Imagine that you live in Russia (Moscow), you have tons of rubles (aka cash) in your bank or you live in Brazil (Rio) and have millions of Reais (aka cash) in the bank. You have cash, but you don’t have an American credit card. You still don’t see the problem? You want Ferraris, Fendis, Hermes, Ferragamos, but you can’t buy them. Why? I already told you, you don’t have an American credit card so your credit, bank account or address can’t be verified. That’s the cream of the money cup, while at the grounds of the money cup are millions of hard-working illegal aliens living in the U.S. or even U.S. citizens who don’t own a credit card: they can’t buy on-line either.
After Global Payments was recently hacked and hackers got customer information from up to 1.5M accounts across North America, you may NOT want to use a credit card as much for making your on-line purchases. Never heard of Global Payments? That’s understandable, but you have heard of Visa and MasterCard. Global Payments provides processing services for them as well as for every other major credit card company.
Yesterday, April 3, 2012 I traveled to the new payment processing capital of the world: San Francisco. I met with Alan Safhi, President, CEO and Founder of ZipZap. Some famous San Francisco-based payment processors are Square, Facebook Credit, Blackhawk and now ZipZap.
So How Does this Wrath Reliever Work? You make an online purchase, pay bills, top-up your e-wallet, prepaid and mobil accounts, then you complete the transaction in one of the 700,000 globally-located payment centers. Usually there is a neighborhood one and you can use your local currency. In short you: “Shop online. Pay cash offline.” If you haven’t already guessed Wrath is the last sin of the David (Blumberg) Series: The Seven Deadly Sins, Sin Sells.
Now that Alan Has Made the Cash-Laiden Consumer Happy, What is he Doing for the Merchant? With ZipZap, Alan give e-commerce merchants a way to monetize the billions of cash-perferred customers world wide.
How Does ZipZap Differ from PayPal? ZipZap and PayPal are complementary rather than competitors. You could potentially, some day, use ZipZap to add cash to your PayPal account. As you PayPal users know, you need a credit card to set up a PayPal account or a bank account. PayPal in it’s current form can’t service the world-wide cash only customer.
Revenue Model? Instead of the 30% surcharge added by the Russian shopping agents, Alan’s charge is comparable to credit card charges, 3-5%, but unlike credit cards which have to deal with disputes and charge backs which can equal 1-1.5%, since all the transactions are cash, there are no disputes. A shopping agent is a person in Russia that the cash rich pay to buy goods on-line or in foreign countries, in return the shopping agent adds a 30% surcharge and makes you wait several weeks before you get your items, since they have to be shipped to the shopping agent first, then shipped to the customer by the shopping agent.
Scaling? The scaling is done with partners both on the processing side and the merchant side. Recently ZipZap formed a partnership with SafetyPay, a secure payment provider for online shoppers, merchants and banks worldwide. The partnerships first target will be the travel industry.
Lucky, Smart or Just Good Timing? Alan realizes that since over 50% of the world’s population does not have access to banking or credit (statistic from World Bank) and 30% of consumers would spend more online if they could pay with cash (Javelin Research statistic), Zip Zap is a smart solution. Alan is also lucky because he got snapped up into the startup portfolio of visionary, Silicon Valley VC, David J. Blumberg (Blumberg Capital).
Takeaway: If you are a global consumer with cash, ZipZap has leveled the consumer goods playing field for you. If you are an e-commerce merchants, ZipZap, can tap you into the piles of Rubles and Reais that want to be turned into goods.