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With 18% of internet users still thinking it's too risky to shop on the web (source: GetSafeOnline), it’s clear that there's a big opportunity out there if etailers can persuade these wily refuseniks that e-commerce is safe.

One thing that might help them is PayOffline - a system launched in August last year that enables consumers to shop online but pay for their goods at one of 17,000 physical locations around the UK.

Supported by Alliance & Leicester and offline payment network payzone, it is now being used by 300 retailers to lure customers that can’t or won’t pay for goods on the web.

We asked managing director Steve Berry about the company’s plans for the future, including how it aims to achieve scale among consumers and merchants...

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Can you start off with a brief rundown of how PayOffline works from a retailer’s perspective?

PayOffline was designed to be a full functioning payment processing system, despite the customer physically paying for goods over the counter at a payzone outlet, either with cash or debit card.

One of the first things we did was to design the system to integrate very easily with shopping carts and e-commerce platforms in the same way as a card processing system would, using standard technology like .Net and Web Services. We have two different types of API – one that’s quite simple and one that is a bit more complex. We have had shopping carts integrating in less than a day.

For merchants, we wanted to automate as much of the system as we could. First thing each morning, at about 7.30, there is a file uploaded from Alliance & Leicester that shows all of the transactions made the day before. As soon as that happens, all of the merchants are automatically notified by call--back or email or both. They can also access a lot of historical information about payments.

The other aspect of the system is the partnership with Alliance & Leicester. They have a lot of retail clients and experience in the over-the-counter payments market. They were a natural partner for us and lend our service a lot of credibility.

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What figures can you give us on the people out there that either won’t or can’t pay online for products?

We spent around six months doing research prior to launch, specifically asking people about their purchasing behaviour online and their concerns about security.

The sample was around 3,000 people. When asked the question, “Would you be interested in using a PayOffline-type service”, there was a lot of interest.

There was concern across the board about giving out their card details online, and a lot of people were quite careful about where they shopped. That really convinced us that there was really a market out there for people that wanted to pay offline for online purchases.

When you add that there are something like 5m people in the UK that do not have a bank account, and that according to GetSafeOnline, 18% of UK adults refuse to shop online due to concerns over fraud, you can see there is potentially a significant marketplace.

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Besides targeting e-commerce vendors, what reception have you had from the big online retailers?

We went round to a lot of the big players last year and asked them what they thought. All of them said they liked the idea and saw the potential but said, “Come back in six months when there’s proof that there is a market out there”.

They don’t want to be the missionaries but will want to play when there is proof people will want to use it.

That’s why we’ve concentrated on integration with the key shopping carts, and are looking to develop the SME market before focusing on the big guys. We have around eight of the main shopping cart providers, and have just over 300 merchants through them.

One of our biggest merchants is flattelly.co.uk, which was rated as the seventh fastest growing UK company in the Sunday Times recently. It implemented PayOffline at the end of October and says 5% of its turnover is coming through the service.

As soon as we have got a good body of merchants signed up, we will start marketing it to the consumers more heavily. It will take a big joint effort by us and the retailers to reach out to people.

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Have you signed any individual retailer deals?

Not as yet. But there are some big name retailers keeping a watching brief on PayOffline.

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What’s your cut of payments?

We charge between 1.25% and 3%, depending on the volume of business. We are not as competitive as credit cards as there is a handling charge involved for cash, but we’re not far off.

We’re competitive within the overall scheme of things. Once this takes off, we’ll also get economies of scale and we will get more negotiating power when we get more volumes going through.

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Have you any plans for a vertical search engine or directory for products that are available through the service?

We haven’t published it yet, but we plan to publish a directory of each merchant using PayOffline by category in the next two or three weeks.

We will provide a search facility for merchants but whether we will drill down to specific products remains to be seen. Hopefully Payoffline would be widely enough distributed in the future so that it wouldn’t be necessary.

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What other services could you offer via your network, potentially in the area of m-commerce perhaps?

We use a standard format barcode to identify each customer’s transaction. At the moment, customers currently need to print them out.

But we have a pilot system working where we can send a text message to a mobile phone, and the customer can access that barcode via a .mobi website. It can then be scanned at the outlet.

That’s one of the next advances we are looking at. But there are all sorts of applications we could offer – ticketing for concerts, for example, or charitable giving.

The real key, as we move up the food chain, is that if online retailers want to reach out to these people, they have to offer more ways to pay. Our focus for the next 12 months is to get as many merchants on board offering Payoffline and other offline payment methods.

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If you succeed, do you expect the likes of Paypal, Amazon and Google will want a piece of the action?

I’ve got no doubt that once these guys realise there is a big market out there, they will. Whether they develop their own service or work with us, let’s wait and see.

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Steve will be speaking at the Retail Business Show in London on February 5th and 6th.

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Related research:
Online Fraud Roundtable Briefing
Online Retail 2007: Checkout Special

Related stories:
Survey reveals attitudes towards e-commerce
New scheme aims to increase consumer trust
Establishing trust in the buying process

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Published 15 January, 2008 by Richard Maven

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