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The company behind eBillme has announced a partnership with Discover Financial Services that furthers the alternative payments provider's strategy of aligning itself with mainstream players.
February 24
There may someday no longer be such a thing as an alternative payment.
This year, there have been several acquisitions or product changes that take payment systems designed to function as online alternatives to traditional payment methods and combined them with a company or product that handles payments in person.
The most recent example is Western Union Co.'s purchase of eBillme, the alternative payment system developed by ModaSolutions Corp. of Rye Brook, N.Y. This follows last month's decision by Google Inc. to absorb its troubled online payment system Checkout into Google Wallet, a mobile payment system that functions at the point of sale. Another example is Visa Inc.'s February purchase of PlaySpan Inc., which handles payments for computer games and digital items.
"We are at the beginning of a roll-up of smaller alternative payment providers," says Andy Schmidt, research director for global payments at TowerGroup in Needham, Mass. "Another way to look at this is that traditional payment providers are also realizing that they need to be more agile and need more innovative partners to survive."
Western Union, of Englewood, Colo., confirmed Monday the eBillme acquisition, which it completed in October but did not announce (Payments News
Chiefly, the acquisition lets Western Union offer a broader array of products and services to customers with bank accounts.
"Western Union has been working to position itself more effectively with banks, both for remittance and bill payment support," says Beth Robertson, director of payments research at Javelin Strategy and Research. "EBillme has the bank linkage and bill payment link, and [Western Union] sees this as a logical fit."
The eBillme brand will be subsumed ultimately into the Western Union suite of services and its name eliminated, a company spokeswoman says. The spokeswoman could not offer details about what would happen to eBillme's current management, which includes company founder and chief executive Marwan Forzley.
EBillme lets consumers pay for things online using their bank's online bill pay function. This allows consumers to send payments without sharing a credit or debit card number.
The eBillme deal will expand Western Union's product offerings and boost eBillme's scale by giving it access to Western Union's base of millions of customers globally, analysts say.
"From the bank perspective, this is an alternative payment mechanism that leverages bank infrastructure," says Rick Oglesby, senior analyst with Aite Group.
Customers with bank accounts will be able to use them to tap into Western Union's broad range of payment options via Westernunion.com, a company spokeswoman says. They previously had to use a credit or debit card for the services.
"EBillme has a processing platform that lets U.S. shoppers pay for Ecommerce from a bank account and Western Union intends to apply this to improve the customer experience for those sending money transfers via Westernunion.com," the spokeswoman says.
EBillme works with 800 online merchants and 17,000 online bill payment sites, Western Union says.
Already a smaller player than the likes of eBay Inc.'s PayPal, EBillme saw its market-share decrease over the past year, according to data published in November by Javelin Strategy and Research. Only 2% of consumers who have used an alternative payments provider said they used eBillme in 2011, compared to 3% who said they did in 2010, Javelin says.
By contrast, use by consumers of PayPal's BillMeLater, an instant-credit system for online and mobile payments, grew to 14% from 1% over the same period, according to the research.
"Our big assumption is that PayPal was able to get BillMeLater positioned within a broader range of e-commerce platforms and therefore with a broader number of merchants who are mostly PayPal merchants," Robertson says.
PayPal also has a global reach of 120 countries, and its mission is to enable cheap payments worldwide, analysts say.
Western Union has nearly half a million agent locations around the world, and says it served 165 million consumers in 2009, the last year for which it has numbers. It offers services that include expedited bill payment and wire transfers.
In its third quarter earnings call in October, Hikmet Ersek, president and chief executive of Western Union, said it had agreements with 70 banks for its service that enables wire transfers from bank accounts.
In December, Western Union announced a partnership with Vodacom Group Ltd.'s M-Pesa, which enables person-to-person payments using mobile phones. The partnership will let M-Pesa customers wire money abroad using Western Union's infrastructure.
M-Pesa conducts more transactions in Kenya than Western Union does globally, Schmidt says.
"Western Union has a big target on its back and it's trying to stay relevant," Schmidt says.
