Payments: U.S. Targeted by RBS In e-Payments Business

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Royal Bank of Scotland has just finished piloting an electronic payments service in the U.S. that it says will facilitate payments from local and foreign customers. Its goal is nothing less than to become the dominant payments player on both sides of the Atlantic, and it's got a good start, considering it already boasts the largest e-payments operation in Europe-with a 46 percent market share in the U.K. alone.

The new online payments service-which RBS is rolling out to its entire client base-lets U.S. firms process credit-card payments from U.S. cardholders and enables multi-currency transactions for non-U.S. cardholders.

Firms' online customers can pay for purchases in more than 100 currencies, using a credit card or other local payment types. For example, a business operating in the U.S. with overseas customers can offer them the ability to pay in their local currency and card types in 143 different countries, rather than in U.S. dollars. That gives businesses an instant local beachhead in foreign markets.

RBS believes it has the existing multinational reach to make the service work. It's the No. 3 payments acquirer globally, the No. 1 acquirer on the Internet in Europe and the No. 1 provider of cardholder-preferred currency services globally. In 2006, it handled 3.1 billion transactions, worth $306 billion, for 250,000 clients around the world.

The service aims to provide a single, integrated source for the payments chain for both domestic and foreign payments, with a single gateway and risk module, as well as local and international processing and local acquiring connections. "From a single product, we can give merchants a gateway to process both domestic transactions and give them access to international customers," says Josh Groves, president of e-payments at RBS Lynk, the bank's provider of e-payment-processing services. "A lot of Europeans don't carry Visa- and MasterCard-branded cards, instead using other payment tools like in-country debit schemes that are supported by banks in that country."

For example, says Groves, in Germany the prevailing payment mode is via debit schemes supported by ELV, an online-banking-payments service open to anyone with a bank account. Such payment methods are common overseas, including JCB-the most popular card in Japan-Dankort in Denmark, Netpay in Austria, eNETS in Singapore, Laser in Ireland and both Maestro and Solo in the U.K.

The risk component is managed by offering a service compliant with the Payment Card Industry data-security standard. By offering a PCI-compliant service, merchants can accept online credit-card payments without storing the card information or becoming PCI-compliant themselves. The gateway also helps merchants determine the risk of transactions before they are sent for authorization, meaning that merchants can lower the risk of incurring charges for fraudulent transactions.

Groves, who was recently appointed by RBS to run the new e-commerce venture after a four-year stint as CEO of P2P and gift-card specialist Magex Holdings Ltd., says RBS hopes to help clients bypass a payments service with one company as gateway, another as U.S. processor and yet a third as the international processor. "This is useful particularly when you're dealing with businesses that have chargeback issues in certain countries or are putting new payment types in new countries," he says. "There can be disputes among the parties where neither party winds up taking control. In our case, there's one account manager, and one technical support system that will own the entire value chain."

Alenka Grealish, manager of the banking practice at Celent, says factors like the lack of an international ACH make check and other payments originating in other countries a complicated proposition, especially for smaller U.S.-based firms. It's in this space where banks with a large foreign exchange or multinational payments operations can find opportunity. "For the banks that handle checks for businesses in these countries, they already have the rails down," Grealish says. (c) 2007 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com

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