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Santa Cruz, Calif.,-based e-commerce startup PayStand is coming out of beta with a new payments service aimed at the heart of PayPal’s small-merchant business.(s ebay) The company announced today it has raised $1 million in seed funding from investors Cervin Ventures, Serra Ventures, Central Coast Angels, and TiE LaunchPad, and opened up its service to any entrepreneur looking to sell his or her goods from a PC or mobile browser.

Unlike other emerging payment services like Braintree (which was recently bought by eBay/PayPal) and Stripe, PayStand isn’t focusing on startups looking to rapidly scale both online and in mobile. Instead, PayStand is targeting a much smaller type of business: boutique retailers, bands looking to sell their CDs and T-shirts online and charities that want to accept donations digitally. That’s right in PayPal’s sweet spot, but PayStand has done a few things to try and differentiate itself from the financial giant.

PayStand accepts both credit cards and automated clearing house (ACH) payments in the from of eChecks and Dwolla transfers, but it is also making bitcoin a key element of its service, allowing merchants to deal directly in the crypto-currency if they chose. A lot of merchants and an increasing number of payments platforms like Stripe and Square Market are accepting bitcoin, but PayStand seems a lot more serious about it than most. Instead of making bitcoin a mere option, it’s trying to drive consumers toward the digital currency by making all bitcoin transactions cheaper, said Jeremy Almond, PayStand’s founder and CEO.

PayStand is reversing the interchange fees on all transactions, Almond said. Instead of lopping the processing charges off the of the merchant’s cut, PayStand is tacking it onto the customer’s bill. An eCheck costs 25 cents to process and a credit card payment will incur a 2.9 percent fee. Any bitcoin transactions will come with no processing fees, though, Almond said. The hope is that PayStand and its merchant network can raise awareness of the steep fee structure inherent in traditional financial transactions, he added.

“Ultimately we can’t change overnight the fee based business model of the old card networks that were built pre-internet,” Almond said in an email. “But [what] we can do is provide an economic incentive to get both merchants and consumers using a next generation payment network like bitcoin, which is not fee based. Our goal is to drive adoption of no cost and low cost payment networks and ultimately change the business model of payments from being a fee based one to a flat cost model.”