Short of a credit card, consumers looking to shop online but defer payments have limited options. PayPal's BillMeLater service is at the forefront, but availability to online merchants is limited by volume requirements, and shoppers are by no means assured of approval.
Credex, the branded offering of Emerging Payments Technologies, is looking to fill in the gaps in the deferred-payment space, specifically going after smaller and midsize online sellers.
Launched in April, Credex collects a very limited amount of personal information from first-time shoppers to confirm their identity, and runs on a novel algorithm that within seconds prequalifies customers for a line of credit, taps into its network of banking partners and identifies the one most likely to approve the application, and then presents the most appealing reward or incentive program for the pending purchase.
To identify the most appropriate incentive offer, Credex's calculus considers factors about the purchase such as the vertical and the ticket price. A customer buying an expensive piece of jewelry, for instance, might be inclined to take advantage of 18 months of zero-percent interest, whereas shoppers making smaller purchases might be more receptive to an instant rebate offer.
"Within the issuing banks' programs we will find a reward program or an incentive program that will be most advantageous to the customer," explained Stephane Touboul, CEO of Emerging Payments Technologies.
What's in It for Merchants
Credex presents an enticing offer for merchants. For each new customer a merchant registers with the service, Credex pays out a bounty of $10. Additionally, Credex charges no set-up or transaction fees.
"Our business model is we completely get paid by the banks," Touboul said. "The banks are really interested in working with us because we bring them prequalified leads."
Credex also boasts that the instant access to credit delivers merchants a higher conversion rate, and attractive financing offers tend to drive up average sales.
How It Works
Credex makes a point of keeping its data collection to a minimum. The company partners with leading data clearinghouses such as LexisNexis, DataX, Experian and TransUnion to confirm consumers' identities at registration. With only a customer's first and last name and ZIP code in hand, the Credex API will query far-flung databases ranging from DMV records to lists of hunting and fishing licenses in the patented process it calls express verifiable authorization.
"What we've done is through a fairly sophisticated API we're able to tap into these databases and we're able to reverse match information extremely rapidly," Touboul said. In the event that the individual's identity remains ambiguous after the database query, Credex will present a few simple multiple-choice challenge questions (i.e. asking to select which bank has issued the person a mortgage loan) to confirm.
When customers return, they are only asked to enter their email address and the last four digital of their Social Security number.
With its streamlined login process, "on the front end it's like BillMeLater," Touboul said. "On the back end it's like Lending Tree," he added, describing the process of pairing shoppers with the most appropriate bank and advantageous credit package.
Credex vs. BillMeLater - Competitors or Future Partners?
With this sort of payment model, the comparisons to BillMeLater are inevitable. But Touboul notes several important differences, beginning with Credex's courtship of smaller merchants that don't meet the minimum threshold (Touboul says it's $30 million) for PayPal's deferred payment service. Also, by tapping into its established network of banks, rather than itself acting as a credit issuer, Credex boasts that its prequalification process results in nearly 100 percent approval.
Though in a sense they are rivals, there may be some symmetries to be found. Because BillMeLater caters to the largest retailers on the Web, and Credex, while it would welcome a foothold in that market, is particularly geared for smaller sellers, an alignment of some kind could give the PayPal subsidiary access to a whole segment of commerce that it is currently bypassing.
Touboul said that he has had preliminary talks with officials at PayPal about a potential partnership to flesh out the low end of the market left unserved by BillMeLater, though he stressed that at this point it is unclear how such an agreement might be structured.
"PayPal has expressed interest in working with us because BillMeLater rejects a lot of traffic," he said.
Having only recently launched the service, Touboul declined to provide figures about how many merchants or account holders Credex has signed up. He said that his company is both reaching out directly to merchants and enrolling sellers through third-party heavyweights like Cardinal Commerce, which helps pair merchants with alternative payment providers. "Hundreds of thousands of merchants are in the pipeline," he said.
Credex has had some early-stage talks with firms like Google about adding its service on their marketplaces, but is focused primarily on signing up individual merchants.
The service also offers a mobile payment option, available for download in the app stores of the leading smartphone makers. Down the road, likely in the second or third quarter of next year, Credex is looking to use that capability to make its payment option available in brick-and-mortar stores.