Store finance specialist FlexiGroup is moving into online payments, announcing the purchase of the online payment service provider Paymate yesterday.FlexiGroup has acquired Paymate's Australian, New Zealand and Asian businesses, which service a total of 3500 retailers. Paymate, which has been in operation since 2000, offers a similar service to that of PayPal, but compared with PayPal it has been an underachiever. PayPal processes A$2 billion of online payments in Australia each year. Paymate Australia processed just $20 million last year.FlexiGroup chief executive John DeLano said Paymate's poor performance was the result of a lack of investment in the business.DeLano said FlexiGroup had earmarked $1 million for investment in building the Paymate business in the 2012 June half."Paymate has good technology and competitive merchant fees. The appeal for retailers is that when they want to start selling online they can use Paymate to plug and play," DeLano said.He said the acquisition was a good strategic fit for FlexiGroup because many of the retailers it services with its store finance products were moving into online retailing.FlexiGroup will look at using the Paymate platform to offer its finance products, such as Flexirent and deferred payment options, to online consumers.FlexiGroup faces a number of challenges in turning Paymate around. At the moment its system can only process payments made with Visa and MasterCard debit and credit cards. It does not handle Amex, Diners, JCB or any Asian cards.FlexiGroup's head of e-commerce, Andrew Pipolo, said he would be looking at that issue but it was a bit early to say what might be done.The company will also have to do something about the almost total lack of brand recognition of Paymate in the consumer market. DeLano said he was confident FlexiGroup had skills in the development of high-volume payment processing that would work for Paymate.He said he expected Paymate to make a positive contribution to group earnings in the 2012/13 financial year.Paymate began life in Australia, in 2001. It moved its headquarters to Silicon Valley in 2009, and in April this year it was acquired by ACT Merchant Services.Paymate's founder, Dilip Rao, who sold his shares in the business in April and is now running a consulting business in Sydney, said the sale to a local business was a good move."The Americans were only really interested in the American market," he said. "Some focus and some investment here is what Paymate needs."Rao said Paymate's most valuable asset was its presence on eBay, where it is offered as an alternative payment option to PayPal.He said another asset offering good prospects was its joint venture with the Chinese online payment service provider, Alipay. The joint venture provides a payment service that allows Australian merchants to sell goods to Chinese buyers and be paid in Australian dollars.