TechCrunch Europe is reporting a deal between KashFlow and Barclaycard that sees Barclays developing a pilot e-billing scheme for its customers. According to TCE:
As for KashFlow itself, the email makes mention that the company usually charges £15.99 + VAT a month for its service but that Barclaycard is “waiving” the charge for pilot merchants. It’s likely that in turn KashFlow is doing the same. The accompanying FAQs also makes clear that the startup will be responsible for all customer support relating to the e-invoicing service, aside from transactions.
When I met Duane Jackson, CEO KashFlow last month we discussed such a deal in broad terms. During our conversation, I speculated how the business model might work. Although unusually reticent he said: “I don’t work for nothing.” This is how the deal most likely stacks up:
Barclaycard charges its customers 3% on transactions, therefore it does not need to charge its customers an additional fee for using the billing service provided that per month billing exceeds £533 per customer. This is not as ambitious as it may sound. Last month, FreshBooks put out an infographic that showed its UK customers bill on average $1,389 per transaction. (See also graphic above) That’s about £926.
There is a big difference between business to business billing and credit card transactions. However, for small businesses and especially those that understand the web economy, paying for services via credit card is second nature. If that includes a small but important piece of an accounting service bundled into the transaction fee then why would I not do such a deal?
On KashFlow’s side, they can provide Barclaycard with an attractive deal that allows KashFlow to generate revenue based upon the anticipation of a bulk deal. The current pilot is for between 100 and 1,000 customers. That’s hardly ambitious but it allows both sides the opportunity to learn how these kinds of arrangement will work at relatively low risk.
The big question though: where was Sage in all this? Sage has been a partner with Barclays for many years yet it seems Barclaycard could not get a solution from them. That’s not quite true. Sage has online billing solutions like BillingBoss and Pastel Online. But as a decentralized operation it is likely that Sage UK wasn’t aware that it had something Barclaycard might have been able to use. For free. Alternatively, Sage looked at this, thought about its own payment gateway and realized there could be a disruptive conflict.
As always with these things, adoption will be the key. The next 12 months could prove very interesting for both parties.
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