A payment startup declaring plans to become the next PayPal Inc. probably is a bit of a stretch. But what about being “the anti-PayPal”?
That’s the tack two young entrepreneurs are taking with WePay Services, a Palo Alto, Calif.-based startup that hopes to grab market share from PayPal and Square Inc. by going after small, first-time merchants with an online payment service that takes less than one minute to set up.
And WePay also boasts that its users can expect to get immediate, personalized help from customer service representatives, unlike many other alternative payment services.
“We’re the anti-PayPal because everything they do poorly for new merchants, we do better,” contends Rich Aberman, one of the firm’s two cofounders.
WePay enables users to accept payments online via credit or debit cards through its website with very few steps. Accountholders immediately may opt to use one of four tools on WePay’s site: send invoices, sell tickets, accept donations or sell items.
While the majority of transactions WePay handles are initiated via credit and debit cards, consumers may also set up their own WePay accounts to make payments to WePay accountholders directly from their bank accounts through the automated clearinghouse system. It takes up to two business days for WePay to confirm consumers’ bank accounts to accept payments, a spokesperson for the firm explains.
WePay accountholders may begin receiving payment as soon as card transactions clear, “usually within two to three business days,” a WePay spokesperson says.
The firm stores accountholders’ funds in an FDIC-insured account it has established with Wilmington, Del.-based The Bancorp Bank.
WePay charges accountholders a flat transaction fee of 3.5% of the purchase, with no setup fee or volume discounts. WePay then subtracts the transaction fee from the funds it reimburses to customers.
Accountholders may receive their funds from WePay accounts by going online to request that the firm mail them a check, which typically arrives within four business days. Accountholders also may opt to link their bank account to receive funds there, or they may transfer the funds to another WePay accountholder. WePay charges no additional fees to accountholders to receive funds through any of those channels, the spokesperson says.
The idea is to keep setup and pricing highly streamlined for busy entrepreneurs whose main goal is speed and simplicity, Aberman says.
“We believe we are also cheaper than PayPal for small businesses,” he says, noting that PayPal charges independent merchants 2.9% of each sale plus 30 cents.
That means that, on a typical $10 transaction, a WePay transaction would cost the accountholder 35 cents, whereas using PayPal the total cost of the transaction would be 59 cents.
PayPal executives were not available for comment.
New users can click on a button on WePay’s website for help and a customer service representative will respond by email, usually within 68 minutes of initiating a question, the company claims.
The privately held firm increased its revenues tenfold last year, and although its managers decline to discuss revenues, the firm claims to have signed up 25,000 customers since its 2008 launch.
Boasting a growth rate of 30% monthly, WePay also claims that about half of its new customers are coming through social-media channels, specifically individuals and small organizations. WePay offers users a $20 reward for referrals that result in new WePay accountholders; the person providing the referral also receives $10.
“PayPal has a strong foothold in e-commerce with small businesses, but PayPal makes it hard to get started and lacks good customer support,” Aberman says. “Our goal is to go after PayPal where it’s weakest, such as the pages of steps you have to go through to get started and the fact that it’s very hard to get direct help from PayPal if you run into any problems with transactions.”
“Word of mouth is our biggest marketing channel as people spread the word about how easy it is to use WePay compared with PayPal and other services,” he says.
WePay so far is confined to online payments, but the firm plans to offer a mobile-payment application “soon” that may include a point-of-sale payment option.
Aberman, 27, who says he dropped out of law school to team with his investment banker pal Bill Clerico, 26, to launch WePay, acknowledges the challenges they face in trying to build a mass of users merely from word of mouth for a service that is rapidly becoming a commodity, as legions of other startups offer various forms of alternative online payments.