Neteller
From Wikipedia, the free encyclopedia
| NETELLER | |
 |
|
| Type | Public |
|---|---|
| Founded | 1999 |
| Headquarters | Douglas, Isle of Man |
| Key people | Stephen Lawrence, Founder John LeFebvre, Founder Ron Martin, CEO & President |
| Industry | Online Banking |
| Products | Electronic Money Transfer |
| Revenue |  $172.1 Million USD (2005) |
| Net income | $91.5 Million USD (2005) |
| Employees | 475 (2007) |
| Website | www.neteller.com |
Neteller is an electronic money service owned and operated by British company the Neteller PLC Group. The company was founded in 1999 and has corporate headquarters located on the Isle of Man. Customers can use their Neteller accounts to transfer funds online and deposit from or withdraw into banks around the world. Language support is offered in thirty languages around the clock. Dealing primarily with online gambling sites, the online payment processor was relatively small until PayPal stopped accepting gambling-related transactions in 2002.[1]
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[edit] Company description
Neteller PLC is a publicly traded company on the London Stock Exchange Alternative Investment Market with a symbol of NLR. Its initial public offering was in April 2004. By the end of 2005 its stock price had increased approximately 300%. The company is also regulated by the UK government’s Financial Services Authority (FSA). The company operates e-wallets under the Neteller and 1-Pay brands, and credit card processing and debit card businesses under the NetBanx brand. Over 3,500 merchants accept payment via the company’s services across many industries[1].
Revenue for the third quarter of 2005 more than doubled to US$45million compared to a year earlier, while pre-tax profits increased from $13million to $26million. Neteller's market cap at the end of 2005 was over US$1.5billion.[2] Neteller acquired its 3 millionth customer in the third quarter of 2006.
As of March 2007, due to a legal dispute with the US government and uncertainty over the loss of its U.S. customer base, the company's shares have been suspended for several months.
[edit] E-wallet service
The company's core product is an e-wallet, similar to paypal, but focused primarily on gambling merchants. The company makes no mention of gambling on its homepage [2], but many of its merchants are in the online gambling business.
The company is regulated by the United Kingdom Financial Services Authority [3].
[edit] Fees and services
According to Neteller's April 2004 AIM placement prospectus, 60% of its income is derived from merchant fees [4]. Of this income, up to 97% comes from 'transfer to' fees charged at a rate of up to 7% of the value charged to the merchant. The remaining 3% of the merchant income comes from 'transfer from' fees, for payments back to the customer, which are charged at up to 2.5% of the value, but often much less.
For users depositing by bank transfer, no fees are charged. Credit card users are charged 3.9%. [5] The company offers an Instacash service, charged at 8.9%, which debits money instantly from the user's bank account. Currently this service is only available in Canada and Australia, following the US action against Neteller (below). Users can use the instacash service to deposit to many online merchants. The merchants are charged negotiated fees that are less than the rates consumers pay. Many gaming sites choose to absorb the instacash cost for payments to their own sites, and thus, the cost is frequently not charged to the end user.
Neteller users can open their account in Candian Dollars, Euros, US Dollars, or Pounds Sterling [6]. When making or receiving a payment that is not in the currency of the user's account, a rate of 1.9% is applied.
Users can make peer-to-peer transfers to other Neteller users. These are charged at 1.9% of the value transferred, with no maximum. Currency exchange charges are also levied where the peer-to-peer accounts are not in the same currency. US users are currently restricted from making peer-to-peer transfers [7] due to the legal action described below.
Neteller offers an ATM card. As the Neteller wallet is not a bank account, the card cannot be used to withdraw money directly from the neteller account - instead money must be first transferred to the ATM card online [8]. The account is denominated in USD or CAD, even if the user's account is in another currency, and so users without a USD or CAD Neteller account will pay the 1.9% currency charge when loading the card. A further charge is levied if the ATM used is not dispensing US$. Accordingly, the neteller card works out expensive for non-US and Canadian users. For US users, a $2 loading charge is levied, plus $1.50 for a withdrawal. Charges are made for declined transactions, balance inquiries, as well as for POS sales. Following the US action against Neteller, US users can no longer use the card [9].
Withdrawals are also available by simple bank transfer or cheque. Fees levied are typically about £2 flat for any size of withdrawal.
[edit] U.S. crackdown on Internet gambling
Recent actions by the United States Congress and the United States Department of Justice have created upheaval in the Internet Gambling industry.
[edit] Unlawful Internet Gambling Enforcement Act
The passage of the Unlawful Internet Gambling Enforcement Act as a rider on the Safe Port Act by the United States Congress has impacted the company. After passage of the Act, Neteller's stock fell by 60 percent.[3] Neteller warned that the passing of the law "may have a material adverse effect on Neteller's US facing business."[4]
When the regulations are written, the Act prohibits "financial transaction providers" from transfering funds to online gambling sites. Neteller could be prohibited from allowing customers to send money from their online Neteller accounts to gambling sites as a result of this legislation.[5]
Although the company itself operates under British laws, Neteller issued policy changes on 17 January 2007 that prevent US clients from transferring funds to and from online gambling websites. US customers cannot make peer-to-peer transfers, cannot use their ATM card, and creation of new accounts for US customers is disabled. In addition, withdrawals by US customers by any other means, such as cheque, or bank transfer, are indefinitely delayed [6]. Non-US customers are only affected if they have US$ bank accounts, which Neteller is currently unable to transact with.
[edit] Arrest of founders and closure of gaming business for US customers
In January 2007, two of the company's founders and current shareholders were arrested separately in the United States.[7] Stephen Lawrence and John Lefebvre were detained by U.S. authorities on January 15 as part of the US authorities ongoing crackdown on the offshore gambling industry. Both were former directors of the company but at the time of their arrest had no connection with the company besides being shareholders, each with about a 5% stake in the company. Subsequent to the arrests, the company's shares sought a temporary suspension of share trading, effective as of January 16, 2007, on the London AIM stock exchange until the full ramifications of the arrests could be properly assessed. The company has not been indicted.
Following this, the company took the decision to end all transfers to and from gambling sites for all US companies. Customers who had deposited money by neteller to an online casino or sportsbook would be required to seek an alternative means of payment for any cashout.
On February 8 2007, the company confirmed rumours that funds had been seized as evidence and impounded by banks in transit, following the arrests. The group has indicated that the amount of money affected does not exceed $55 million.[8] On March 21, the company announced it had come to an agreement with the United States Attorney's Office to manage an orderly return of US costumers funds: "Per the agreements, the Group anticipates that within the next 75 days it will announce a plan by which the funds will be distributed to US customers."[9]
[edit] Job losses and restructuring
Following its exit from the US market, the company announced job losses at its Calgary, Canada offices, which previously served US clients. In addition, 30 UK jobs were lost with the merger of the UK Neteller and Netbanx offices. The company retained 425 staff worldwide, down from 1000 in mid-2006.[10]
[edit] Canada and Turkey
March 26, 2007 the company announced the cessation of transfers to gambling merchants for customers in Canada and Turkey.[11] The company says service to Turkey, which represents a negligible part of the company's revenue is being discontinued "in light of recent legislation passed in Turkey on 28 February 2007, which prohibits certain forms of online gambling to be offered by any “unauthorised” domestic or foreign company to citizens in Turkey". The discontinuation of service to Canada, which would "likely have contributed significantly to the Group’s revenue and profitability during 2007" is explained in light of heightened risk due to "recent actions by regulators, payment processors, and online gaming operators" "increasing the uncertainty around certain activities related to online gambling in some jurisdictions".
[edit] Notes
- ^ Joanna Glasner (2002-07-09). EBay Says No to PayPal Gambling. Wired News. Wired. Retrieved on 2007-01-19.
- ^ Yahoo Finance: Neteller
- ^ Sharecast: NETeller slammed by US gambling law
- ^ Neteller: US Congress Passes Safe Port Act (PDF file)
- ^ Gambling and the Law: The Unlawful Internet Gambling Enforcement Act of 2006 Analyzed
- ^ US member update
- ^ Reuters: NETeller suspends shares as ex-directors held
- ^ Neteller Group: NETELLER Works to Return Funds to US Customers After US Withdrawal
- ^ Neteller Group: NETELLER Takes Positive Step Towards Returning US Customers' Funds
- ^ Neteller Group: Rationalisation Programme Substantially Complete
- ^ Neteller: NETELLER Announces Service Changes to Canadian and Turkish Market
