New online venture bids to take pain out of paying

MORE DETAILS have emerged about internet entrepreneur Colm Lyon’s new online payments venture Carapay.

Due for launch next year, it will allow people to make electronic payments easily without the hassle of needing the other party’s account number or sort code.

Last month Carapay was awarded a licence by the Financial Regulator under the Payment Service Directive which allows new companies to offer payment accounts in the European market without a banking licence.

The technology will allow consumers to use mobile and web apps to make secure payments for free in real time. “It has to be electronic and mobile: people want to be able to initiate a payment from their mobile phone because that’s what they have with them all the time,” says Lyon.

Carapay is also intended to reduce over-reliance on paper payment. Cheque use in Ireland remains among the highest in Europe. “Markets are places where there are problems to be solved and I would see cheque replacement as a big problem,” says Lyon.

The company owes its name to the Irish word for friend and it uses the social networking concept of trusted relationships. Carapay users can set up a ‘CaraCircle’ of known parties in order to pay them. This could include anyone from a mechanic or dentist to club memberships or school fees. “Payments are social: a payment comes at the end of an interaction between two parties,” Lyon explains.

Consumers will also be able to use Carapay to shop online, removing the need to enter credit or debit card numbers. Lyon says Carapay won’t be a direct competitor of systems like PayPal. “If you took an electronic wallet and a social networking site, your online bank and a credit transfer system and blended them all together, you’d end up with Carapay.”

Businesses that register with Carapay can accept payments electronically, ensuring faster payment and reduced risk of fraud, Lyon claims. A business receiving a payment will only have to pay a flat fee per transaction of around 30 cent – cheaper than processing credit card payments.

The licence terms also permit Carapay to operate in other EU states. It will operate as a subsidiary of Realex Payments, the online payment processing firm Lyon founded 10 years ago.

Carapay is now in the product design stage ahead of a launch planned for the first quarter of next year. In Ireland, the initial release of the product will require subscribers to top up their Carapay accounts with sufficient funds to make payments. Although Carapay won’t provide credit facilities, Lyon’s ambitious plan envisages that over time, people will use Carapay as their default account, and transfer money back to their bank if needed.

His vision also includes the possibility of one day providing people with debit cards for withdrawing money from ATMs. “It’s conceivable that in due course you could have your salary paid into your Carapay account,” he says.

Earlier this year Lyon was named 2009 Internet Hero at the Eircom Golden Spiders awards for his work in setting up Realex Payments. He will step back from day-to-day operations at Realex, though he continues to be involved in business development and product design.

“I’m really hoping to get up to 80 per cent involved in Carapay’s product design. The risk is that you leave something out that becomes the real adoption trigger or you include too many features and that delays the launch,” he says.