Hoping to build on its solid foundation in Europe and Latin America, SafetyPay Inc. this month announced plans to test its online payment platform in the U.S. through a retail pilot program.
The online platform gives merchants another option for promoting secure online payments by enabling U.S. consumers to shop online and pay directly from their online bank accounts.
But one analyst says the concept faces challenges, including gaining adoption among banks that already have an array of other alternatives and wooing U.S. consumers unfamiliar with its name.
The Miami Beach, Fla.-based company is inviting merchants to participate in a three-month trial with two top U.S. banks, Manuel Montero, CEO of SafetyPay, tells PaymentsSource. He declined to disclose the banks’ names. The company is also targeting community and regional banks in its pilot program.
Merchant fees for the service consist of “a small percentage” of each transaction, a portion of which SafetyPay shares with banks, Montero says, but he did not disclose the costs.
Banks also will have the opportunity to offer exclusive merchant promotions to online banking customers to generate transactions, Montero adds.
The system is free for banks to use and integrating the platform “is fairly quick because it runs through the Web” and is compatible with typical bank operating systems, Montero says.
SafetyPay enables a consumer to complete an online purchase in real time through their bank’s online banking platform. Transactions are processed through the automated clearinghouse system.
The scheme reduces transactions’ exposure to online fraud by confining the transaction to a bank’s online website and eliminating steps in the payment process, Montero says.
SafetyPay, founded in 2006, is available in several countries throughout Europe and Latin America and has more than 90 million bank customers worldwide, the company notes. Bank partners outside the U.S. include ScotiaBank and BBVA/Bancomer. Nike Inc. and Sears Holding Corp. are among more than 2,000 participating merchants.
One of the chief hurdles SafetyPay faces is the task of building a brand from scratch in the U.S., Zil Bareisis, a senior analyst with consulting firm Celent, tells PaymentsSource. “Consumers trust their banks but may not trust SafetyPay because they are not familiar with the company,” he says.
Banks also may not be eager to adopt alternative payment systems that could undermine their other profit channels, Bareisis says. “Why would banks want to cannibalize their card transactions when that is how they make the most revenue?” he notes.
Merchants, however, will probably be very interested in using the service, Bareisis says. “Merchants would be an easy sell because while they will most likely pay a fee to process SafetyPay transactions, it would be less than what they pay for interchange and service fees when a consumer pays with a card,” he explains.
If the scheme overcomes initial hurdles, however, it could succeed as an alternative payment option, “especially for consumers who may have a bank account but do not have a debit or credit cards,” Bareisis suggests.
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