Fintechs push to get out of the shadow of Uber, Amazon

September 17, 2018 12:01 AM

Uber and Amazon aren’t payment processors, banks or card companies. But both companies loom as threats and trendsetters for companies that squarely are in financial technology.

As Uber makes a direct assault on digital payments and Amazon’s no-cashier Go stores proliferate, the two companies have inspired what amounts to a sub industry within the payments technology business.

Executives from four companies—Worldnet co-founder John Clarke, Payrailz CEO Fran Duggan, CardFree CEO Jon Squire, and Sionic Mobile CEO Ron Herman— view Uber and Amazon as drivers of the shift to an "unattended" retail experience that removes human interaction from the process of making a payment.

During a phone roundtable last week, the executives discussed artificial intelligence, blockchain, mobile tech, and the two big elephants in the room.

Uber sets the pace for everyone to follow

A pedestrian checks a mobile device in front of the Uber Technologies Inc. headquarters building in San Francisco, California, U.S., on Wednesday, June 21, 2017. Travis Kalanick has resigned from his job leading Uber Technologies Inc., giving up his effort to hold onto power as a torrent of self-inflicted scandals enveloped him and the global ride-hailing leviathan he co-founded. Photographer: David Paul Morris/Bloomberg

David Paul Morris/Bloomberg

Worldnet recently partnered with IDTech to speed authorization to streamline EMV chip card payments, cutting time for the consumer to just over a second. The goal of these “faster EMV” payment features is to make the transaction less of a hassle, and thus less of an effort.

“It’s the ‘Uberization’ of the business that’s the big trend,” said Worldnet’s Clarke.

To be fair, it's not the same as the nearly seamless Uber experience, where people leave the car without making any effort to pay. But Uber sets the expectation that transactions should be brief to the point of being almost ignored. That's a huge difference from the drawn-out process of waiting for a chip card that's been jammed into a reader.

“People don’t want to think about their cell phone or their payment, and they want their transaction to be safe,” Clarke said.

Uber and other ride sharing apps such as Lyft and Grab are taking steps to become more direct competitors to fintechs and payment companies. Grab, which operates mostly in Asia, has made tangible moves to tie its ride hailing app to food ordering and bank partnerships. Uber’s collaborations in the payments business include a Barclays-issued credit card that can be managed via the Uber app; and a tie in with Venmo.

Payrailz is trying to take advantage of this trend by selling technology to banks on a software-as-a-service basis to power bill payment, P2P and other use cases, using artificial intelligence to improve user experience over time.

“It’s all about moving the payment to the background. It has to be sale and secure, but it also has to frictionless,” said Payrailz’s Duggan.

Amazon changes the rules of retail

The Amazon’s Go cashierless store has turned a lot of heads in the retail industry, even though Amazon has only a handful of locations.

But the potential of bringing Amazon’s cashierless technology to its Whole Foods network has plenty of retailers worried. That gives the fintech industry no choice but to pay attention to what Amazon does next with its Go model.

"Their recent announcement about opening a store in New York means keeping an eye on 'Amazon Go 2.0' will be front and center," said Sionic Mobile's Herman (pictured). "Companies will have to stay focused and pay attention to what Amazon Go is doing behind the scenes."

To respond, companies are looking at ways to use technology to smooth the payment experience. Sionic Mobile uses selfie authentication and a virtual currency to support incentive marketing, both of which can reduce the need to interact with store staff.

Other fintechs have responded to Amazon Go by trying to clone its cashierless environment.

"When you look at the unattended payments space, we're looking for a major breakout in that sector, not in vending machines and kiosks, but in actual checkout-free stores...the ability to make a purchase without engaging with a store employee is the next step," said Clarke.

CardFree has extended its API to manage enterprise level deployments, which is designed to make it easier for retailers to add new payments technology and merchant services. Its clients, including Dunkin' Donuts, Taco Bell, Sonic and Red Lobster, quickly added the new API to power features such as order ahead, self-serve kiosk enhancement and location search.

"Amazon's had a big head start in unattended retail," CardFree's Squire said. "But if you can get down to one API, the experience and workflows should be the same. Most merchants are moving toward one API and in five years it will be hard to find a merchant that hasn't taken pains to conquer that project."

AI takes over the home

Fran Duggan, the CEO and founder of Payrailz

Lynne Graves

From security to authentication to customer service, artificial intelligence is making its mark on financial services.

The ramifications are huge, and have the potential to make marketing and sales more proactive for merchants and payments less of a task, or more "invisible" for the consumer.

"It's no longer about doing things such as 'I need to buy milk, so how do I pay?'" said Duggan (pictured). "Now it's going to be about a connected refrigerator telling you 'I'm out of milk. Do you want to order more?'"

Amazon has an advantage in this use case through its Dash buttons, which allow a consumer to automatically reorder household items. Amazon recently opened the technology that powers Dash to third party developers in an effort to extend its use cases and sophistication.

Mastercard is also active in home shopping and payments, having worked with Samsung to embed payments into an internet-connected refrigerator. The ubiquity of smart appliances and devices is placing pressure on merchants to make a move sooner rather than later, as human interaction becomes less critical.

"Mobile tech has proven that consumers don't want to interact with other people live anymore," said Squire. "The market is not seeing the transactional volume yet, but it will see it in the coming years."

Blockchain steps out of the spotlight

Blockchain is all over the place, gaining investment and being used drive cross-border payments and securities. But its path to widespread use as a payments enabler is still unclear, partly because of the complex technology and lack of collaboration between providers.

The executives in our roundtable weren't enthusiastic about blockchain — a distributed ledger system originally developed for bitcoin payments — mostly viewing the technology as mere tool rather than a full-fledged product.

"Blockchain's a great tool, and it's interesting technology in a lot of ways," Duggan said. "But for payments I wouldn't put all of the eggs in one basket in the short term."

Blockchain's decentralized model could pose both a benefit and a threat, in that it can threaten monopolies from search engines and social networks from controlling access to the internet, according to Herman. "That's exciting on one hand but also a threat to [interoperability] on the other," Herman said.

Blockchain developers say collaboration and interoperability are improving, but Clarke (pictured) is doubtful that this trend will make blockchain providers top-of-mind for merchants.

"Blockchain has a lot of potential as plumbing under payments, but like broadband, you don't really know or care about who's providing that," Clarke said. "Blockchain has a place but it will low level infrastructure."