Australian start-up PromisePay is making solid inroads in payments for online marketplaces, but its founders have grander ambitions.
The business offers a payments engine which allows online marketplaces to facilitate payments between users, helping build trust between payers and payees. The founders are considering financing the payments (in fact, it already underwrites the risk on transactions) as well as licencing its software to banks.
PromisePay says it has contracts with over 30 customers
with a combined $7 billion worth of transactions on their platforms, and expects about $1 billion of that to go via the engine.
Company founders Simon Lee, Simon Jones and Darren McMurtrie had all worked as freelancers and contractors who had struggled with getting paid on time – this was the problem they initially set out to solve.
“We actually raised money with that in mind,” says Lee. “What we quickly saw when we started looking at payments in general was that there were marketplaces out there where people had trust issues and payments weren’t happening online, and we saw this really large opportunity where we could take that market.”
In talks with the management of sites including Flippa and hipages, the PromisePay founders realised that many online marketplaces weren’t accepting and facilitating payments because they saw it as too much effort and too much risk. Many were leaving users of the marketplace to facilitate their own payment then trying to chase them up later for the transaction fee.
Aside from providing a payment engine for online marketplaces, PromisePay also facilitates payments for other platform sites that aren’t necessarily marketplaces but where users want to make and receive payments.
It’s a product that is aimed at site owners rather than retail customers. In fact, in most cases buyers and sellers won’t know that they’re using PromisePay. When users sign up to the terms and conditions of an online marketplace they are signed up to PromisePay at the same time. “We’re just the engine behind the platform,” says Lee. “As long as we’ve got your bank account details we can pay you.”
Lee says PromisePay also builds consumer trust in online marketplaces, because users are paying online and know that if there is a problem they can get a refund.
PromisePay conducts checks on users to ensure they’re above board, examining their email address, the device they’re using, their name and address, as well as rules that check for specific behaviours online. “The smarts isn’t about taking a payment and handling a payment for someone. It’s about underwriting the risk of the transaction to make sure the two parties are who they say there are and also putting the protections in place to protect both parties when the transaction goes wrong,” says Lee.
The site offers four types of transactions:
- Instant payments
- Escrow – where the funds are held until the purchaser has received the goods or service
- Partial payment – where the payment is released over time as a project is progressively completed
- Text pay – where the purchaser receives a text message and simply has to reply ‘yes’ to make the payment
PromisePay is considering licencing the application programming interface (API) which drives its payments engine – essentially a computer program – to banks. “The most powerful thing that we’ve created is with a single API call you can set up who the buyer of the transaction is, who’s the merchant, how much it’s for, the description, when to send invoices and receipts to both parties, which currency it’s in, what sort of fees are going to be collected by the intermediary and the type of transaction,” Lee says.
He also sees potential to finance the transactions. “When we sit in the middle of these two parties there’s all sorts of ways in which we can potentially finance the transaction on either side – invoice financing on the seller side or financing the buyer side as well,” he says.
The company, which has attracted investment from Westpac’s venture capital fund Reinventure Group, raised $2.6 million in seed funding earlier this year, is in the midst of another $1 million raising, and plans to raise another $10 million next year.
“For us at the moment it’s sticking with what we’re doing and executing on our customer pipeline, but long term there’s other opportunities we could look at,” Lee says.
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