Ecount News & Press Releases
Firm keeps cash flowing online
The Philadelphia Inquirer
Ecount's different approach to Web payments brings the Conshohocken company some major customers.
Two years ago, the traditional checkbook seemed doomed, as e-mail payments for goods and services were threatening to make paper checks obsolete.
Companies with names such as Flooz and Cybergold sprang up to help consumers and businesses move cash over the Internet via online accounts.
But the concept still has not caught on widely, and many of those online-payment companies are no longer in business despite having spent millions to market their services.
Ecount, a Conshohocken company, is one of the survivors, having carved out a niche as a provider of online rebates on behalf of major corporations such as Dell Computer Co., Ford Motor Co. and J.P. Morgan Chase & Co.
"We don't have [customer] acquisition costs," Paul Raden, Ecount's cofounder and chief marketing officer, said. "We're getting paid to get a customer."
Ecount provides the technology to set up and manage online accounts into which corporate rebate and Webcertificate funds are deposited. Those online accounts can later be replenished by the customer using funds transferred from a credit card.
An example of how it works:
Dell offered a Webcertificate program last year that gave customers $25 to $100 in online money if they bought certain laptop computers.
Dell contracted with Ecount to set up the online accounts. Customers could spend the funds at any site that accepts MasterCard. (Dell did not allow the customers to receive cash.)
Ecount notified the Dell customer via e-mail about the new account. To claim the funds, the customer would click on a link in the e-mail that opened Ecount's Web site, where the customer would click on the claims button and register for an online account.
The 16-digit account number then could be used to purchase products online.
Ecount says 95 percent of those sorts of rebates and Webcertificates are spent within a month.
Thomas Layne of Omaha, Neb., said he spent most of his $75 Ecount Webcertificate within a day, buying clothes online. Layne had received the certificate from Cox Communications Inc. for programming his computer to make the switch from bankrupt Excite@Home Internet service to Cox's high-speed network.
"It was extremely easy" to set up the Ecount account, Layne said. "The registering took maybe five minutes."
Yet once the money in the account was gone, Layne said he did not plan to replenish it himself, because he is not that interested in shopping online.
"If I'm buying something, I like to see it," Layne, 28, said. "Buying online, you have to wait three or four days to get the product. At a store, you get it then and there."
For Ecount, that's a common, and significant, problem. After the initial infusion from a rebate or Webcertificate program, only about 30 percent of its users add more money to their accounts, the company said.
Ecount's revenue comes primarily from the fees it charges corporate clients for managing online accounts. Matt Gillin, Ecount's cofounder, president and chief executive officer, said his company manages more than 1 million accounts, with an average balance of $35 each.
Ecount also issues a debit card for offline purchases.
Last year, revenue grew 500 percent, to between $5 million and $10 million; the privately held company would not disclose the exact amount.
Ecount, which has its headquarters inside the bHive business incubator in Lee Park, said it expected to become profitable by the end of this year.
Some analysts remain skeptical about the prospects for online-payment services, however. While they may make it easier for certain consumers, such as participants in online auctions, to transfer money safely via the Internet, in most cases credit and debit cards work well enough.
"There's a lack of compelling need" for online-payment systems, said James Van Dyke, a research director at Jupiter Media Metrix. "It's still convenient for consumers to use credit or debit cards" for online payments.
The numbers bear this out. Last year, online-payment systems were used in 7 percent of transactions over the Internet, according to a recent Jupiter study from Van Dyke. By 2006, that figure is expected to rise to 9 percent of all Web-based transactions.
The major player is PayPal Inc., of Palo Alto, Calif., which dominates the person-to-person online-payments sector primarily because it has become the payment system of choice for many customers of eBay Inc., the online auction powerhouse.
Anyone with an e-mail address can set up a PayPal account, which allows customers to send and receive online payments from aNorther person or business with a PayPal account.
The account is funded with money transferred from a customer's credit card or bank account. For basic consumer accounts, PayPal does not charge transaction or fund-transfer fees.
PayPal, which lost $18.5 million on revenue of $40 million in the fourth quarter of 2001, filed for an initial public offering of its stock in September.
The highly anticipated IPO, initially scheduled for last week, was delayed until today or later because the company was dealing with a patent-infringement claim. The company also disclosed that it was facing pressure from regulators in nearly a dozen states to license its online-payment system.
It has more than 12 million customer accounts.
Gillin said Ecount was adding about 20,000 accounts a month from its corporate partners.
Still, "Ecount is not going to make a lot of headway until it gets millions of users," Avivah Litan, an analyst with Gartner Group Inc., said.
Gillin acknowledged that online-payment accounts may be ahead of their time for most consumers. Nevertheless, he said Ecount planned to market more services this year. One such service would allow customers to have money from their paychecks deposited directly into their Ecount account.
"Applications are down the road, but the technology is there," Gillin said. "Right now, we're using a third of the technology."
- Wendy Tanaka - Inquirer Staff Writer