Friday, May 13, 2005

Greenzap (or Green Zap)- flawed or just missing information?

I haven't seen any other commentary on this vital piece of the internet payment puzzle, so I thought I would mention it here.

There has been plenty of cries about Green Zap possibly being a scam, and loads of contrary opinions and enlightening press releases. I am staying clear of that controversy.

Green Zap are trying to position themselves as the newest and best alternative to Paypal. Their free $25 bonus just for signing up, plus the matrix earning potential are obviously attractive.

There are however a number of missing details, and a gaping whole in there service offering that the free $25 tends to put in the shadow.

Credit Card Payment Gateway

Paypal is disliked by many merchants on the internet, but they continue to offer it. This isn't because of the 65M existing users. It is because of the credit card facilities, that don't require $15 to $30 per month in fixed charges, and anyone in their supported countries can use.
Paypal as far as I know has no real competition in this service. Every other company has gateway fees.

Paying by credit card does not force you to open a Paypal account - this is Paypal's advantage over every single one of the 20+ other payment processors on the internet. Those are just the established ones, new ones pop up every day.

Credit card transactions account for 90% of online business. Green Zap currently will only be competing for a share of the 10% of other transactions (though this percentage will probably grow), and they have a vast number of competitors for this small piece of the pie.

A large proportion of the business they claim Paypal makes per customer results directly from payments their customers receive by credit card. The merchants subsequently use Paypal for other transactions, maybe to their affiliates, or for personal items. A huge proportion of the money in circulation on Paypal accounts originated in credit card transactions to purchase goods, and not credit card deposits.

Additional Fees

The Greenzap service is not the cheapest money transfer system offered on the internet.

Moneybookers for some time has offered cheaper - Only a 1% charge with a maximum charge of 0.50 Euro.
That means the minimum charge is 0.01 Euro compared to Greenzap $1, and the maximum is still less (I doubt we will see 1 Euro = $2 anytime soon).

Funding account

Greenzap hasn't as yet posted any information regarding the charges to fund your Greenzap account. It is not safe to assume they will be zero for all transactions.
Moneybookers offers free deposits by bank transfer to your account. Deposits by credit card are charged at 3%

Withdrawing from account to a bank

Obviously at some time people want to use the money they have earned on the internet offline.
As a plus, Greenzap will be offering a Mastercard to their Gold subscribers, but currently there is no mention of the fees for using this, or for the fees associated with withdrawing to a bank account. It should be noted that people will be withdrawing funds to bank accounts worldwide.

Moneybookers as an example charge most counties 1.80 Euro to make a withdrawal to their bank account. It is a fixed fee and takes a couple of days normally. For some countries you have to withdraw by cheque with a 3.50 Euro processing fee.

International Currencies

Banks make a huge amount of money with foreign exchange transactions. The only way to have a real control over margins related to exchange rates, is to run a special bank account, most probably in US$. I don't do this with my Moneybookers account, because up until now I have found their rates to be extremely reasonable, and with the weakness of the dollar currently, I don't like holding money in a dollar based account.
Greenzap are aiming to be a truely worldwide service, absolutely no banned countries. Foreign exchange earnings will no doubt be a key issue for a large number of their future customers.

Summing it all up

Greenzap offer $25 free.
They are certainly not the cheapest payment processor online, and they haven't announced all their other fixed fees and variable charges.

Certainly Greenzap will be able to compete with Moneybookers and other processors, simply because of their $25 free offer.
They will get their $100 deposits for gold membership, mainly because a large percentage of their membership will get it all straight back in referral comissions.

Without the payment processing facilities that Paypal offers, Greenzap have almost no chance of capturing the active customer base that Paypal now boasts. Even if they manage to achieve 65M customers, those customers will still use Paypal more frequently. Paypal will always have large amounts of cash growing in their system due to credit card transactions, and that cash will stay in circulation.

Moneybookers could be ideal if they covered more counties, and offered a credit card gateway. They are slightly heavy on the regulations, which are often misunderstood
Paypal I can't use (I live in Poland) unless I lie about my current country of residense (my passport still shows my parents current address). Thus I have been using the internet actively for 10 years and do not have a Paypal account.

I am still waiting for the "killer" internet payment processor to come along.


Greenzap (or Green Zap)