E4X Inc., New York, is attempting to carve a niche in the e-commerce space by making it easier for Internet-based merchants to offer products and services in multiple currencies.
Typically, foreign customers of U.S.-based Internet sites see online prices in dollars. "Today, European and Asian consumers can only see a site in U.S. dollars, and then they have to guess what they're going to pay," said Yuval Tal, CEO of E4X. "That's a big obstacle."
Sites using E4X's software allow Internet shoppers to select from among 22 currencies. When a purchase is made, the exact same price from the site will end up on the consumer's credit card statement, with no surprises.
By handling the foreign exchange transaction, E4X effectively undercuts the credit card issuers that normally convert foreign currency into U.S. dollars. "Issuing banks will charge, in absolute numbers, 3% on top of the Reuters interbank rate," said Tal.
For example, on a $100 credit card purchase, the U.S. merchant will typically net about $97. However, a foreign consumer might have to pay the equivalent of $103 in local currency to his or her bank, including $1 for the card network and $2 for the card-issuing bank.
(Incidentally, these charges are currently the subject of a series of lawsuits alleging that Visa, MasterCard and their member banks have failed to provide adequate disclosure to customers about the fee structure for foreign currency transactions.)
One of E4X's partners, either WorldPay, based in Cambridge, U.K., or PaymenTech, based in Dallas, Texas, clears the transaction locally by submitting the charge to the card-issuing bank. Merchants can either receive foreign currencies directly or they can let E4X perform the foreign exchange transactions at an exchange rate that readjusts on a weekly or monthly basis.
If the company succeeds in collecting a critical mass of international Internet transactions, it can conceivably shift a sizable chunk of foreign exchange business away from credit card issuers into the dealing rooms of foreign exchange banks.
For now, E4X outsources its foreign exchange business to Natwest and J.P. Morgan Chase, although an announcement is on the horizon. "We are about to sign a big deal with one of the AAA-rated foreign exchange dealers," said Tal.
Current customers include Tourico Holidays, based in Maitland, Fla., rental car company Sixt Israel, and Kagi, a Berkeley, Calif., payment-processing site.