There’s a new kid on the online payments block. Chicago-based Braintree is coming to Australia to tap a growing market of innovators it says are poorly served by the current offerings of banks and industry giant PayPal.
The company has already signed up clients including Melbourne-based 99designs.com and Perth-based agricultural ecommerce site AgWorld and wants to win business from the growing number of start-ups in Australia.
“They’ve been stifled to some degree because of a lack of viable payment solutions,” Braintree chief executive Bill Ready says. “PayPal wasn’t a solution they could grow with necessarily. Integration to large banks was difficult. They’ve got this pent-up entrepreneurial spirit.”
While estimates vary, online commerce is growing in Australia – research company Telsyte thinks it will jump to $20.9 billion this calendar year from $18 billion last year – and this is opening up the market for online payment technologies. Market niches are differentiating and customers, who are only just getting used to swiping their credit cards rather than inserting them, are becoming more used to mobile-based commerce. All this is creating new opportunities for entrants into the field.
“It’s still early days in Australia from a software and hardware point of view,” Telsyte senior researcher Sam Yip says.
Braintree, which processes more than $1 billion worth of smart device-based sales in the US – 10 per cent of that particular market – is better placed to grow as ecommerce start-ups grow, Ready says.
“For a start-up, with low volume, we’re going to be similar to PayPal or others in the marketplace,” he says. “However, PayPal has been viewed as a solution only for the smallest of merchants. We’re a tool a start-up can use to get their first dollar of revenue as well as major multinational companies. It’s a tool you can use to get started, get access to the most sophisticated tools, but it has everything you need to grow and scale.”
PayPal Australia director of product, strategy and new business Andrew Rechtman says the company has large retailers as customers, including Jetstar, Virgin, JB Hi-Fi, Kmart and Harvey Norman.
“Large retailers see value in having PayPal payments integrated on their websites as it allows them to connect with our 4.6 million active Australian users,” Rechtman says in a statement.
A recent report by Nielsen, eBay and PayPal shows that while smartphones and tablets are used to find products and compare prices, desktop and laptop computers dominate purchases. As many as 47 per cent of respondents to a survey said they used smartphones for “discovery”, while only 25 per cent said they used their phone to make purchases.
Ready says this poor rate of conversion from discovery to sales by mobile devices comes down to speed of transaction. Typing credit card and payment details in on a phone is an impediment to closing purchases. Making a further comparison with PayPal, he also says Braintree’s “single-click” payments do away with the need to take the transaction away from the merchant’s site, which speeds the process up and keeps merchants happier, Ready says.
“PayPal takes you away from the merchant,” he says. “That is an additional friction in the process. It drives people away.”
But Rechtman says PayPal’s system is smooth.
“With PayPal, consumers can purchase an item in two clicks without needing to input any credit card details,” he says. “The integration of PayPal mobile payments is seamless for the consumer, with merchants reporting significant increases in conversion and consumer confidence when paying with PayPal.”
Yip agrees that faster transactions will help, especially in the growing realm of micropayments for games, where customers pay to unlock extra digital content.
“In a game, when you’re trying to get to the next level, you don’t want to re-register, or even for another window to pop up,” Yip says. “That’s where speed of payment is crucial.”
However, any new entrant such as Braintree faces a challenge coming up against entrenched competitors such as PayPal, which has more than 60,000 merchant customers in Australia.
“With PayPal, it’s the relationship they have with merchants and consumers,” Yip says. “Their installed base is very large. The challenge for someone like Braintree is to gain share from that. A lot of people do have existing funds in PayPal that they need to use up as well. “