WePay Inc., an online payment service, recently released a public beta version of its payment site designed to enable groups, organizations, associations and individuals to collect, manage and spend money. The company hopes to compete with eBay Inc.’s PayPal by making it simpler to collect money from groups of consumers.
The co-founders of the Palo Alto, Calif.-based company began designing WePay in 2008 to provide a more-streamlined means for consumers ages 20 to 35 to collect funds from other consumers, especially in a group setting, WePay co-founder Rich Aberman tells PaymentsSource. “We wanted the product to be more consumer-to-consumer focused because most big payment companies solely focus on consumer-to-merchant relationships,” he says.
WePay enables consumers wanting to collect money for rent, membership dues or vacation packages from roommates, friends or membership-based organizations to set up an account to receive and make payments, Aberman explains. WePay also enables potential users to create free accounts held by WePay’s partner bank, The Bancorp Bank, a subsidiary of Bancorp Inc., and insured by the Federal Deposit Insurance Corp.
Accountholders may “share” their accounts with other group or organization members so those individuals always can verify where their money is going, Aberman says.
Group or organization members can track where their funds go and view what the group or organization is using them for by looking up the organization’s transaction history and account balances, Aberman explains. However, only the account creator, for any account, may use the account to make and receive payments.
To receive payments from group members, the account creator can send bills electronically to them that they may pay from a bank account or by using a credit card. Because of the electronic-bill function, groups members do not have to set up their own WePay account.
Accountholders can spend money or make payments using a WePay Visa prepaid card, paper checks or electronic transfers. WePay released the WePay Visa prepaid card on April 8. Customers using the card include fraternities and other membership-type groups.
The main difference between WePay and other online-payment service providers, such as PayPal, is that WePay accountholders may create separate accounts for different purposes, Aberman explains. Because of this, accountholders can keep funds separate and not mix personal accounts with business finances, he says.
Consumers or members pay nothing to make payments, but WePay charges clubs, groups or organizations as little as 50 cents per payment they receive.
While WePay’s co-founders and backers believe their service has a place in the market, some observers have mixed feelings on the company’s chances to succeed.
Because WePay essentially is starting from scratch, it will need “smart people and good clients,” Red Gillen, a senior analyst with Boston-based Celent LLC tells PaymentsSource. “PayPal was able to succeed because they were in the eBay ecosystem, and no one has been able to beat them.”
Nick Holland, a senior analyst with Boston-based Aite Group, agrees. “The [online-payment services] landscape is extremely competitive,” he says. Moreover, if a company is “too small and has no connections, then how will they stay in business?” Mainly, it boils down to how the company can get on the scale; it will need both “ubiquity and mass adoption,” he says.
However, WePay’s limited scope within group-payment collections gives it a future, Andy Schmidt, research director, global payments, at Needham, Mass.-based Tower Group, tells PaymentsSource.
“Really, it is part PayPal for groups and part Virgin Money for groups, which is WePay’s differentiator,” Schmidt says. However, WePay is not a threat to PayPal, and the main challenge for the company will be “outlining how it can add value to the marketplace,” he says.
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