Cloud-based invoicing and payment system speeds transactions

By SCOTT SIMPSON, Vancouver Sun July 12, 2011 6:31 AM

From left: VersaPay’s Ryan Wilson, Jody Rebak, Greg Bell and Matt Vague offer streamlined bill-paying systems for business-to-business transactions.

Payment systems are a $44-trillion market, and VersaPay wants just a slice of it.

The Vancouver-founded company got its start in 2005 in a familiar niche — credit-card and debit payment processing.

According to a discussion document released Friday by a task force that’s undertaking a federal review of Canada’s payments system, there are 24 billion such payments annually.

Federal Finance Minister Jim Flaherty last year used the word “bewildering” to describe the array of methods Canadians employ to pay for purchases — including online, key fobs, automatic billing and, now, cellphones.

The task force calls the present Canadian payment system a patchwork, and is expected to present by year’s end recommendations that will make it more streamlined, secure and cost effective for both merchants and consumers.

VersaPay has a very modest portion of the consumer-to-merchant market: 3,000 small- and medium-sized businesses across Canada use its debit- and credit-card swipe machines to make about $722 million worth of transactions last year, compared to $370 million in 2009.

Customers include Grouse Mountain and Tourism Vancouver.

Last year, however, VersaPay starting working on a second project that it believes could represent a more substantial growth opportunity over the long term.

It has developed a cloud-based payment system for business-to-business transactions — a Canadian market that was worth $859 billion in 2010 and, more significantly, is still conducted largely through the exchange of paper invoices and cheques.

“Canadian businesses, especially small- and medium-sized ones, continue to rely on paper-based payment and invoicing systems,” the task force noted. “In Europe, phasing out older, paper-based payments is yielding immediate economic benefits.”

When you’re waiting up to 120 days to receive a payment for goods or services, it can cut into your revenue — in some cases you may be spending your line of credit, including interest costs, while you wait for a payment to arrive via Canada Post.

VersaPay launched the business-to-business system in mid-2010, at the behest of one of its existing customers, and began to generate revenue from it late last year.

They have about 3,000 customers signed up — including many who were already using VersaPay card-swipe machines.

The recent postal strike was helpful.

The company went from signing up about 50 new customers a month to gaining more than 200 in June, and according to VersaPay technology director Ryan Wilson, that’s expected to mushroom as the new signees bring their own partners into the fold.

“There’s a bit of a viral growth model to this product, where you as a business sign up but then all of the businesses that you pay, or that pay you, also sign up. So we suspect that there will be exponential growth moving forward,” Wilson said in an interview.

“One example is Corus Radio. They own stations across the country. They’re receiving thousands of cheques a month. You can imagine the administrative challenge it is to receive all of those payments.

“So we finished integrating to their online radio advertising [payment] platform and have now fully automated their bank account and credit-card payments for their thousands of advertisers across the country.”

Brewers Distributors Limited, owned by Molson-Coors and Labatt Breweries, prompted VersaPay to develop the new payment model.

“The BDL is responsible for all of the beer delivery to the licence holders, for the government,” Wilson said. “They operate in a zero-risk model where they won’t release your order until it has been paid, or if you have a letter of guarantee from your bank.

“There’s all this hassle around doing something that most license holders do every week, which is to order more beer for their hotel or restaurant or whatnot. So people are doing things like driving cheques around, they pay cash, or they’ve got to go into bank branches and get certified cheques.

“Our chief technology officer Kevin [Short] saw that opportunity and we built the first version of our platform to automate the BDL payment system.

“Their 3,000 licence holders in British Columbia now have the option of working with VersaPay, where they simply go online, they make their order for beer, and, when they sign up, they say, ‘I want to have this billed to my credit card or my bank account.’

“We just process the payments for them automatically. Their orders went from taking two days on average to be released from credit hold, to same day, almost instantly.”

It’s not just a bill — it’s a detailed invoice that’s compatible with a wide spectrum of billing-software systems.

Wilson said VersaPay did a test with a company that processes payments for 250 charities around North America.

“They said they always got paid by the charities, but it took a really long time. Their [accounts receivable] was on average 90-120 days.

“We did a test pilot with some of their customers and by the end of the first day, half had already approved the payments and it was in their bank account — and the rest were paid within five days.”

Wilson also believes the system will provide businesses with greater security.

“Before VersaPay, a lot of the work I did was network-security testing. I got paid to break into businesses and I can tell you that at every single business I went to, we were successful at breaking in and we found credit-card numbers, bank-account numbers of their customers.

“In many cases the people I audited handled information for other organizations and those organizations’ data was in the custody of another business that wasn’t properly protecting it. A big advantage of the VersaPay platform is that you get to shift the burden of storing and transmitting and dealing with sensitive information off onto us. We collect it directly from the business or the consumer. We store it in our SAS 70 Type II audited data centres and we have a professional team of people employed to protect that data.

“The average business that maybe you give a preauthorized debit to, or give a credit-card number over the phone, they probably don’t have the scale to protect your information the same way we do.”

Read more: Business-to-business payments key to VersaPay growth