Moneta’s Bank-Centric Strategy Gives It a Lift with Online Retailers

Alternative-payments processor Moneta Corp. this week announced the addition of three online merchants to its roster of clients and next week will sign a major Internet housewares retailer, says Guido F. Sacchi, chief executive of the Atlanta-based company. In all, some 20 merchants will be signed by month's end, he says, double the number on board last fall (Digital Transactions News, Oct. 21, 2008). Sacchi as well as merchants and observers credit the growth to the processor's efforts to enlist banks as Moneta marketers. As with many alternative-payments startups, 3-year-old Moneta uses the automated clearing house network to process transactions. The twist it adds is that it is trying to do deals with major banks in which the banks will recruit their customers to use Moneta in return for a part of Moneta's transaction fee. That strategy seems to resonate with merchant prospects, who see it bringing new customers to their sites. “The banks help introduce Moneta to their customers, and that will probably give us relatively significant exposure to those banks' customers,” says Chuck Bishirjian, chief executive of Pro-Techt, an Atlanta-based online seller of umbrella-like covers for beach chairs, boats, grills, and other outdoors items. Moneta announced on Monday that Pro-Techt, along with Global Living, a furniture merchant, and Trade As One, a seller of merchandise made by craftsmen in the developing world, would begin accepting its payment method on their sites early next month. In addition to smaller specialty merchants, Moneta has had some success with big retailers. The merchant to be announced next week, which ranks among the 500 largest online sellers according to Internet Retailer magazine, will join Delta Air Lines and Shoebuy.com, the 90th largest online retailer, among the largest e-commerce merchants to adopt Moneta so far. With Moneta, consumers enroll their bank-account data and then make payments by selecting the Moneta option on participating merchant sites. They are then redirected to Moneta's servers, where they enter a user name and password to authenticate themselves. If the customer has enrolled through his bank, this page will look like a page on his bank's site. After authentication, the customer returns to the merchant site. Merchants assume the risk of fraud; the risk of insufficient funds is assumed by either the merchant or the bank, depending on when the problem is detected, Moneta says. Sacchi says one bank, ranking among the 10 largest in the country, has signed up to promote Moneta and will be announced in October. Deals with a handful of other banks, all large, are still in negotiations. “By the end of the year we'll have another bank for sure,” he says. Moneta's user count has grown over the last 10 months to almost 100,000 from 75,000, but Sacchi says the company will rely almost exclusively on bank marketing for enrollments from now on. By signing up banks with big deposit bases, Moneta hopes to maximize the potential transaction flow to client merchants. At the same time, banks can deliver vetted customers who are familiar with how to use Moneta. “Cost [of transactions] is not the only thing merchants are analyzing,” says Bruce Cundiff, a senior analyst at Javelin Strategy & Research in Pleasanton, Calif., who has studied Moneta “The ability to bring pre-registered customers who have some idea of how to use the payment method is almost, and maybe is, as important.” Banks get around 50 basis points on each transaction one of their customers makes, a number that Sacchi says is subject to some negotiation. That's out of a total transaction fee of 1.2% plus a dime, pricing Sacchi says is deliberately kept at roughly half what bank cards and PayPal charge. Some banks may balk, pointing out that they'd make less on any Moneta transaction that crowds out a bank card payment, on which they earn interchange income. But Sacchi argues banks have to take a broader view. Moneta, he says, can help banks counter any erosion they see from other alternative payments. “PayPal has become a major strategic threat to them,” he says. “Moneta can be more strategic for banks than just creating a nice little revenue stream.” But signing banks could be a struggle, Cundiff says. “That will definitely be a hurdle,” he says, for Moneta's strategy. Even so, banks may conclude that a piece of a Moneta transaction is better than a larger percentage on each bank card transaction that no longer exists. Indeed, the share of e-commerce transactions on bank-issued cards is dwindling. They will account for 78% of dollar volume next year, down from 82% in 2008, according to Javelin. “Something is better than nothing,” says Cundiff. “With PayPal, it's questionable whether [banks] get anything.”