Interview : How DEAL enables P2P credit card installment payments for offline market transactions
The “cashless society” is approaching. In China, mobile payments through Alipay and WeChat have already become popular, so the volume of cash sales is falling rapidly. It is likely that South Korea will eventually follow this trend. Thus, various P2P remittance and payment services are emerging in the country.
The app “DEAL” is a secure payment service, developed by Fireseed, that allows individuals to make credit payments to one another. The app’s biggest advantage is that it can be used to make installment payments to other people. It does not require any devices such as POS or QR code scanners to function. This service is possible because individuals create their own accounts and conduct transactions through URLs or QR codes. Specific examples are as follows:
– In offline markets (even flea markets) you can use a credit card to pay for goods directly by using a URL provided by the seller.
– Buyers and sellers can agree to installment payments when trading expensive used goods.
– Parents can even make payments to tutors for private lessons.
As you can see, the main users of DEAL are individuals or small sellers that do not have their own websites. It takes more than five days to register a point-of-sale (POS) terminal device, and it takes a month to sign up for electronic payment services for online transactions. For these reasons, it has always been difficult for small sellers to accept payments in forms other than cash. To solve this problem, Lee Moon-Young, CEO of Fireseed, decided to start his business in 2016.
How did you first start your business?
I love traveling. In most cases, students do not have much money, and once they start working they have no free time. Thus, I decided to build a service that would allow users to make payments to themselves as an encouraging way to motivate saving. For example, one could create a product called “Tokyo Trip”, which in nature is a travel plan, for himself or herself. $4.20 would be paid every time he or she saves by not drinking coffee that day. People could also share payment request links with their parents or friends. This was the beginning of the business, but I experienced a lot of difficulties since I had to coordinate with many travel agencies to put the ideas into practices.
Is DEAL the result of pivoting?
Yes. We took the early model of MWC Barcelona, a conference where global investors gather. We were going to run an offline crowdfunding event at the booth, but nobody was carrying any cash at the event. At that moment, we came up with the idea of applying the services we had created to peer-to-peer transactions. This changed the direction of our service. We raised a certain amount of money using the service there, and we officially launched the app DEAL in April last year.
I heard DEAL is frequently used in trading used goods, handicrafts, and paying for private lessons. What inconveniences did you see in these transactions in the past?
First, there are too many things small businesses need to prepare to register card readers. They need various papers, such as business registration certificates, reader registration fees, authentication certificates of the corporate seal, and new corporate franchise documents. Furthermore, it takes longer than a month to register for the electronic payment services required for online transactions. Thus, it was difficult for small business owners to accept non-cash payments.
How does DEAL solve these problems?
The value of DEAL is to enable transactions and payments whenever and wherever necessary. We had to make it easy and fast to make payments on mobile devices, even in environments where there are no facilities such as terminals, communication lines, or websites. On the mobile app, sellers can start making transactions right after verifying both the ID and the business registration (if any) without the hassle of providing lots of documents. The buyer can make payments through the link or QR code sent by the seller even without downloading the app. PayPal, Naver Pay, and Kakao Pay are also available to be used with our service.
Is the revenue model based on commissions?
Yes. We receive 1% of the total transaction amount from the seller. The seller is also responsible for paying a 4.5% commission charge, including the credit card fee. Those charges can increase to 7-30%, however, if people sell using e-commerce platforms rather than making direct deals.
Many people think that the volume of transactions will not be large since the app is used for peer-to-peer payments. Is this idea true?
In Korea, flea market sales are equivalent to $187 million, which is huge. Furthermore, there is a lot of demand for making installment payments for the purchases of luxury goods, so we think we can exploit that market. In the private education market, parents frequently use our service because it is many would prefer not to give their credit cards to their children. Also, DEAL can be used in all sorts of other markets. I strongly believe that DEAL’s impact will be very large.
Large companies are showing a lot of interest in DEAL, right?
There are few startups that generate meaningful results in electronic payments outside of money transfers. This is because electronic payment systems require a lot of money to build and have high barriers of entry. Large companies are approaching us to improve their payment systems using strategic investment methods.
Do you have difficulties with regulatory agencies?
There are many rules and many obscure regulations that all emerging fintech companies deal with. You never know how the regulations will gradually be set up, so we are trying all sorts of things first. It seems that the government has yet to clarify many of the issues that have come up. Companies should operate properly and then respond to issues once they arise. In my view, it is impossible to complete all the preparations and start things before worrying about all the rules. Just like the cases of fintech services such as crowdfunding and P2P lending, I think it will take some time until clear standards are set up for payment. What we can do now is just legally register as an electronic payment service company.
Do you have a plan for overseas expansion?
We are always ready to advance overseas. Our first target is the Vietnamese market. Since DEAL is a platform-type business, I think we can bring the basic structure and connect it with local card companies and payment gateways. What is more important is to manage the local employees who can serve customers there.
Lastly, please share the medium and long-term goals of Fireseed.
DEAL is a new concept for personal financial accounts. Rather than emphasizing only the services the company provides, I hope DEAL will be integrated into our lives. Our short-term goal is to stabilize the service. There are also regulatory issues, and many rules and regulations remain uncertain. In the medium and long-term, we aim to create a new sector in the financial market. Currently, we are residing in Hyundai Card’s Studio Black. Recently, we were given the opportunity to introduce our service in front of Chung Tae-young, Vice President of Hyundai Card. After we finished pitching, VP Chung asked, “So do you really think that you can change the world with that?” It may be difficult to change the world with just one service. But I believe we can change the world if the creators and one-man small businesses who use our service come together. Our ultimate goal is to grow into a stepping stone service that connects these people.
(Top photo from 699pic.com)
This article, entitled “Interview: How DEAL enables P2P credit card installment payments for offline market transactions”, was written in Korean by Margot Jung of Platum, edited by AllTechAsia.