Many merchants still don't take credit or debit cards, usually because of the cost. Two-year-old Plastiq aims to help these holdouts by shifting the cost of card acceptance to the consumer.
Plastiq's goal seems to be the opposite of rival payment providers like LevelUp, which just convinced 20 merchants to temporarily ban credit cards in favor of its mobile payment system. However, both companies use the same tactic of making payment acceptance free for the merchant.
Plastiq “allows the [country] club to wash its hands of charging convenience fees and processing fees,” says Ray McDonald, CEO of ClubSoft Inc., a software company in the private club market.
Plastiq's online payment system resembles any other checkout page. The service fee is presented to the consumer just like sales tax or shipping fees before the total is calculated. ClubSoft is currently rolling out Plastiq to its clients, so club members can choose whether they want to pay enrollment fees and dues with their credit card.
“The private club industry for a long time has wanted to take credit cards,” McDonald says. “But ticket items are fairly large … and clubs can’t pay the fee associated with those credit card transactions."
While some states are allowing merchants to charge convenience fees, McDonald says, it’s difficult for a retailer to meet all the guidelines.
Plastiq enables consumers to make the decision whether to pay a percentage more at the point of sale for the convenience and flexibility of paying with a credit card, says McDonald.
Most consumers want to use their credit cards to gain more rewards points, says Dan Choi, co-founder at Plastiq.
“Plastiq was founded to address a fairly simple pain point, cardholder choice,” says Choi.
Plastiq, which announced the completion of a $6 million funding round last week, joins a growing number of choices at the point of sale.
Large incumbents and stealthy startups are making many types of payment methods available. From facilitating cash transactions between landlords and tenants with PayNearMe Inc. to purchasing coffee with a scan of a smartphone through the Starbucks app, consumers are never at a loss for payment options.
Plastiq started in Canada, working with colleges such as the University of Alberta and St. Michaels University School. In 2008 and 2009, a lot of universities stopped accepting credit cards even though consumers were still demanding it. So Plastiq developed a way for such institutions of higher education to accept plastic again.
Plastiq is now seeking partnerships with universities and property management companies in New York City, Boston and Chicago.
This year Plastiq plans to fill the last few open positions in its senior team, plus continue to partner with merchants that would benefit from the acceptance of credit card payments.
“What we’re looking to do is take the foundation we’ve created and go full force at the verticals we’ve targeted,” Choi says.