VCs putting money into personal finance sites

February 17, 2008

Venture capitalists have been busy investing in personal-finance Web start-ups, attempting to tap into a new generation of consumers who have never balanced a checkbook and increasingly view online money management as they would any other kind of Web service.

Read at

PayPal offers secure way to shop non-PayPal sites

November 19, 2007

By Eric Auchard

PayPal, the payments service arm of online auction leader eBay Inc, is set to release on Tuesday a convenient way for its customers to make payments on Web sites that don’t accept PayPal directly.

The new software utility, called the PayPal Secure Card, recognizes when a user lands on an e-commerce checkout page and automatically helps the user fill out the payment form in a secure way that also offers stepped-up fraud protections.

It answers an innovation by Google Inc, which a year ago introduced Google Checkout, which stores financial details to make shopping more convenient, analysts said.

Through a partnership with credit card issuer MasterCard Inc, Secure Card generates a unique MasterCard number each time a PayPal user arrives on an e-commerce sales checkout page that does not otherwise accept its payments.

“From a merchant’s perspective this looks like any other MasterCard transaction,” said Chris George, director of financial products for PayPal. “And it’s just another PayPal purchase to the customer.”

Secure Card has been tested by 3 million PayPal customers in the past year. The plug-in will be available to U.S. customers on Tuesday, with international customers to follow.

When a PayPal customer wants to pay for something on a site that doesn’t normally accept PayPal payments, users click a downloaded PayPal button on their browsers to generate a unique, single-instance Secure Card transaction number.

“Actual PayPal activity goes up,” George said. “It makes sense, because it just makes shopping easier and safer.”

By residing on the PayPal user’s computer, Secure Card can detect when users visit e-commerce sites. The software then automatically fills in their stored financial information, requiring just a few more clicks to authorize a transaction.

PayPal stores no details on the local computer for security reasons. Instead, it logs Secure Card activity in the user’s account on central computers for safety and record-keeping.

Secure Cards work on Windows computers running either Internet Explorer or Firefox. Users of Apple’s Safari browser have only partial access to the service for now, George said.

Red Gillen, an analyst with financial services research firm Celent, said the new service makes PayPal useful on e-commerce sites across the Web, not just on online merchants that have embedded PayPal technology into their own sites.

“This is really the way to complement those Web sites that don’t take PayPal already,” the analyst said.

Usage of PayPal on the Web at large is growing at nearly twice the rate that it is on eBay and the new service will help further accelerate this growth beyond the tens of thousands of merchants who already accept PayPal payments.

In the third quarter ended September, transactions through Web merchants grew 61 percent to $5.38 billion from a year ago, while overall PayPal transaction volume grew 34 percent to $12.22 billion over the same period.

PayPal reported 37.5 million active accounts during the latest quarter, and 164 million total accounts worldwide.

Secure Cards is the latest measure from eBay to curtail “phishing” — spam e-mails that seek to deceive customers into clicking on bogus sites and giving up key financial details.

A study by anti-virus firm SophosLabs found in September only 21 percent of phishing purported to come from eBay or PayPal. A year ago, 85 percent of these bogus messages claimed to be from these two leading auction and online payment sites.


Alternative Payment Methods: Increasing the Consumer’s Willingness to Pay

November 15, 2007

magine walking into your local supermarket as you normally would. You fill your shopping cart with groceries, and when you get to the checkout line, you see hundreds of abandoned carts loaded with items, strewn haphazardly about, but with no shoppers to be found. Was there a fire? Natural disaster? In a brick-and-mortar supermarket, only a catastrophe could cause such an odd sight, but online it is par for the course. The majority of people who take the time to load a shopping cart never make it through the checkout line; the industry average projects a staggering 60 percent figure of abandoned shopping carts.

Why don’t these people pay? Why would somebody go through the effort and maneuvers of shopping without actually following through? Quite often it comes down to price or, moreover, willingness to pay. There is a lull between loading a shopping cart and actually paying that allows a pajama-clad online shopper plenty of time to pontificate the merits of the would-be purchase, look for a better price or simply get distracted and lose interest.

A Good Place to Start

There are many ways to increase successfully completed checkouts, but perhaps the most important one is to try to augment the consumer’s willingness to pay. Adding alternative payments is a good place to start because it’s not too difficult to see that increasing payment options can potentially rope in more potential shoppers.

If your wallet only contains an American Express card and a US$20 bill, and you stumble across a restaurant that is selling $30 meals and only accepts Visa and MasterCard, chances are you will continue your stumbling until you find an establishment that accepts your money in a form you presently have available. Likewise, the PayPal effect is real; somebody who just sold an antique doll on eBay via PayPal might have $200 sitting in a PayPal account, willing to use that balance on a somewhat cavalier purchase. It’s almost like money found under a couch cushion, subject to less stringent purchasing criteria than money earned from a paycheck, and therefore increases the consumer’s willingness to pay.

There are other ways that alternative payments can help. Sometimes a consumer’s willingness to pay will be diminished by the lack of trust in an unknown merchant, which is something that reputable alternative payments like PayPal and Google Checkout can help offset. BillMeLater, likewise, might attract consumers who are hesitant about placing a large purchase on a debit or credit card. Other payment types simplify the experience and reduce the amount of friction in a checkout — call it the solution to the “my wallet is downstairs and I’m upstairs” effect that brings so many checkouts to a grinding, permanent halt.

Another Problem

Unfortunately, there’s another — much bigger — problem: Sometimes people want an item but they just don’t want to pay for it — or at least what you’re charging for it — no matter what form of payment is accepted, whether it be credit card, cash, check, PayPal, BillMeLater, Google Checkout, gold ingots, etc. Traditional payments and most alternative payments don’t really solve this problem, because they simply shift the tender type around without really overcoming the consumer’s fundamental resistance.

Shoppers are bizarre creatures. The same person who might agonize over whether to buy the $8 or the $9 pair of socks might drop $200 — without so much as an afterthought — on a bottle of wine, spend $120 per month on car insurance without even looking for a lower quote, or cough up anything to get the latest trend in denim. People have different price sensitivities for different products at different times.

It turns out that a terrible customer for one merchant might be a great customer for another merchant. The same person who abandons your shopping cart might be the best customer in the world — come Valentine’s Day — for FTD, or a terrific shopper at Gap, or an ideal Geico policy holder, or a lifelong Blockbuster member. These companies, in turn, will pay a lot of money to acquire a new customer.

Alternative Payments

What if you could offer your customers your products for free if they bought flowers, signed up for a premier wine club or switched insurance carriers — things that they apparently want to do anyway? It turns out that you could get paid as if customers purchased from you directly, fundamentally changing the whole nature and numbers of the conversion game for “bad” customers.

This is where alternative payment companies like TrialPay, Webloyalty and Affinion help. TrialPay is a different kind of alternative payment, a conversion tool for the large numbers of customers who ordinarily would not pay. Just as BillMeLater can help convert a customer who might not have enough cash to make a purchase, TrialPay helps convert customers who wouldn’t normally purchase — period — by allowing those customers to “pay” when they transact with a trusted partner for which they have a high willingness to pay, like Geico, FTD, Blockbuster, etc. The Geicos and Blockbusters pay TrialPay for the customer acquisition, which covers the cost of the product or discount you give away to the customer.

The concept is not too far removed from Amazon’s “Get $30 Off When you Sign Up for an Visa Card” promotion that Amazon shows in every U.S. checkout — the key differences being that not everybody wants a credit card, and offering other services might prove more lucrative to the merchant and compelling to the consumer.

Significant Revenue Possibilities

This concept can be used in so many more places. If a customer closes the browser window on the shopping cart page, you can show them a message offering them a discount funded by a blue-chip advertiser. If a customer is looking up shipping prices, you might be dealing with a frugal customer more likely to abandon their shopping cart.

Customers who haven’t come back to shop with you in months or years are buying other things elsewhere. You can win them back by offering them discounts when they transact with your partners. This yields you — as a merchant — incremental revenue, but also recaptures your customers’ attention.

When you truly increase a consumer’s willingness to pay, the revenue possibilities are significant simply because the vast majority of your visitors probably never engage in a transaction on your site. An intelligent and thorough implementation of relevant alternative payment options can slowly but surely chip away at a consumer’s reluctance to pay you and make a lasting effect on your business.


Revolution Online Money Transfer Service Pits Itself Against PayPal

November 14, 2007

By Antone Gonsalves

Startup Revolution Money, an online payment service that’s up against EBay’s popular PayPal, launched on Thursday as a new alternative money-transfer service.

The company’s Revolution Money Exchange service enables subscribes to transfer money from their bank accounts to each other. People interested in the service, which is available at no charge, must sign up through the company’s Web site.

See more at