for payment, and when you do that PayPal tries to get people to login to their existing PayPal accounts. If you don’t have one, they try to get you to create one and they try and get you to pay with your bank account. The merchant doesn’t get any of the savings PayPal creates by getting people to pay with bank accounts, rather than credit cards.
How much demand do you realistically expect to see for your payment buttons?
There are about 30m small business in the US and less than 5% of that 30m currently accept payments online. The size of the online payments market is massive and it’s only going to grow as more of these small businesses come online. These are people who do real transaction volume, they are supporting themselves and their families, but they’re not serious e-commerce powerhouses. They’re marketing consultants and life coaches and limo services.
In the long term the majority of our business will come through payment buttons. There are countless numbers of small business owners that have some kind of web presence and now need to look at how they’re going to accept payments, it’s a green-field opportunity. As PayPal shifts its focus towards business development deals with McDonalds, it leaves what used to be their bread and butter demographic wide open to us.
What cut do you take?
2.9% plus 30 cents for credit cards. That matches Google and PayPal. In the US, PayPal and Google are the target of criticism for charging that, but it's really much cheaper than a traditional merchant account for small businesses. There're merchant accounts that advertise 2% plus 15 cents, but that's on only qualified credit card transactions. Most transactions are non-qualified so there's this big surcharge and you've got to pay a monthly fee, a setup fee, a gateway fee, a settlement fee. If people pay from their bank account we charge 1% plus 30 cents.
What do you make of Square’s recently launched monthly subscription model?
I have a tremendous amount of respect for Square and the big moves that they make. That monthly fee is much more exciting than people think. For them to bite the bullet and offer a monthly fee when their cost structure is variable is aggressive and it's probably directionally correct for the merchants they're looking for. My guess is that the average merchant will probably end up paying around the 2.75% market average for a swipe transaction. But it's a no-brainer from a marketing perspective.
What are your plans for mobile payments?
We're going to need to provide some way for people to accept payments on the go. We'll release an app in the next few months. We're most likely not going to have a dongle in the foreseeable future. We'll have some way of invoicing on the go or offering a virtual terminal. We respond to what merchants are asking for and it seems that right now merchants want a quick way to invoice their customers and maybe punch in credit card numbers.
How much traffic do you get from mobile sites?
From the consumer perspective, 20% of payments are made from a mobile device. And these aren't people that are making in-person point-of-sale payments. They're just browsing the web on an iPhone or an Android. There is a lot of room for us to focus on improving the mobile payment experience of people on a mobile device. If you look at the drop off for check-out on mobile, it’s doubly as high as a computer. That's free revenue for us and for small business owners.
What are the main challenges?
We're worried about the PayPal brand. They have a reputation for poor service, but in reality they are the de-facto solution. That’s a barrier for us. What I lose sleep over is can we make the product good enough that we can take some of that brand equity from PayPal.
In terms of the general space, there is no stopping small business owners from accepting credit cards online now. We're going to see that mushroom. Square's riding a tremendous wave of smartphones, increased sophistication, the expectation for people to accept credit cards in the real world. There are 25m businesses that are not currently accepting credit cards. In 10 years every one of them is going to be. It's a mad race to appropriate market share.