Pitney Bowes Inc., best known as the worlds largest producer of postage meters, is jumping into online payments by developing what it calls a PayPal look-alike service.
PitneyPay users will be able to send or receive real-time payments through automated clearing house debit or hold funds in escrow. The Internet service was unveiled last week and will become available in mid-July as an extension of PitneyEscrow, launched in October.
PitneyPay, which targets users of online business-to-business exchanges, will also let payments be dispensed to multiple vendors through an integrated routing system, the company said.
Michael S. Ryan, vice president of PitneyB2BCapital, the umbrella group for the companys online financial services, said PitneyPay was developed in response to market demand for online transaction settlement, from the 26 Internet exchanges that Pitney serves.
Payments will be dispensed automatically to all the parties involved, and the exchange will collect commissions that would be lost if the transactions were closed offline, Mr. Ryan said.
Once the service is up and running, Mr. Ryan said, the next step will be to make it more like that of PayPal, the Palo Alto, Calif.-based leader in Web payments.
Pitney Bowes plans to offer a debit card, to be tested in the fourth quarter, that would be used for offline purchases or to send and receive funds by the same method PayPal uses, Mr. Ryan said. Fund recipients would get an e-mail advising that the money is available, click on a link to PitneyPays Web site, and then choose to keep the funds in an account at Pitney Bank of Salt Lake City or have a check mailed to them.
Like PayPal, which requires users to have accounts with the company, either the PitneyPay sender or receiver must have an account with Pitney Bank, which was created in 1996 when the company bought a defunct industrial loan charter bank.
The objective is not to steal customers away from PayPal, but to enable Pitney Bowes small-business customers to receive funds without paying credit card interchange fees, and to persuade customers to stop using checks for these payments, Mr. Ryan said.
Peoples reluctance to forgo paper checks has hurt the growth of online B-to-B payment, but providing an instrument with the familiar feel of a credit card will encourage them to do so, he said.
I think Pitney Bowes is in a trusting relationship with a lot of those customers who still use checks, Mr. Ryan said. We see huge potential to leverage our brand.
PitneyPay already has been selected as the exclusive payment option by two online marketplaces, and Mr. Ryan said his company is in discussions with others.
PitneyPay is just the latest foray into financial services for Stamford, Conn.-based Pitney Bowes, a $4.4 billion provider of integrated mail, messaging, and document management services. The company offers a co-branded Visa card, and its capital services division, created in 1982, provides financing for big-ticket purchases such as computer data processing, transportation equipment, and real estate. Last year Pitney Bowes earned about 15% of its net income from financial products and services, Mr. Ryan said.
Deane M. Dray, a research analyst at Goldman Sachs Group Inc., said Pitney Bowes has a captive customer base in its nearly one million small-business customers, but financial services will likely remain a peripheral operation for the company.
I doubt that will become one of their core businesses, but to the extent at which they can generate incremental revenue and become more meaningful to their customer base, thats probably what they should be doing, he said.
Kartik Mehta, a research analyst at Midwest Research in Cleveland, said Pitney Bowes may have a tough time getting small-business customers to abandon checks and credit cards.
Convincing people to do something different is not that easy, he said. Youre trying to change a behavior. A lot of people who pay by credit card do it because they get free air miles or theres some [other] incentive.
Mr. Ryan said he is confident.
Theres lots of room for big names who can do this successfully, he said. If we dont do it, someone else will do it to us.