y 2005, more than three quarters of the online population will reside outside the United States, according to Jupiter Research. However, most U.S. e-commerce sites have yet to offer localization tools to support their international customers' online needs. Merchants who want to aggressively pursue regional commerce opportunities will need to incorporate multiple currencies for online payment solutions.

Whether located in Seattle or San Antonio, e-commerce merchants who wish to seem like local retailers to customers outside the United States want to be able to tell shoppers the exact amount that will be charged to their credit cards. But by the time the foreign exchange occurs between credit card companies such as Visa or MasterCard and the consumer's local credit card, the rate may change.

That's where E4X, Inc. comes in. The company has neatly put together a multicurrency conversion product for the payment-processing industry - it installs its software in the merchant's Web site and lets shoppers have the option to pay in their local currencies.

Unlike other multicurrency solutions that do not guarantee daily exchange rates, even for a day, E4X allows merchants to display prices on their respective Web sites in numerous currencies and guarantees those prices as the exact and final amount the consumer will pay, regardless of exchange-rate fluctuations.

"For over two years we've had a working solution. We've ironed out all the details," says Yuval Tal, CEO of E4X.

Privately held and financially backed by J.P. Morgan Partners, LabMorgan, Pitango Venture Capital, Delta Ventures and other private investors, E4X was started by Tal in an apartment in Tel Aviv in 1999. The company has rapidly grown, is based in New York and employs 20 people, although its R&D department still is in Israel.

"I spent many months finding out what was available in the marketplace," says Tal. "First, working with Chase's e-commerce group, we got their blessing to go ahead and find a solution, a solution that would save money for the consumer, increase profit for the merchant and provide a unique service for the industry."

According to Tal, the core competency of E4X is making the foreign-exchange process more efficient while guaranteeing rates. The company accomplished this by figuring out what critical nuances needed to be focused on, such as chargebacks, refunds and reconciliation.

"There's a tremendous amount of detail to be addressed. Our solution addresses all of them," says Tal. "Most of our funding was spent in research and development, figuring out the way the operation had to work to be successful."

While Tal recognizes other entities are out there trying to figure out just that, he believes E4X has the edge. "Foreign exchange represents millions of dollars. It's not going unnoticed," says Tal. "There are a number of players in this space, others claiming to be getting into the space, but we are not aware of any other working solution."

E4X is providing that solution to 10 customers who represent more than 3,000 merchants collectively, and Tal says that figure will double shortly. "We are presently working with e-commerce aggregators who are tracking the rate of new customers coming aboard daily," says Tal.

With a target market of large volume e-commerce merchants, E4X has priced its services aggressively. "We're positioning ourselves for the long run," says Tal. "We do not want to create resistance to acceptance, so our product comes with very aggressive pricing to begin with. If you are VC-backed, you can think clever and not short-term. We try to share the revenue with the merchant so the merchant actually makes money right after installation. They get a nice chunk of additional revenue for every international transaction."

Prices are based on a pre-determined exchange rate and include E4X's commission. The longer a vendor locks in a rate - daily, weekly, monthly or even up to a year - the higher E4X's commission, reflecting higher hedging costs for such contracts. (A hedging contract locks into an exchange rate for a set period of time, after which the currency exchange is executed according to that rate.)

By aggregating thousands of single transactions into one, E4X is able to trade currencies with its bank at the wholesale rate. It then can offer lower rates to the merchant, who can pass that on to the consumer.

And by paying in their local currency, shoppers avoid a foreign currency fee that the bank would charge. The payment gets routed back to the credit card processor. E4X receives the foreign currency payment from the processor and then pays the merchant in dollars. With the currency, E4X then settles its hedging contract.

E4X offers a number of pricing features where the exchange rate frequency is controlled by the merchant and can be updated hourly, daily, weekly, monthly or yearly. Companies can lock prices for subscription payments for up to a year, for holidays and sales promotions as well as price differentiate in other currencies.

The standard turnaround time for E4X's software is a matter of weeks. "Integration of our product takes no more than a few hours on our side," says Tal. "It takes much longer for procedural set-up on the part of the merchant."

E4X also provides quality services after the exchange solution is up and running, boasting the most comprehensive reporting system in the industry. Reports carrying aggregation of transactions or listing each separate transaction are available online.

Payment providers that are customers of E4X receive customized daily reports through electronic files. Service providers receive the same private-label reporting services. A 24/7 live voice help desk for both technical and financial questions is also standard operating procedure at E4X for all customers, merchants and, pretty soon, ISOs.

Speaking of ISOs, E4X is looking to that channel with hope and promise. Though its ISO relationships are few, E4X is planning on changing that fact quickly and decisively.

With the hiring of a new Vice President of Sales, Betsy Waters, E4X is structuring a sales team to seek out and support the ISO community. Though Tal does admit that he has an in-house sales force, he sees no competition.

"We have no willingness to compete," says Tal. "Our sales team ultimately is only working, training and coaching. We are not excited about going after merchants. We are excited about developing relationships with ISOs."

It would seem the appeal to resellers is there, especially in ease of selling and, more important, the potential for additional residual income.

"There's lots of appeal to the ISO," says Tal. "There's no need for merchant training. Our solution goes in seamlessly and automatically. We follow up before, during and after integration. Ours is a straightforward and simple solution. And then there's the per-transaction residual base with resellers. We try to make everyone very happy by bring to the table a source of revenue previously owned by issuing banks. We're bringing percentages into the processing world."

Tal continues, "For every international transaction, you normally have to pay 3 to 8% for foreign exchange processing. That's potential income left sitting on the table. We charge much less. Our mark-up is just 2%. Our mark-up offers money back to the merchants and the resellers."

That mark-up has drawn the interest of some major players. E4X has strong alliances already in place with Paymentech, WorldPay, GlobalCollect, and Europay, the European credit card entity owned by MasterCard. For E4X, the biggest challenge is the stability of the marketplace. "Some of the companies we installed solutions for have gone bust here in the U.S.," says Tal. "When that happens, we lose investment and effort. We are constantly seeking strong, stable companies in the e-commerce space."

But E4X will continue to search because Tal sees a huge future for American companies doing international e-commerce sales.

"As long as the United States controls e-commerce, the largest potential for sales growth is outside the U.S.," says Tal. "If you want to get to those markets, you have to know how they think and how they do business. Countries like Europe and Japan do buy American products and will spend in their currency where they feel a secure sense of the price."

E4X sees itself as providing that sense of security. "We want to be the standard solution for this market," says Tal. "When an American e-commerce merchant wants to go to different currencies, they need to recognize the risk of currency fluctuation. They need to know how that will affect their Web site pricing. They need to know currency forecasting, accounting, taxes in each currency, banking procedures in each currency.

We eliminate all those worries. We allow the merchant to run his business in U.S. dollars and always guarantee that merchant will also get at least 1 to 2% more than he normally would get."

E4X plans on expanding in the United States to the point-of-sale. According to Tal, E4X is planning a rapid expansion within the next year - an expansion in which the ISO community will play a big role.

"Our message to the ISOs is that there is a great potential for commission. We can take an average 3% foreign exchange commission normally taken by issuing banks and bring it to the point-of-sale for merchants and resellers. We can inject new money into the processing world."