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Consumers outside the U.S. don’t carry credit cards to anywhere near the extent that U.S. consumers do. Now a group of former high-level credit card executives has formed a company to create e-check-style payments for retailers who want to sell to overseas customers.
Who would know better than MasterCard and Visa executives the limits of the credit card as a payment vehicle outside the U.S.? Consumers have not adopted credit cards in other countries as they have in the U.S.-and that creates an obstacle to U.S.-based e-retailers who want to expand to overseas markets.
A group of former high-level executives at MasterCard and Visa has formed a company called Payment Partners to address that gap. The company has developed a sort of e-check that facilitates an electronic funds transfer from overseas consumers’ bank accounts to U.S. merchants. “We have developed relationships with banks in 20 countries to turn international payments into a series of domestic payments for online merchants who want to sell to non-U.S. consumers,” says Deb Hylen, chief administrative officer of Irvine, CA-based Payment Partners. She says 30% of visitors to U.S. online retailers are from foreign countries, but many fail to buy when they are presented with payment options limited to credit cards.
The biggest difference between how U.S. shoppers pay with what has come to be called an e-check and how consumers in most of the rest of the world pay is that in other countries, the consumer must initiate the transaction. Consumers must instruct their banks to transfer the funds to the recipient’s account. In the U.S., the recipient can instruct the bank to transfer the funds.
Under the En-point Direct program, Payment Partners provides currency conversions and shipping fees at checkout so the buyer knows the price in local currency. The buyer then provides the banking information and the En-point Direct server provides the deposit information. At that point, the order is completed, but then the buyer must take the additional step of providing his or her bank with the payment information to effect a transfer to an account maintained locally by Payment Partners. When the transfer is completed, the order is considered paid and the merchant can ship the product. Payment Partners subsequently transfers the money to the merchant’s account in the U.S. using the ACH.
In the U.S., the majority of customers who order goods and then promise to send a check never follow through. But because overseas consumers are used to initiating the transfer of funds, Payment Partners does not expect a significant number of customers to not follow through on the sale. “The only way to complete a sale today is through an international wire transfer, and since this is so much easier than an international wire transfer, we’re not expecting significant drop-off,” says David Roddy, an investor in and consultant to Payment Partners.
Management and the board of Payment Partners is almost a Who’s Who of Visa and MasterCard through the 1980s and 1990s. Chairman is Charles T. Russell, CEO of Visa International for nine years. CEO is Greg Bjorndahl, former senior executive at Visa. Treasurer and senior vice president, international, is Tom Cleveland, former CFO, group executive vice president and treasurer of Visa. Payment Partners’ board includes Roger Peirce, former COO of Visa. Adviser to the board is Alex “Pete” Hart, former president of MasterCard International.
Payment Partners will market the service through banks and independent sales organizations, as well as through developers of e-commerce shopping cart software. Payment Partners hopes to eventually offer the service to overseas merchants selling to customers outside the merchant’s home country.