Online payment gateway eWAY, which processes about 20 per cent of all internet purchases in Australia, is expanding to the United States to take on competitors such as Stripe and PayPal’s Braintree in their home market.

After starting life in the dotcom boom of the late 1990s, eWAY, which sets up a connection with a bank for online businesses so they can get paid, has about 18,000 merchant customers, making it the dominant online payment processor here.

It processed $4.6 billion in transactions in the 2014 financial year and is expected to earn $12 million to $14 million in revenue in 2015. But it is facing competition from cashed-up US competitors offering a faster, hassle-free set up with banks.

Founder and 100 per cent owner Matt Bullock told The Australian Financial Review that eWAY is rolling out a new, faster sign-up process in new markets it is entering in New Zealand and the US. It is similar to Stripe in that it takes over all the relationship with banks. eWAY’s service to date has left it to the merchant to set up and maintain relations with its bank and eWAY provided the payment link.

The new model will change how eWAY makes money. “We are now selling merchant facilities,” he said. “So instead of a flat rate up front, we take some of the merchant service fee that goes to the bank for each transaction.”

He said the company has got the merchant sign-up and ability to take payments process down to four days and in some cases “four minutes”. Competitors cite a similarly quick connection to a bank.

New Zealand launch this week

In Australia 3,000 of eWAY’s customers are now on the new business model, but all of eWAY’s 900 new New Zealand customers, where it is officially launching this week, will be on this model, as will its US customers, where it will begin operating “soon”. The company also has existing overseas markets in Britain, Hong Kong, Malaysia and Singapore.

Globally, eWAY added 3000 new merchant customers in 2014 and is aiming for a further 6000 to 11,000 in 2015.

“You want to come over to my place? well, I am going to yours,” Mr Bullock said of his rivals in the US. “So Braintree, Stripe – we don’t yet see a lot of these guys in the market – but, well, you know what? we should go to their market.”

However, it is a costly and time-consuming process to set up in the US, due to a range of legal and regulatory requirements. eWAY has also had to arrange bank contracts. While it has just one in Australia, it has several in the US. It also has to make arrangements on how it will pay tax via so-called transfer price agreements.

But once complete, it will be relatively easy to start operating in the single biggest market eWAY has entered.

“We have all 500 shopping cart systems, [such as] Shopify and Chargify, as well as [accounting software company] Xero and Netsuite – they already link to us in Australia, NZ and the UK. So we just have to turn it on in the US and they will link to us there,” he said.

In New Zealand, eWAY’s partner bank is Bank of New Zealand, owned by National Australia Bank, its banking partner in Australia.

Already quietly under way

eWAY’s shift to a cut of transaction fees the bank gets was already quietly under way when new global players such as Stripe started arriving.

With much fanfare, the five-year old start-up set up in Australia in July 2014. Its 25-year-old co-founder John Collison offered to take all the hassle out of maintaining bank relationships by doing it for online start-ups.

“It allows people to start accepting payments from anyone, anywhere in their particular currency,” he told the Financial Review in 2014. “[Online businesses] are very fast moving and the last thing they have time for is to spend time setting up payments.”

Stripe says it is now being used in 17 countries and is processing “billions of dollars” every year.

It pays the merchant service fees that a business would normally pay to the card companies and banks, as well as storing credit card details and handling fraud detection, and pockets the difference.

Hire car start-up Uber uses Braintree, which was acquired by PayPal in 2013, as its payment gateway. Braintree provides features such as one-touch payments that identify the device being used to authenticate who is paying, removing the need to enter passwords or PINs.

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