A start-up business-to-business Internet billing company has assembled an eye-catching executive lineup that reads like an alumni roster from Visa International, MasterCard International, and First Data Corp.
One of the latest additions is Alex W. Pete Hart, a former chief executive officer of MasterCard, who was recently hired as a consultant by the Irvine, Calif., start-up, Payment Partners. One of Mr. Harts former rivals, Charles T. Russell, a former CEO of Visa, is the chairman of the 20-month-old companys board of directors (as well as a director of First Data).
Roger Peirce, the former group president of First Datas merchant services division and a former Visa chief operating officer, has also joined Payment Partners board.
The start-ups CEO, Gregory J. Bjorndahl, is himself an alumnus of Visa (as well as Citibank, Deluxe Corp., Acxiom Corp., and Security Pacific Bank, among others).
We wanted to surround the company with the best and the brightest in the payments industry, Mr. Bjorndahl said.
The companys technology handles online billing, payment, and remittance for small and midsize companies, particularly those that do a lot of international business. It connects a companys billing system to Internet foreign exchange and automated clearing house systems.
A typical Payment Partners client is Mohawk Carpet Corp., a Dalton, Ga., manufacturer that sells flooring products through a worldwide network of distributors. When one of Mohawks 40 wholesalers sends a payment through Payment Partners Enpointe system, it handles the currency exchange and deposits the funds in the appropriate account. The system also provides detailed remittance information that can be transferred straight into the customers accounting system.
A number of Payment Partners competitors among them Xign Inc., Bottomline Technologies Inc., and Clareon Corp. offer online payment services with invoice data, but weve taken it one step further in that we really own a bank, Mr. Bjorndahl said.
The start-up owns Security State Savings Bank of Nevada, a $42-million-asset limited-purpose industrial bank that processes ACH payments through a network whose participants include Chase Manhattan Bank, Visa, HSBC, Danske Bank, and Lloyds TSB.
Because the payments go through the bank, Payment Partners must follow the screening requirements the Treasury Departments Office of Foreign Assets Control. Mr. Bjorndahl called this another advantage of hiring experts in payments rather than technology. Thats not something the software guys get involved in. CFOs love it.
Payment Partners specializes in relatively low-value B-to-B payments, in amounts less than $1 million. With an average transaction value of around $20,000, the company pitches its service as an alternative to international wire transfers, bank drafts, and foreign checks.
That makes up 90% of the cross-border transactions, Mr. Bjorndahl said. You have a few very high-dollar transactions that move back and forth.
Though he likes to call Payment Partners a PayPal for business, referring to the person-to-person payment company that dominates the market for Internet-auction transactions, he also acknowledged that his company is based on a different business model not anyone-to-anyone, but many-to-one.
Payments Partners has 10 customers actively using the service and about 50 in the pipeline, he said.
The company now can support ACH transactions in 20 countries. Mr. Bjorndahl said setting up the infrastructure to handle transactions in so many countries was made more complicated by the fact that the ACH equivalents, if you will, in other countries are so different from the way we do things here.
Mr. Hart said he spends his time talking with prospective investors and customers and opening doors with his extensive industry contacts.
This is all about filling out our capabilities and building our distribution systems, he said. Were making good progress, but weve got a lot of work to do.
Part of the fun is connecting with longtime industry colleagues. Theres something of a brotherhood among people who are in the payments business, said Mr. Hart, who is also a former CEO of Advanta Corp. and is now works as a consultant and corporate director for the company. (He is a member of five corporate boards.) Theres an awful lot of cross-pollination.
Chris Penny, a senior research analyst at the investment banking firm Friedman Billings Ramsey & Co., said the privately capitalized Payment Partners has a fertile opportunity in international payments.
They are serving a market that is very inefficient, because it is very cumbersome, very time consuming to make cross-border transactions, he said. What PayPal recognized early on was its not about the technology, its about the process. Thats exactly how Payment Partners is looking at it. You do something that addresses the process, youre going to get customers.
