PAYMENT GATEWAYSFor UAE STARTUPS

by Alexandra Tohme

• Cashu – www.cashu.com • InnovatePayments -

http://innovatepayments.com/ @innovatepayment on Twitter

• 2Checkout - www.2checkout.com • Gate2play - http://www.gate2play.com• Paypal – www.paypal.com • Network International – www.network.ae

• Paypal– You and I can use Paypal, however you are unable

to withdraw funds as a merchant from banks here (they have yet to make agreements on that)

– You can set up as a merchant in USA / Europe using Paypal account there – you will be withdrawing from a UAE bank on an American Bank account – currency charges will apply

– Can still be cheaper though depending on # of sales

Network International

• NI is the Emirates Bank Payment Gateway for authorisation & processing of online transactions

• Supports online transaction processing and merchant payments of Internet transactions through eCompany (A business unit of Etisalat for e-business solutions)

• DEWA / DED / DIC / Police etc using this solution

Some Stats for NI

• Network International provides credit-card payment processing services to 70 banks and 17,000 merchants.

• Its 45,000 card readers are in 28,000 stores across the region

• It also operates about 700 ATMs in the Gulf• Abraaj owns 49% of NI (paid 2 billion AED for

it)**Purchase price contingent on NI meeting certain profit targets

What it offers

• Offers MIGS (Mastercard) / Comtrust (Etisalat) and Enterpayment as different types of gateways

• Incentivizes merchants to bill customers in their currency of choice (dynamic currency conversion / Planet payment – pay in your currency) – good for tourists….

• Also has a GPRS solution for payment processing• Also requests $25,000 security deposit!!

• Payment gateway costs – can be any or all of the below:– Set up costs– Per Transaction fee– Monthly or yearly subscription fees– Per currency fees– Deposit at bank to counter fraud

• Example: Item listed at $25• 3.99% transaction charge = $0.9975• Additional $0.45 transaction fee• = $1.4475 (merchant bears cost)• Sell at $26.5

• 100 sales per month = $45 (transaction fees)• 500 sales per month = $225

• 500 sales of item priced at $25…• $0.9975 * 500 = $498.75• $0.45 * 500 = $225

• Total fees = $723.75 (plus your monthly fee of $5.99!)– ($729.74)

• If you buy at $17, sell at $25 – you make $4000• Minus $729.74 for processing• 18% of your margin is being eaten by payment gateway!• Don’t forget costs for usual business overheads as well…

Example: Innovate Payments vs Cashu

• Transaction fee– IP – 3.5% – Cashu – 3.3% + 2 aed

• Set up fee– IP - $200 per currency, (dirhams and dollars offered )– Cashu $1000

• Monthly payment– IP - 150 AED– Cashu – annual $1k -$3k depending on how many products you

have and sales volume• Security deposit

– Approx $10k for both

Comparison outcomes:

• Innovate - $700 per year (1 currency) + deposit

• Cashu - $3000 per year + deposit

• 500 sales of $25 item:– Cashu $272 (transaction fee) + $412.5 (% fee) =

$684.5– IP - $437.5 (about 10% of your margin)

Comparison table v1.

• SETTING UP:• Trade licence (RAK / Fujairah / ?)• Merchant account• Payment gateway

• Trade licence – 30,000 AED + 100,000 AED in bank (working capital)

• Merchant account (fees?)• Payment gateway deposit – 20,000AED –

40,000AED….

• Estimate $40 - $50k just to set up a business with a payment gateway in place in UAE….

• Issues:– Lack of easy to compare pricing across payment

providers, banks and free zones– Pricing can be low per transaction – if you have

volume payments – need to factor this into business model over time

– DON’T FORGET DELIVERY COSTS!– Still better than COD (cash on delivery) in long

term…..

E-Commerce stats (by Aramex)

• 50% of online shopping in Saudi originates outside of major cities (think m-commerce)

• Amount of returns for COD is 7 times higher than when people pay online

• Biggest markets for Shop and Ship – – Kuwait, Saudi, UAE

• Biggest markets for E-commerce in general – UAE, Saudi, Egypt

• Who pays more online? – Jordan, Bahrain, Oman, UAE and Qatar

Something startling

• Although everyone says, people in the region like to “touch” and “feel” stuff, look at the top category for online purchases:– Apparel– Electronics– Books– DVD/CD– Shoes– Bag/Case– Mail & Magazines

Some ideas to get started

• Spend your money on testing before you invest in your own ecommerce platform

• Set up shop on www.nahel.com / www.souq.com / www.dokkankom.com / www.shopgo.me

• Test various customer acquisition and marketing strategies

• Co-market with others in the same vertical• DATA DATA DATA!

Points to consider

• Dropshipping vs Warehousing, inventory management and logistics – Aramex / Fedex / DHL

• Time to process customer payments into your bank account and then to suppliers

• Returns – how can you minimize these and how much will they cost you?

• Customer service

Some useful contacts

• @hudz from www.glowskies.com • @okassim from www.jadopado.com • Rania Kanaan from www.ananasa.com • @nadersm from www.nahel.com • @mohanadgh from www.shopgo.me• @ronmou from www.souq.com • And www.wamda.com • http://

www.wamda.com/2012/06/debates-day-one-of-coeecommerce

@alextohme

www.alextohme.com