Checkout.com has used alternative fees and a high-touch approach to build a market for its online payments toolkit in Europe. Now it's come to the U.S., where the likes of Stripe and Braintree already own a sizable chunk of the market.

The London-based company says the retail industry relies too much on APIs for a one-size-fits-all approach to technology and pricing. Checkout.com is attempting to outflank that by relying on its private ownership model, which he said precludes heavy pressure to build a huge base of consumers. By focusing on expanding midtier businesses, Checkout.com hopes to build relationships that encourage customized cross-selling as an alternative to the multibillion-dollar firms such as Stripe and Braintree.

Peter Caparso, Checkout.com's president of North American operations
Peter Caparso, Checkout.com's president of North American operations

"It's not a numbers game; we want to understand the businesses," said Peter Caparso, Checkout.com's president of North American operations. "We don't have a bank or a PE firm telling us, 'This is what you need to do. You need to hit a certain goal.' If a merchant wants to have a certain function created, we pick up the phone."

Checkout.com has about 300 employees and 100 developers. Its 700 clients include Samsung, TransferWise, Hopper, Virgin and Adidas. The company recently opened offices in Boston and San Francisco, where it will tackle an e-commerce enablement market that includes huge established brands.

Checkout.com's niche includes small businesses that have gained some traction, creating a sudden burden of merchant service and payment needs to accommodate the merchant's more aggressive growth plan.

"We get to the business right as they take off, at a crucial inflection point for the merchant, when it wants to expand into a new territory or offer new payment methods," Caparso said.

Its online payments tools cover most international credit cards, pass-through wallets such as Apple Pay, stored value wallets such as PayPal and Alipay; and alternative payment options such as Klarna, Nets, Boleto and iDeal.

Checkout.com is also using a fee structure that's different from most APIs for payments, which usually charge 2.9% plus 30 cents per transaction, or something close to that. Checkout.com is charging "interchange++ (a formula of processing and card payment costs designed to spot the "best" rate), which standardizes commissions that card issuers collect, Caparso said. The amount varies by card type, bank, merchant location and other issues, making it more customized to the specific merchant.

Alternatives to the standard 2.9% plus 30 cents have been tried before, including by mobile payment and marketing company LevelUp, which has changed its fee policies several times over the years. Caparso said combining Checkout.com's fee structure, lack of a long-term contract and no setup or maintenance fees creates a sense of cost transparency that should be attractive to merchants.

"All of the markups are revealed, so merchants know what they are going to have to pay," Caparso said. "And there's a month to money agreement, with no terms."

By focusing on a niche within the broader e-commerce merchant payment market, Checkout.com's strategy will become more common as other much larger merchant acquirers companies look for share.

"Legacy acquirers such as First Data and Vantiv/Worldpay have been entering the space, often through acquisition," said Raymond Pucci, associate director of research and consulting services for Mercator Advisory Group, who said the valued services now include API integration, subscription payment needs and smart transaction routing options in addition to the basic e-commerce interface. "Watch for a high degree of provider differentiation to occur that's aimed at merchant verticals."

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