Moneris Signs Up Peppercoin for Pint-Sized POS and Web Payments

Moneris Solutions, a major acquiring processor in North America, has become the first processor to agree to adopt Peppercoin Inc.'s latest micropayments system. Under an agreement reached this week, Peppercoin will serve as a gateway for transactions performed at both brick-and-mortar and online U.S. merchant locations and sites served by Moneris, which is a joint venture of Royal Bank of Canada and Bank of Montreal. It acquires for 350,000 merchants in North America, but refuses to break out its U.S. merchant base. Nor will it say how many it expects to sign up for Peppercoin, how many transactions it projects, or what it will charge merchants. The new processing arrangement will go into effect by the end of the year. “We identified the need for a small payments service offering that would allow us to address this emerging [micropayments] market,” said Larry C. Wine, president of Moneris Solutions U.S., Buffalo Grove, Ill. “Peppercoin's system fits within the financial industry's existing infrastructure and allows Moneris to deliver an efficient and cost-effective payment processing alternative for small-dollar transactions.” Peppercoin, a startup based in Waltham, Mass., introduced its new processing platform, Peppercoin 2.0, this summer, announcing at the time that it was seeking relationships such as this one with Moneris, in which it would serve as a payments gateway for transactions originating from the Web as well as from physical points of sale (Digital Transactions News, June 28). Incorporating a gateway, payments-processing service, and customer-service system, Peppercoin 2.0 does not require buyers to create accounts or download software to make payments, as its original version, introduced late last year, does. It supports online, automated customer service at a dedicated Web site where consumers and merchants can get transaction detail. Peppercoin is aiming its new system at Web and physical merchants as well as merchant processors looking for ways to support micropayments for digital content, typically $5 and under, as well as small payments, or $5 to $20 in value. The company will host the gateway or license it, with pricing determined by transaction volume. Peppercoin refuses to disclose the licensing fees, but says transaction pricing on its hosted service will run in the 7% to 10% range, with larger-volume merchants or processors paying closer to 7%. Merchants will set a value threshold under which all transactions will be routed automatically to Peppercoin's gateway. Peppercoin's proprietary model, which was developed by noted cryptographers Ronald Rivest and Silvio Micali, relies on the mathematics of probability to select micropayment transactions, step them up in value, and route them for processing through the credit card networks. In this way, credit card fees are reduced as a percentage of the ticket. All the while, the model relies on what Peppercoin calls “universal aggregation” to keep track of which payments from which consumers get credited to which merchants. Moneris and Peppercoin hope to tap in to burgeoning markets for both online content and small-value sales in the physical world, including the quick-service, video-arcade, and gasoline segments. Peppercoin cites TowerGroup research showing consumer transactions under $5 at the physical point of sale reached $1.32 trillion last year. The markets for digital song downloads, mobile games, and ring tones, meanwhile, are all approaching or surpassing the $3 billion mark in sales, according to research cited by Peppercoin. Founded two years ago, Peppercoin went live with a commercial product late last year. It signed two merchants, Musicrebellion Inc. and the Folkways Recordings unit of the Smithsonian Institution, for music downloads. Moneris, which ranks as a top 10 merchant processor in North America, processes 2 billion transactions annually.