Plastiq: Enabling vendors to accept credit cards at 0% processing fees

Mobile Payment Companies such as Square, iZettle and PayPal charge a percentage of transaction amount as fee for their services. A segment of merchants including private schools and car dealers have not adopted these systems due to the additional fees that they would have to pay the credit card companies if they accept card payments. Plastiq, a startup in the payments space claims to have found a solution for these merchants.

Plastiq was founded by Harvard University graduates Eliot Buchanan and Daniel Choi in 2011. The company received $2.3 Mn in funding from Atlas Ventures and Flybridge Capital Partners in November, 2012. On 2nd February, 2013 they acquired a further $8.3 Mn in Series A funding from Flybridge Capital Partners, Atlas Venture, NextView Ventures and Greenoaks Capital, along with angel investor Harvey Golub, (former Chairman and CEO of American Express).

Plastiq allows merchants to accept credit cards, and provide their consumers the option to pay using their preferred cards. It shifts the cost of transaction from the merchants to the consumers. The merchants need not pay anything, and therefore, Plastiq provides a cost saving option for them. For the customers, in exchange of 2% of the transaction amount as a fee, they get the flexibility to pay to these merchants using their preferred credit cards, and utilize the rewards program. Customers can make payments with their credit card to achieve next level reward tiers faster. They can also pay with multiple cards. The customers can use the accumulated reward points for airmiles, cashback and more. The services for merchants are similar to PayPal’s offerings, except that it is free

Plastiq’s secure platform enables transaction between consumers with the only requirement being an internet enabled device like mobile phone or tablet. Once the platform has been integrated onto the merchant site, consumers can register on the Plastiq site and pay the amount to a registered merchant. It also provides the merchants value-added services like recent transaction information and transaction history. The consumers can view their transaction history to identify spending patterns. Plastiq also allows consumers to schedule their payments, and automate recurring payments.

Plastiq’s partners include major players in the payments segment such MasterCard, American Express, Moneris Solutions and FirstData. The simplicity and flexibility of the offerings has encouraged many merchants to adopt Plastiq for their credit card transactions. Institutes like University of Alberta, Mount Royal University, and British Columbia Institute of Technology are using Plastiq to receive tuition fees. Tax payment in Canada can be done using credit cards through Plastiq. The company has also partnered with large property management companies in Canada, like MetCap, as well as companies like ClubSoft, which operates around 300 country and membership clubs across North America.

LTP View: Most companies that have entered the payments space target small and medium sized businesses. Plastiq’s audience includes merchants dealing in high value transactions, and being the first company to operate in this field could give them a competitive advantage. Their offering might provide these merchants with significant savings in cost, and give consumers the flexibility to make online payments in scenarios which were not possible earlier. Plastiq’s challenge may lie in building a brand recognition quickly to reach the average credit card user. With a successful round of Series A funding of $8.3 Mn in February, Plastiq may be poised for significant growth in the future.