NETeller Vies for a Piece of the 'Alternative Payment' Market

It's not as hard as finding a needle in a haystack, but many Net betting site operators are struggling to find the perfect payment solution for their customers. Amid the myriad of choices is a smart card service from NETeller.com, which has already signed at least 20 operators.

In their own words, NETeller "connects merchants and Internet users by providing an immediate, secure and effective mechanism to transfer cash over the Internet."

The company, which spent 18 months developing its product and began transferring money last month, provides several advantages to Net betting operations. According to John Lefebvre, the company's president, those advantages include "much lower costs of transfer, significantly reduced administration, particularly on payouts, and no chargebacks."

Setting up a merchant account requires very little work. When merchants sign up with NETeller, they receive a small amount of code to enable the payment system on the virtual sportsbook or virtual casino site.

"Merchants pay for transfers (of money) in and out," explains Lefebvre. "Fees are $15 for transfers of $100 or more, 15 percent for transfers less than $100 but greater than $7 and $1.05 for transfers of $7 or less."

The company's service is broken down into three components:

The Smart CashCard allows customers to deposit cash onto the card, make cash transfers with the card, and withdraw money from the card. Customers can access account information from the NETeller website. The CashCard offers instant verification and ensures customers can safely transfer cash online.
The NETeller website provides customers access to their personal account information including transaction, deposit and withdrawal history.
Merchant sites permit customers to use their smart card for cash transfers. Two types of cash transfers are possible. First, cardholders can send money to the merchant site by withdrawing cash from the CashCard and is then credited to the merchant site. Second, a merchant site can refund payment onto the customer's CashCard.

After setting up an account with NETeller, the customers receives a unique personal account number (used to independently identify card holder during telephone inquiries) and is set up with a PIN (personal identification number.) Customers are required to supply the IP address of the computer they will be using, which provides one more layer of security.

A customer can enter the wrong PIN three times before the smart card freezes. If information for the card is sent from the wrong IP address, however, the card instantly freezes.

New customers receive a NETeller Smart CashCard (the Schlumberger Playflex 1K card ) and a card reader (the Towitoko Chipdrive Micro 100) free of charge. The reader connects to the customer's PC through a 9-pin serial port for data and a PS/2 keyboard tap for power.

The CashCard comes with few requirements. The maximum cash deposit is typically $5,000. No minimum deposit is required. Alternatively, customers can deposit $1,000 onto their smart card using a credit card one time per month. Customers can deposit cash onto their accounts through Bank of America, Citibank or NationsBank. NETeller also accepts deposits from credit cards, by wire transfer or via PayPal, an email payment service.

Lefebve says NETeller has about 2,000 customers and orders for 5,000 more cards. Clients are based in the United States, the Philippines, Kuwait, Hungary, Hong Kong, Japan, Australia and Great Britain.

The creators of NETeller are hoping for wider acceptance among gambling website operators. Their success at doing so could depend on whether alternative payment systems are adopted by the masses. Unlike Visa and MasterCard, smart cards and other payment systems have yet to establish market domination. Merchants, including Net betting site operators, have yet to find a payment solution accepted as commonly as traditional plastic. It could ultimately come down to one or two solutions standing out from the many contenders, and NETeller plans to be in the thick of it.