PayGate, an intermediary between online retailers and banks in online shopping transactions, was founded by online payments trailblazer Peter Harvey in 1999. Business has been good for the company which recorded its best month of trading at the end of 2012.
It has a large number of online merchants as clients, among them airlines, universities, Woolworths, iTickets and accommodation booking websites.
Harvey’s experience in running the IT for a direct marketing music club gave him the idea for a solution that would make it easier for online merchants to get paid. “I studied computer programming at Wits Technicon and then got a BCom with majors in economics, business economics and computer science from UNISA,” Harvey says.
“My first job was at Trust Bank as a computer programmer and then I moved through various consulting positions, first as a programmer and then project manager, until I became the IT manager at Club Music Direct which was launched in the mid 90s at the start of the e-commerce boom. It was a very dynamic and energetic company, ideally positioned to leverage off the huge e-commerce growth which was happening at the time. I learnt a lot about selling in a non-retail environment, distribution and the challenges merchants faced to get paid when the client was not present at the point of sale.”
Spotting the gap
Club Music Direct was sold to Naspers in the late 90s. Based on his experiences with payment processing, Harvey decided to start a company focused on helping online retailers get paid easily, securely and reliably via the Internet. He financed the business with money borrowed from family and friends.
Today, PayGate offers merchants a variety of different ways to get paid via the Internet. These include debit card, credit card, voucher, EFT and an economical and innovative way to get paid via EFT in different currencies.
“Fraud is always a challenge for merchants selling products and services on the Internet so we offer a fraud and risk screening service,” says Harvey. “But what really differentiates the company is reliability of sales and service. Our IT team is 100% focused on system reliability and uptime. If our systems go down, even for a few minutes, our merchants lose money. Our service is the best in the industry. We help every new merchant through the daunting process of signing up with a bank for a credit or debit card merchant account. Once a merchant is loaded on the PayGate system they have easy access to email and telephonic support.”
Harvey says one of the keys to PayGate’s success is that the company understands the needs of its clients. “We deliver effective merchant services that have the power to simplify seemingly complex problems. This contributes to our solid market leadership in the continuously evolving online payments arena.
Because we are consistently ahead of the game, our clients can be certain they have the competitive edge they need in their business.”
It was difficult to raise capital for PayGate in the early days. “Few people understood the Internet properly and knew what a payment gateway was,” Harvey recalls. “Over the years we’ve had a variety of different shareholders in the business. Cleaning up and optimising the shareholding for growth took a lot of time and effort. We’ve never borrowed money so our growth has been totally organic. We had to build systems to make money to fund the development of new systems. I don’t think I’d use this approach again.”
Key lessons learnt
Harvey cautions that organic growth is a slow and painful exercise. “Try to get a venture capital partner on board who can add value to the business in addition to the capital investment. The worst mistake I ever made was not getting venture capital funding to grow the business.”
Dialup access to the Internet was slow and cumbersome in the 90s and early 2000s. When ADSL came along, PayGate’s growth doubled and doubled again as more people suddenly had easy and reliable access to the Internet.
“We are seeing a similar growth spurt now as mobile data bandwidth becomes cheaper and tablets and smartphones become more prevalent,” says Harvey. “The arrival of ADSL and mobile devices have been the two tipping points for the business. Everybody has access to the Internet and more and more people are starting to enjoy shopping online. Our goal now is to remain the top online payment intermediary on the continent.”
Players: Robin Philip, David Beukes and Peter Harvey
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