Not many consumers are aware that every time they make a purchase online, there are hidden eCommerce fees in the form of payment commissions to cards and e-wallets that are included in the funds moving from their bank accounts to the business accounts of merchants.
According to Simone Martinelli, founder and CEO at U.K.-based checkout startup Volume, these surcharges from third-party providers like MasterCard, Visa and Stripe can be anywhere from 2% to 7% of the sale, forcing merchants to raise their fees which in turn impacts the price an end consumer pays.
To address this problem, the firm is leveraging the variable recurring payment (VRP) mandate for sweeping — an extension of the open banking payment initiation service which allows the automatic transfer of funds between a consumer’s own accounts — to provide online shoppers with a much lower bank rate at checkout, as part of its goal to drive transaction costs to zero.
With their one-click checkout solution, users pay a 0.75% charge for executing an online payment from their bank through open banking. “You end up paying $28.75 for a product and the merchant receives $28.65. The 10 cents difference, which is our fee, is 3x cheaper than Stripe and 10x cheaper than PayPal,” Martinelli told PYMNTS in an interview.
On the other hand, merchants, who are left with higher fees when consumers pay with cards and must wait several weeks to receive payments, are paid faster through the open banking infrastructure that eliminates third party intermediaries.
“It’s literally one-click and super secure and that is what every retail customer experience should look like in 2022,” he said.
Ad-Free, Personalized Checkout Experience
Martinelli acknowledged, however, that there are still individuals who would prefer to pay with their credit and debit cards because of the insurance protections they offer and the ability to easily recover funds when a transaction goes wrong.
But those benefits come at a high cost, he said, when considering the 2-7% surcharge on eCommerce purchases consumers could avoid by making a direct payment from their bank account to that of the merchant.
That said, he pointed to Volume as an additional checkout option available to consumers, one that is much needed today. “You might use a credit card to pay for a holiday trip and choose to use Volume when ordering a product on Amazon,” he noted.
When it comes to digital fraud prevention, Martinelli said feedback from eCommerce merchants shows that the 3D Secure (3DS) protocol, which was mandated years ago and requires customers to complete an additional verification step for online card transactions, has not been as effective in preventing fraud as they hoped it would be.
It’s the reason why the industry, especially from a consumer payment perspective, has been quickly moving into a higher level of security with biometric authentication, which Volume leverages before authorizing payments from the banking app installed in a user’s phone.
Read more: Checkout Startup Volume Notches $2.4M
Founded in May 2021, the young firm has already onboarded over 50 U.K. merchants across various sectors like retail and food delivery, and recently raised $2.4 million in a pre-seed round earmarked for expanding its U.K. operations before targeting the rest of Europe and the North American markets.
Martinelli said they want to move beyond Volume’s one-click online payment solution that is fixing the hidden fee pain point, to enabling an ad-free, personalized checkout experience for online shoppers that includes product reviews from Trustpilot, for example.
“The battle to eliminate hidden fees is only the beginning of our journey,” he said.
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