U.S., European and Asian merchants wanting access to Chinese consumers and businesses now may enable customers in that country to pay using Alipay under a partnership payment-technology provider Zooz announced today with China’s popular online-payment service.
Founded in 2010, Zooz works with some 1,000 large retailers, including Groupon and Ikea, by connecting them with up to 35 acquirers globally to enable access to customers in more countries. Its “smart payment engine” identifies in real time and for every transaction which acquirers to use to route purchases based on criteria set by the merchant. By enabling eCommerce with Alipay’s 300 million registered users, for example, Zoot is opening access to sellers based outside of China to much of the Far East market.
Zooz typically charges merchants 20 cents to 25 cents per transaction, depending on volume. However, by reducing processing fees by dynamically routing payments between selected local acquirers worldwide based on such factors as cost and the likelihood of cart abandonment, Zooz provides a significant and relatively quick return on that investment, CEO Oren Levy told PYMNTS.com in an interview this week.
Cart abandonment is reduced when Zooz can find acquirers that are less likely to reject a transaction based, for example, on where it is initiated or the type of card it is, Levy explained.
“If you recognize that a Chinese cardholder has a 4 percent decline rate for acquirer X and just 2 percent for acquirer Y, we will route the transaction over acquirer Y because there’s a lesser chance of a decline,” Levy said. “The users might not even know this is happening, but they won’t leave the cart because their card was declined.”
A large European merchant that Levy declined to identify expects to begin accepting Alipay payments later this month. Though the Alipay arrangement most likely will affect primarily business-to-consumer payments, there’s nothing preventing B2B-transaction support if suppliers opt to become Zooz customers. One of Zooz’s clients is Dwolla, which processes a large number of B2B transactions, Levy noted as an example.
“We don’t care whether transaction are made by a consumer or a business as long as the entity accepting the payment is using the Zooz platform,” he said.
In the announcement of the Zooz/Alipay deal, Andrei Charniauski, Research Manager at IDC Financial Insights, noted that providing payers with a wide range of payment options at checkout is essential in modern day eCommerce. “This not only reduces shopping cart abandonment, but also improves customer loyalty,” he said. “Partnering with major wallet providers that offer unique funding and checkout experiences should be on every retailer’s agenda.”
Zooz, as a “back end site solution,” never touches the funds involved in transactions, as some payments aggregators might do when trying to offer a similar service, Levy added.
Asked whether acquirers view Zooz as a threat, Levy said they don’t, and nor should they. Some U.S. processors may not support transactions in a specific country, yet their merchants might prefer to continue using them domestically and use another to accommodate transactions elsewhere. “Why not have a consolidated solution platform that has everything in one place?” he asked. “In Europe, they could work with Barclaycard or RBS.”
Acquirers see the value in that, Levy said. “We might route to a different acquirer, but it forces the acquirer to be more open minded and build equilibrium into the system,” he said. “If the acquirer has the best fees and lowest decline rate, we’ll route through them.”
Alipay ranked first in China’s online payment market with a 51 percent share in gross merchandise volume in the first quarter of 2014, Zooz said, citing iResearch data. Alipay offers payment and escrow services for transactions on Alibaba Group’s marketplaces as well as to third parties in China.
Levy declined to note its typical monthly transaction volume, but suggested that with 1,000 large merchants as customers it’s “quite significant.”
In a recent podcast interview with Market Platform Dynamics CEO Karen Webster, Levy described how optimized acquirer routing can both boost a retailer’s ability create an omnichannel experience for its customers, and reduce transaction fees as well.