If you sell anything online, whether physical goods or services, you’re probably keenly aware of the 2-3% (plus $0.30) lost through transactional fees every time someone makes a purchase with their credit card. This fee rears its ugly head whether you use PayPal, Google Checkout, or Amazon Flexible Payment Service since those companies are largely just passing on the fees imposed on them by credit card companies.
Noca, a startup founded by ex-Visa employees, is attempting to virtually eliminate transaction fees by bypassing the credit card companies altogether with its own online payment service. Since $5 billion goes towards online transaction fees every year in the United States alone, and since online vendors have particularly slim profit margins, the company thinks that the near elimination of transaction fees would be a huge boon for online vendors. Concurrently, Noca seeks to provide consumers with a more rewarding and more secure purchasing experience, thereby making its service appealing to both actors involved in a transaction.
While Noca aims to eventually facilitate online payments for purchases of all sizes, it begins with a focus on micro-payments, and on micro-payments made through Facebook in particular. It has launched two Facebook applications to test its payments system out: OneClick Pay and HelpYourWorld.
The former provides a simple way to send money to friends. As you can see in the screenshot to the left, the idea is to send someone a digital check; you actually enter your routing and account numbers into the application instead of using a credit card. This poses a significant obstacle to adoption (who remembers these numbers or carries around a check in their pocket?). But the company insists that using checking information rather than credit card information increases security and reduces the chances of identity theft. Plus, Noca is working to provide functionality that would allow you to enter your online banking credentials in lieu of your checking information.
The latter Facebook application, HelpYourWorld, provides a good use case for Noca’s micro-payment system. Since the application solicits $1-at-a-time donations for a series of causes, it benefits greatly from Noca’s lack of transaction fees (especially the standard fixed one of $0.30). Noca hopes that many other Facebook applications with similar micro-payment needs will use its APIs to implement its payment service.
As for the benefits to the consumer, Noca promises to provide strong and flexible incentives through cash back schemes, frequent flier miles, and the ability to designate a part of your payment to a charity of choice. The company also insists that its service will be substantially easier to use than others like PayPal, and that consumers will gain access to a much more comprehensive transaction history than they would get elsewhere.
In the longer term, Noca will become much more like a credit card company itself, providing credit to users through direct partnerships with banks. In doing so, it will be able to provide users with the same benefits of buying things on credit without charging vendors standard transaction fees, which it considers mostly oligopolistic fat. To make money, Noca will also attempt to leverage its user data to target them with tailored advertising and product deals.
noca as in no card
Great to see someone has figured out a way to use the ACH system at such a low cost per transaction. The problem for regular merchants however is the time lag ACH requires for processing the cash transfer. For everyday retail stores, vending machines, taxis, etc. this system will not work because there is no guarantee to the merchant for payment. Once NOCA figures out a way to provide some kind of middleman guarantor to merchants, they will really have something that can change the world of credit/debit cards. I hope they do.
Can Bokon Too Koonet explain how giving out a routing number ( = sort code in the UK?) and account number can ‘drain’ an account? Anyone who writes a cheque does this.
I will bet that companies will simply continue to charge the 2 to 3% anyway. They are not going to display two prices because they will also want to have the other payment options. Nothing will probably be gained here.
It’s a great idea. So good.
Right now the product isn’t revolutionary. We can already pay for most items with a check - or a debit card - without transaction fees. If they add lines of credit with no transaction fees, thats when they will become something.
The purchases and payments online are more and more common, therefore the security must be greater. Personally I had a bad experience with paypal, with this I do not mean that the system is bad.
Doesn’t Paypal do this exact same thing and still charge merchants for it? I thought they had millions of users with bank info and Paypal just takes the spread on the 2-3% they charge.
Banks and credit card companies are gouging here - no question. Could it really cost 3-5% of a payment to process it? (almost as ridiculous as real estate agent fees
So there is an obvious market, especially for smaller payments where fixed fees drive the percentage up further. Can this be done securely? Yes, the world has the technology. We already use it to pay bills online. To me the “returning goods” thing is a lark. My credit card company would not lift a finger to return fees to me. As a matter of fact, my card was used fraudulently online and it took me 4 months and two sworn affadavits to get credited for fraudulent purchases on a canadian credit card with delivery going to Hong Kong. Bring it on, and worst outcome is the monopoly players will reduce their fees to represent reasonable margins. And how much does a GD transaction cost?
Actually, Amazon FPS charges only 5 cents plus 5% for transactions less than $10 that use a credit card, not 30 cents as you posted Mark.
I just finished a post of micropayment providers and how Amazon, right now, is the best choice for $1 transactions.
http://www.trumptheniche.com/2.....developer/
Does anyone know of a company that is similar to Noca?
What other companies are doing the same thing as Noca?
What is the legal status of Noca? Is it a bank? A financial intermediary? Or is it simply a services company? If so, how can it act directly on bank accounts without any bank processing?
Amazon FPS has some micro-payment support. It isn’t great, but it allows you to bundle a lot of micro payments into a single larger transaction, thereby cutting down (but no eliminating) the transaction fees.
Lots of alternate payment processors have been doing micro-payments for years. The digital previous metals industries all handle micro-payments, all with different types fee structure. e-Gold, e-Bullion & Goldmoney are the oldest that come to mind.