GPWA Times Magazine - Issue 29 - July 2014

ment in but in the payment out, the pre- paid card, liquidity, going toanATMma- chine, having24-hour access tomy funds, and the geolocation and KYC require- ments and theubiquitybeyondpayments means once we launch, pretty much all the merchants will have NETELLER as anoption – amongst others, I’m sure – on their cashier page. VN: Thinking more globally, people don’t get payment processing. It’s this sort ofmysterious thing that happens in the background. What are some of the complexities thatpeople justdon’t think about that you have to deal with on a regularbasis? JL: It’s funny. I think it’s always the last piece of the puzzle when groups are looking to launch. In theU.S., for example, a lot of time and energy (were) spent on theplatform. Is it 888, is it bwin.party, is it Amayaorothers?But thepaymentpiece is really theoxygen. The reality today is a lot of money is being spent onmarketing. So you spend a fewhundreddollars to bring a customer to your site, he brings out his credit card and the credit card fails –what do you do then? If the customer walks away, you’ve just lost that marketing dol- lar that you spent bringinghim there. Thecomplexitiesvary.Numberone, ifyou go around the world, there are various complexities that are specific to individual countries. Credit cards don’t workwell in many countries andunless youoffer some sort of alternative payment method, it’s justnotgoing tohappen.Thatbrings in the value component ofNETELLER. I think the KYC requirements are com- plex. We collect passport information, driver’s license information, and so for every100people that come toNETELLER and signup for aNETELLER account,we probably only convert maybe 40-odd of those hundred because we need to buy that you arewhoyou are. It’s not an easy processwhen you start talking about col- lecting physical documents. And I think that’s something that is certainly over- looked. It’s complex. It requires people and process and verification and valida- tion that people arewho they are. I think geolocation and the triangulation process that’s required to verify that peo- plearewhere they say theyare iscomplex – it has its own subtleties. It’s not a per- fectworld, but it’s gettingbetter. I think that fraud issues are also quite complicated.Wedo a lot of things behind the scenes that youwouldn’t even consid- er.Wefingerprint your computer tomake surewegetmore comfortwhenyou come backon thesamecomputeroverandover. We’ll check the languageofyourkeyboard and validate that it’s consistent with the place that you live. Sowe’redoing a lot of stuff tokeep thebadguysout onbehalf of ourmerchants. VN: And that’s really important for you guys because you have 100 percent indemnificationona lotofyourofferings. JL: Our necks are out because we’re guaranteeing all the funds to the mer- chants. Sowe need todo a lot of the stuff behind the scenes. We have clients that opened up and started marketing heav- ily inBrazil andSouthAmerica.And they came to us and said, “Hey, our approval rates are 10 percent. We’re getting 90 percent rejections and credit cards aren’t working – the issuing banks are rejecting them all.We’re amess.” And that’swherewecome intoplay.We’ll integrate some local payment methods, how to pull money out of bank accounts properly, how to authenticate and even micro deposit methodswherewe’ll put a few pennies in your account and you tell us howmuchmoneywasdeposited. That way,weknowyouactuallyhaveaccess to that account andarenot stealing someone else’s account. There’s other stuff behind the scenes that goes toward improving the conversion rates and thenultimatelymaking sure the customer iswhohe sayshe is. The other pieces are to provide liquid- ity, to provide you the ability of taking a Net+ card, aMasterCard, andgoing to an ATM or restaurant and getting access to your funds. There are a lot of pieces to it. It’s abit of a Rubik’sCube. VN: There’s a fair amount of vendors offering facial recognition and other forms of technology to help with KYC. Is there technology on the horizon you see coming that canhelpwith this? JL: We’ve seen everything. We’ve integrated with some of those groups. I think theproblem is ina regulatedworld, ina taxedworld, there’s avery significant focus andorientationon cost. So themer- “ Credit cards don’tworkwell inmany countries andunless you offer some sort of alternative paymentmethod, it’s just not going tohappen. That brings in the value component of NETELLER.” — Joel Leonoff 33 When graymarkets turnwhite: Payment processing in a regulated environment