Funding in Hand, eBillme Zeroes in on Consumer Cash Preference

Sensing a strong shift among consumers away from credit and toward cashlike payment, ModaSolutions Inc.' s eBillme online-payment system plans to pump a large share of its resources into recruiting new merchants and funding promotions with those merchants to attract more buyers, the company's top executive says. Much of the money for these campaigns will come from a $12-million financing round announced this week, says Marwan Forzley, the Ottawa-based company's president and chief executive. Meanwhile, in another development related to alternative payments, Universal Air Travel Plan this week held meetings for its member airlines at which half a dozen processors currently sponsored by Washington, D.C.-based UATP made presentations. Addressing airline officials at the meetings were representatives of AccuLynk, Bill Me Later, HomeATM, Moneta, PayPal, and Stored Value Systems, according to a UATP spokesperson, who would not divulge details. UATP, which provides commercial card and transaction-switching services to many of the world's leading air carriers, launched its alternative-payments initiative in 2005. As for eBillme, Forzley argues the seismic events of the past weekend, in which the federal government engineered an $85-billion bailout of insurance giant American International Group Inc. and Bank of America Corp. announced it will pay $50 billion to buy Merrill Lynch & Co., underscore trends that are making it much harder for consumers to obtain credit. The resulting shift to cash, he says, could transform e-commerce, which relies heavily on credit cards. “It's not going to be the same game,” he says. “There will be a lot more emphasis [among consumers] on paying with available funds. Merchants have to react. Credit alone is not going to cut it.” That's where the latest financing round comes in. ModaSolutions, which launched eBillme commercially only three years ago and has now raised $27 million across three funding rounds, hopes its new emphasis on marketing will position merchants to leverage consumers' newfound reliance on available cash. EBillme works by letting consumers use their online-banking programs to pay e-commerce merchants. “It's strategic for merchants to have secure cash payment at the merchant checkout,” Forzley says. ModaSolutions has funded a number of campaigns with merchants over the past two years involving consumer enticements such as product discounts and gasoline cards. The payment service is apparently seeing robust growth, though Forzley won't disclose numbers. More than 180 merchants now use eBillme, and transaction volume is running six times what it was a year ago, he says. “We're in a phase where it's basically a growth phase,” he says. “We've done all the pieces to address all the concerns of consumers and merchants.” That growth, he says, appealed to ModaSolutions' investors, which include venture firms Celtic House Venture Partners, which had an existing stake in the company, and Canaan Partners. “It's very tough to get money these days unless you have a solid story,” says Forzley. “Obviously, there's a growth pattern there [at ModaSolutions].” Consumers who use eBillme pay merchants as if they were paying an online bill, and so don't share any personal information. Also, eBillme offers consumers what Forzley calls the protections of a premium credit card, such as price protection, an in-transit damage policy, and a 90-day return warranty. Such features could be important if Forzley proves correct and consumers seek out cashlike payment products that nevertheless offer the protections of credit cards. “Access to credit is going to be tougher,” he says. “The writing is on the wall. That's going to have an impact on consumers' choice of payment options they work with.”