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Online payment gateways play a crucial role in driving ecommerce in South Africa and the whole world for that matter. The right gateways can give merchants the ability to cut down on transaction fees and create a safe and easy experience for the customer. I-Pay thinks it has the answer to the online payment space’s biggest needs — Electronic Funds Transfers.
When one think of innovation in the payments space, Electronics Fund Transfer (or EFT) is probably not the first thing that comes to mind. Especially in a world with Bitcoin wallets, ScapScan and M-Pesa, EFT seems so last year. To the contrary, however, as the aptly named Thomas Pays and founder of i-Pay argues.
Pays made his name as one of the founders of Smokoo — the late bidding slash gambling website that turned in heaps of revenue back in its heyday. “Smokoo returned R5.5-million in revenue per month after which it was sold to a Durban-based company six months after launch,” Pays says.
After Smokoo, the i-Pay founder and serial entrepreneur turned his attention to an online dating site in 2012, Adopt Him, which has ceased to exist.
Besides the startups, the Frenchman is also the founder of the digital agency, Just Perfect, which claims most of Smokoo’s popularity — bringing over 300 000 visitors per month to the site’s doorstep within just six months. Apart from developing Smokoo’s website, so far it’s been responsible for sites like Daytona Group, Matrix Warehouse Computers and of course, most recently i-Pay which was launched in early November.
“We have been developing a cutting edge ecommerce platform and part of that was to create a payment solution for our clients using this platform that can be fully integrated into their store,” says Pays explaining his inspiration for the Rivonia, Johannesburg-based startup.
If the online payment space seems so crowded with merchant solutions, what made i-Pay turn to EFT?
For one, “Chargebacks are a huge issue in online commerce around the globe,” Pays — who’s self-funded the startup which took him and his team of seven only a few months to build — tells Ventureburn .
A chargeback occurs when a consumer makes an online purchase, receives the goods from the online store and then requests a refund from the issuing bank. This leaves the merchant accountable and at the mercy of the fraudulent consumer, regardless of the measures they took to verify the transactions. This is a huge issue, as JP Morgan in 2012 found that 41% of fraud losses are due to chargebacks.
Chargebacks are one of those things that ecommerce companies, especially, can’t seem to get off their backs. In most counties online shopping requires the customer to have a credit card though some online outlets also include alternative payment options like cash-on-demand, EFT or even Bitcoin.
While obviously not all online, credit card fraud is rampant. Earlier this year, popular WooThemes saw over 1 000 fraudulent cases reported, and was one of many others that have suffered from fraud. The South Africa Banking Risk Information Centre told IOL Business that losses due to credit card fraud increased by 23% from R366-million in 2013 to R453.9-million in 2014.
As you might know, EFTs are secure. Granted there are money in your account and you’ve provided all the correct details, the direct bank-to-bank money transfer is a guarantee.
Another benefit that comes with EFT is the fact that it promises lower transaction fees. I-Pay’s transaction process takes about eight seconds, says Pays, and charges between 1.5% and 2.5% per transaction, depending on the amount.
Moreover, while most existing payment solutions like PayFast and PayGate already offer an EFT option, i-Pay’s six-step payment process claims to be seamless and and more secure.
The user-friendly process the startup promises is coupled with its 24/7 customer support system. “Many online solutions respond to queries as long as one to two weeks. This is not acceptable. We take 60 minutes or less,” boasts Pays.
He also explains that i-Pay’s product is not limited to ecommerce sites but to any business or individual who has a bank account. You can, for instance, send someone a unique link they can then use to pay you via EFT.
Major online payment providers such as PayFast and the like could be seen as competitors, though they are also potential collaborators. I-Pay founder says that the company has pitched to many of these players already and is in talks with major ecommerce playeres such as Takealot and Kalahari.
Pays tells Ventuerburn that it plans to focus on developing a mobile-focused solution in 2015 when it also plans to dominate the local market. “Having just launched in SA, our next step will be to move into the rest of Africa and Australasia,” he says.
Is there space for yet another payment solution in South Africa’s increasingly online market? While certainly playing a way different ball game, will i-Pay become another Smokoo or will it share the fate of the dating site, Adopt Him?