Online payment company breaks into B2B fund transfer

A Mississauga, Ont. company is getting into business to business fund transfer — previously the sole domain of large Canadian banks.

Payment Services Interactive Gateway, or PsiGate, is best known for handling business to consumer

credit card transactions over the Internet. On Tuesday, it announced an electronic fund transfer service to handle transactions between businesses.

It was a logical extension of a service the company used internally for dealing with its own business clients, said Robert Fenos, PsiGate executive vice-president. “”We’d pull money from their accounts to pay their bills with us. Now we’ve done the other side,”” he said.

The service would effectively remove a company’s collection department and provide an automated payment and receivable service handled via a PsiGate holding account. “”The supplier would invoice the buyer on the first of January (for example), and they would make PsiGate aware that these funds are to be pulled on the 30th or whenever the terms are due. It just takes away their whole collection department, their receivables and that stuff. We would handle that for them,”” explained Fenos.

The transfer service should eliminate the need for relationships with multiple financial institutions, said Fenos — PsiGate effectively becomes a central clearing agent to handle incoming or outgoing payments. It also acts as the equivalent of a consumer-based pre-authorized debit system where a person can authorize a company to withdraw specified amounts from his or her bank account on a regular basis. Likewise, the B2B service can be used to handle a company’s routine insurance, lease or utility payments.

PsiGate has a history of expanding into growth markets. The company began as a value-added reseller of high-end enterprise storage equipment. In 1999, the height of the dot-com boom, it moved into the online credit card transaction business. Now PsiGate is planning to market its latest solution to its existing base of B2C clients, said Fenos, which are mostly small and medium-sized Canadian businesses. There are similar financial transfer services available in the U.S., but PsiGate’s only real competition domestically is banks, said Fenos.

PsiGate is correct in that assumption for now, according to Toronto-based Gomez Inc. analyst Guy Van Rooyen, but the banks’ interest in the small business market is only going to increase over the next 18 months. “”They feel that their consumer sites are up to speed or getting up to speed and the small businesses are being solicited or given a lot of capital to expand their offers,”” he said. “”I would expect to see some continued competition from the banks in this space.””

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