Digital Transactions Authoritative, insightful and timely information for payments professionals
Digency Inc., an El Dorado Hills, Calif.-based third-party processing startup specializing in Internet payments, has begun processing transactions for a handful of merchants and now looks to execute an ambitious business plan that calls for the company to earn $13 million in fee revenue in 2004 from some 240 online merchants doing more than 1.2 million transactions a month. That traffic will come from an array of markets in addition to conventional Internet payments, including auction-based person-to-person transactions, mobile payments, and micropayments. Relying on what it expects will be an exclusive license for ground-breaking geographic-location technology, Digency is getting ready to market what it sees as one of the most effective fraud-fighting solutions available for Web-based transactions. Developed by an unnamed federal agency, the technology identifies computer users by tracking them to the point where they are connected to the Internet. The company is in the final stages of negotiations with the agency and expects to have the licensing agreement in place within six weeks. This, in combination with more conventional technologies like neural-network risk scoring and access to public-record databases, is part of a package of anti-fraud and transaction-processing services Digency is selling. “We have a comprehensive platform,” says Ed R. Starrs, chief executive of the startup, which has so far signed up two dozen merchants and is currently handling about 500 transactions a day after going live last month. Consumers who are ready to make a purchase on a site using Digency can use a credit or debit card or an electronic check through the automated clearing house. Digency stands in as the merchant, assuming liability and paying related discount or other transaction fees. Once the consumer's identity is authenticated and the transaction is authorized, Digency credits an account for the consumer with the amount of the purchase. The consumer then goes to a screen that allows him to transfer the proceeds to the merchant's account. Digency claims these steps require fewer clicks than any other online transaction service. “It's streamlined and easy for the consumer,” says Starrs. Digency, which also handles back-office functions, including chargeback administration, manual transaction review, and data security, charges merchants a fee ranging from 3.5% to 5.5% of the purchase, plus a flat fee of $1 per transaction. Consumers pay no fee. Digency has built its own network gateway and is working with a number of merchant banks, chiefly Wells Fargo. The startup also offers person-to-person payments on mobile devices, allowing individuals to pay other individuals by entering the recipient's mobile phone number, as well as a micropayments model based on prepaid accounts set up by consumers. And the company plans soon to enter other markets, including transactions on eBay, the giant Internet auction site, in direct competition with eBay's own PayPal service. Another potential market, says Starrs, is online state lotteries, where the company's geo-location technology could help screen out out-of-state players.
