Ireland has for some time now been the strategic crossroads for global electronic payments. Longstanding players include PayPal in Dublin and Dundalk, Co Louth, which employs more than 2,000 people to process global e-commerce transactions on sites like eBay.
There’s also Killarney, Co Kerry-based Monex, which processes credit-card transactions globally. Fexco in Kilorglin, Co Kerry, provides dynamic currency conversion services, and Dublin-based Omnipay processes 1.2bn transactions for 5.34m merchants across the globe.
Now, a new breed of e-payments players led by Irish entrepreneurs are set to transform the payments landscape, bringing the power of e-commerce into the hands of ordinary people, start-ups and social networking sites.
They include Realex Payments, a Dublin-based company that is enabling 12,000 retailers to process some €24bn worth of payments a year, and Stripe, a Silicon Valley company which is enabling website owners to implement App Store-style payments on their sites.
Limerick brothers Patrick (24) and John Collison (23) are the founders of Stripe, and Colm Lyon is the founder of Realex Payments.
Colm Lyon, founder of Realex Payments
Lyon took the advice of his neighbour John Teeling, a businessman, to wait until he was at least 38 to start his business. In 2000, Lyon established Realex Payments to provide electronic payment processing for internet companies and retailers. The company’s first client was DirectSki.com.
A Business Expansion Scheme (BES) funded Realex Payments, which has since funded itself organically through revenues.
Today, the company employs 200 people in Dublin, London and Paris, and has more than 3,500 clients across Europe, including AA, Virgin Atlantic, Vodafone and Aer Lingus, as well as a number of major gaming companies, such as Party Poker. The company recently won a major managed services deal to provide transaction services for HSBC-owned Global Payments and a similar project to provide a global payments gateway for US Bancorp-owned Elavon.
Lyon said Realex Payments has grown revenues by 40pc from €9.8m last year to close to €14m. “Our sweet spot has always been in the corporate space and high-street retailers. For firms such as HSBC’s Global Payments we migrated nearly 5,000 retailers from their old platform to our managed services platform.”
More social and mobile payments
In Lyon’s latest foray to bring e-payments to the masses, enabling consumers and businesses to send money and pay bills via smartphones and social media sites like Facebook, the company has launched Realex Fire.
The service, which aims to make payments more social and mobile, harnesses the EU’s Payment Services Directive 2009 to operate like a bank account with its own sort code, BIC and IBAN for international payments.
“Instead of traditional card transactions where there is a risk during transactions that the funds may not be in the account, the platform we built involves a push payment request where the funds are automatically transferred,” Lyon said.
The service is reminiscent of Barclays’ Ping It service that lets users send funds and pay for goods via their mobile number.
The EU’s Payment Services Directive 2009 gives companies access to the clearing systems of banks so Realex Fire can provide many of the features of a current account.
Realex Fire app
Via its app, Realex Fire can provide sort codes, BIC and IBAN infrastructure, so the infrastructure is there that the company could use in the future to offer current accounts, said Lyon.
There are also a lot of cheque and cash-replacement opportunities, he said.
So far, Realex has launched the personal app and the company is working on a business account product that will enable firms and organisations to deal with consumers and accept payments via smartphones and social networks.
“By making payments social, sports clubs or utility firms will be able to send notifications to consumers on Facebook, for example, to get their donation or to pay a bill,” Lyon said. “By logging onto Realex Fire they can then see socially who they have to pay and who is also paying them rather the traditional bank statement. There is a narrative.”
The Realex Fire app has been the product of five years of R&D, and is regulated by the Central Bank.
According to Lyon, it is something of an anomaly that despite the presence of global technology giants like Google and Apple in Ireland, Irish firms have yet to embrace e-commerce in a significant way. Less than 23pc of Irish small and medium-sized enterprises (SMEs) have websites are capable of e-commerce transactions, according to the IE Domain Registry.
Recently, Pat Rabbitte, TD, Ireland’s Minister for Communications, said that today Irish consumers make some €3.7bn worth of online transactions a year. Yet 73pc of this is leaking out of the economy to international vendors.
One of Lyons’ observations from his international customer base is that 80pc of online transactions by local businesses are local transactions. In other words, Irish firms are missing a huge trick.
Around 25pc of Realex’s business is Irish, Lyon said. “Compared with the inward investment story there’s not a great story coming out from the SME side of things,” he said. In Realex’s view, the Irish market is characterised by a large number of smaller companies attempting to sell online.
“When we analyse traffic for Irish retailers, around 85pc of that comes from local sales. So there’s a huge opportunity being missed by retailers in spite of the recession,” Lyon said.
Patrick Collison, co-founder of Stripe
Rather than wait until they were about 38, John and Patrick Collison had already sold their first company Auctomatic to Canadian firm Live Current Media for US$5m (€3.2m) when they were 17 and 19 respectively.
Now residents in Silicon Valley, their two-year-old start-up Stripe is beginning to make headway in the e-commerce space, and is now live in the US, UK and Ireland.
The company, which employs 62 people, raised its first round of funding of US$2m in 2011 from investment veterans Peter Thiel, Elon Musk, Sequoia Capital and Andreessen Horowitz. Further funding of US$18m followed in 2012 by Sequoia Capital, valuing Stripe at US$100m at the time.
The company’s technology provides the functionality to make it easier for website owners to enable transactions, getting rid of the weary shopping-cart approach and instead making payments as seamless as it is to buy apps on an iPhone.
“It replaces obsolete merchant account infrastructure,” Patrick said.
Thousands of businesses around the world already use the system, Patrick said, including Rackspace and Foursquare, as well as local players Boards.ie, MOR Solutions and PCH International.
“The key is to make e-commerce fluid,” Patrick said, “and not to be overbearing. It’s about providing people with tools they can use to create a commerce experience that makes sense, be that App Store-style frictionless billing or more traditional e-commerce.”
Stripe technology for all
From day one, Stripe has focused on making its technology available for businesses of all sizes, not just start-ups.
“We want Stripe to work well for the largest companies in the world. It’s part of our motivation – giving people the tools they need to build whatever payments experience that makes sense,” Patrick said.
Aware of all the publicity they’ve attracted since they were teenagers, Patrick wants people to understand that Stripe has been very much a product of all the people who’ve worked on it and not just about himself and John.
“There’s always this great temptation out there to focus on the founders. John and I may have been chronologically first on the Stripe team but everything we’ve achieved has been built with others — a great bunch of folks who’ve joined us along the way. I always get uncomfortable when people make it all about John and myself, it’s really down to the people we work with.”
While questions have been raised as to whether the brothers might steer Stripe towards an IPO or a trade sale, Patrick said the company is only coming to its second anniversary post-launch.
“Talking about IPOs and stuff at this stage is like trying to decide the career paths of four-year-olds,” said Patrick.
He said Stripe has built “a really good product” that’s scaling well and is available to all the people who want to use it. And that’s what the company wants to focus on for the foreseeable future.
“Early exits and all the rest are of no interest to us,” Patrick said. “The money is inconsequential – the most expensive thing I own is a bike – the most important thing to us is building something meaningful.”
E-commerce image via Shutterstock
A version of this article appeared in the Sunday Times on 15 September