10 tech apps taking over banking and payments

October 25, 2018 11:25 AM

Despite the fervor over mobile wallets and banking, one day consumers may never need to open a dedicated bank or payment app. Increasingly, financial firms are putting their services inside of other apps, for example by allowing users of a ride-hailing app to apply for a credit card within that app.

In some cases, startups are filling a void where mainstream payment companies are keeping their distance; in others, banks are willingly letting tech firms take control.

This item is compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun and Michael Moeser. Click the links in each item to read more.

Grab's big bid for payments

A Strides Transportation Pte taxi, operated by SMRT Corp., displays an advertisement for the ride-hailing application Grab, operated by GrabTaxi Holdings Pte, in Singapore, on Tuesday, July 12, 2016. Buyers in one of the world's most expensive car markets just missed their chance to snag one at the cheapest price in five years. Car-ownership permit costs in Singapore have gained since February after ride-hailing companies obtained licenses for their fleets and the regulator eased rules on vehicle loans in May. Photographer: Ore Huiying/Bloomberg

Ore Huiying/Bloomberg

The Grab ride-hailing app is more than just Asia's version of Uber — it's also aggressively expanding into all aspects of its riders' financial lives.

Most recently, Grab and Mastercard partnered to offer prepaid and virtual accounts within the Grab app, beginning next year in Singapore and the Philippines with other countries to follow.

“Grab users who typically use the app to pay for rides and food can now shop online or in stores anywhere Mastercard is accepted, opening up new opportunities for consumers and merchants,” said Reuben Lai, senior managing director of Grab Financial, during an interview at Money20/20 in Las Vegas.

The Grab Financial platform launched in March to offer payments, rewards and loyalty services as well as insurance and financing to consumers, micro merchants and small businesses.

Grab Financial stems from two other partnerships. Credit Saison, a Japanese consumer financing company, works with Grab to provide loans to its customers. Property and casualty insurance company Chubb offers policies to Grab customers and drivers. Using the Grab app, drivers can choose from various policies to protect their vehicles and families from the loss of income.

Uber moonlights as a mobile banking app

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

Grab may be putting more horsepower into its financial efforts, but Uber isn't asleep at the wheel.

Barclaycard and Uber launched a Visa card last year that uses Uber's digital advantage in a few ways: Consumers can apply—and get approved—in minutes by signing up directly within the Uber app, a process sped up by having basic customer information already on file. Once approved, customers can shop immediately with a digital version of the card, earning rewards and tracking them in real time via the Uber app.

The in-app money management features harken to the ambitions the ride-sharing company hinted at during SourceMedia's annual PayThink conference last year.

“What we’re working on, I don’t even want to call it a wallet,” said Brian Crist, chief payments counsel for Uber Technologies, at PayThink. “One thing that we continue to look at is trip experience … could you pay for a restaurant, for example? Could you pay for your theater tickets through the experience?”

The card's rewards structure are in line with that philosophy. Like many cards targeting middle-market consumers, the Uber Visa card has no annual fee, and rewards vary based on the merchandise category, emphasizing activities most popular with Uber riders.

Customers may earn rewards at a rate of 4% of spending on restaurants and UberEATS; 3% on travel; 2% for online purchases (including Uber) and 1% on everything else, and an introductory bonus includes $100 in points after spending $500 on the card during the first 90 days.

Amazon shoppers choose their payment at the door

Pedestrians walk past the Amazon Go store in Seattle, Washington, U.S., on Wednesday, Jan. 17, 2018. After more than a year of testing with an employee-only focus group, Amazon Go opens to the public Monday in downtown Seattle, putting to the test the online retailer's technology that lets shoppers grab what they want and leave without paying a cashier. Photographer: Mike Kane/Bloomberg

Mike Kane/Bloomberg

Amazon already plays a dominant role in e-commerce, but its encroachments into brick-and-mortar retail are the most direct threat to bank-issued cards and mobile wallets.

The Amazon Go store, which began in Seattle and is expanding into other major cities, demands that shoppers load a dedicated app that locks in their payment preference before they set foot in the store. Shoppers must download an Amazon Go app and select from the cards connected to their Amazon account or by adding a new card.

After that, consumers aren't prompted again, even when they want to pay. A complex — and, no doubt, expensive — array of cameras and sensors determine what items the shopper picks up and carries out of the store.

So what does Amazon get out of this retail model?

With Amazon Go, every shopper is known from the moment they enter the store. Amazon has glass-gate turnstiles set up at the entrance, prompting shoppers to check in by scanning an app, much like subway riders might scan an app or a fare card before entering the system.

In Amazon's utopian shopping model, nobody is a stranger. This doesn't wipe out the possibility of shoplifting — any more than security cameras or guards wipe out shoplifting at other stores — but it does change the dynamic in a meaningful way.

American Express takes the Uber approach

The American Express Co. application is displayed in the App Store on an Apple Inc. iPhone in an arranged photograph taken in Washington, D.C., U.S., on Thursday, July 12, 2018. American Express is expected to release earnings figures on July 18. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

American Express may not be one of the nimble tech startups, but it can learn from watching their example.

American Express turned its loss of its Costco card business in 2016 into a pivot to a more technology-heavy strategy, a plan that is paying off with major deals with large partners and solid earnings.

Fresh off its partnership with Amazon, Amex has expanded its collaboration with PayPal to closely integrate Venmo and marketing between the two companies.

PayPal recently announced a partnership with Amex for an integrated peer-to-peer payment experience, enabling Amex cardholders to use membership rewards points at PayPal merchants online and send money via Venmo or PayPal from the Amex mobile app.

Over the next several quarters, PayPal will enhance access to Amex payment options in PayPal’s wallet, including deeper integration of Venmo and PayPal products into Amex’s platform.

Carnival turns one coin into a whole wallet

Carnival Victory, one of the seven cruise ships docked at the Port of Miami, Florida backs away from its dock, Sunday, March 11, 2007. Miami bills itself as the world's largest crusie port. From right, world's largest cruise ship, Royal Caribbean International's 158,000-ton, Freedom of the Seas, Explorer of the Seas, Norwegian Jewel, and not shown, Norwegian Pearl and Oceania Regatta. (Photographer: Richard Sheinwald/ Bloomberg News)

RICHARD SHEINWALD

Carnival's Ocean Medallion uses Bluetooth Low Energy (BLE) tokens, which eliminate even the act of tapping a wristband against a reader. “It’s the ultimate manifestation of the guest experience,” said John Padgett, chief experience and innovation officer for Carnival Corp.

Instead of interacting with a point of sale device, the Ocean Medallions act as beacons. The ship-based beacon system will have an inherent advantage over beacons used in retail stores on land, Padgett said.

Typical retail beacon setups involve stationary Bluetooth devices that communicate with a nearby shopper's smartphone app. Carnival's device is instead carried with the consumer in customized watch bands, necklaces and pendants, or merely slid into a pocket or wallet. There is no need for customers to open a smartphone app to experience the benefits.

In a typical transaction using the medallion, a customer might walk up to a bar on board a ship, and as the guest approaches, a device facing the bartender will use BLE to automatically show the guest profile on a screen, along with a photo of the customer and past orders.

When the bartender hands the guest a drink, no card, signature or other ritual is required. The medallion interfaces with the point of sale, and all of the details are exchanged without any further interaction.

“Ocean Medallion is an individual beacon without variability,” Padgett said. “Our receiving device is not a consumer device. It is enabled with proprietary sensors specifically tuned to the Ocean Medallion device, which eliminates all the technical differences.”

Starbucks and Dunkin Donuts

An employee fills a coffee order at a Dunkin' Donuts Inc. location in Ramsey, New Jersey, U.S., on Thursday, May 5, 2016. Dunkin' Brands Group Inc., a leading franchiser in the quick service restaurants (QSR) sector, operates in almost 60 countries around the world with more than 11,300 Dunkin' Donuts restaurants and 7,500 Baskin-Robbins locations. Photographer: Ron Antonelli/Bloomberg

Ron Antonelli/Bloomberg

In the battle to quench consumers’ thirst for coffee, Dunkin’ Brands is pulling out all the stops to battle Starbucks in mobile, boosting incentive marketing and adding Alexa for purchases.

But Starbucks' huge lead in mobile makes Dunkin's task difficult at best.

Dunkin’s August announcement that it would add Alexa as a purchase option for its On-the-Go Mobile Ordering is an indication of its deepening commitment to the mobile channel.

In addition to the Alexa feature, Dunkin also recently extended its mobile app development deal with CardFree to take greater control of its own technology. It was a recognition that without further mobile investment, Dunkin’ could fall further behind its archrival, Starbucks, who has already built a massive mobile following.

The challenges for Dunkin’ Brands are twofold. First, as more consumers adopt and create a habit of using Starbucks' mobile app, the more difficult it becomes for Dunkin' to create a loyal customer following. Second, as its mobile app becomes a greater part of Dunkin’s sales, how does it evolve its store format, delivery, and loyalty programs?

In its fiscal 2018 third quarter, the Starbucks mobile app generated 35% of the transactions in its U.S. company-operated retail stores, up from 30% a year earlier. Similarly, the mobile order ahead feature grew to 13% of transactions, up from 9% a year earlier. A request to Dunkin’ Brands for a mobile app sales breakout was declined.

Supporting Starbucks’ mobile app adoption has been the Starbucks card, which can be used as a standalone payment form or included in the mobile app. It represented 45% of transactions in U.S. and Canadian company-operated retail stores in the third quarter, up from 40% in the same period a year earlier.

Third-party apps at bank-branded ATMs?

A customer uses a JPMorgan Chase & Co. bank ATM location in San Diego, California, U.S., on Wednesday, July 8, 2015. JPMorgan Chase & Co. is scheduled to announce quarterly earnings results on July 14. Photographer: Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

JPMorgan Chase is one of the most aggressive mobile wallet developers in the banking world, having launched its own branded Chase Pay app and been one of the founders of the Zelle P2P network. But at the ATM, it's content to let another brand take the lead.

The Chase Pay app or Chase banking app won't give customers access to Chase ATMs, but Apple Pay, Google Pay and Samsung Pay will if the wallet app is paired with a Chase ATM card.

The feature also works to allow cardless access to locked ATM vestibules outside of branch hours.

The difference is in how the apps handle mobile payments: Chase Pay uses QR codes, whereas the tech giants' Pay apps use NFC. The cardless ATM feature, which rolled out to 16,000 Chase ATMs this summer, operates by asking consumers to tap their phones on an NFC reader built into the ATM or vestibule door.

Project Verify puts carriers back in the wallet

A pedestrian checks his mobile phone while walking past a Verizon Wireless store in San Francisco, California, U.S., on Wednesday, April 15, 2015. Verizon Communications Inc. is scheduled to release earnings data on April 21. Photographer: David Paul Morris/Bloomberg

David Paul Morris/Bloomberg

The U.S. mobile carriers once banded together to create a mobile wallet they unfortunately named Isis before rebranding it as Softcard and finally shutting it down and selling the assets to Google. But they haven't completely stepped aside from the world of financial services.

Verizon is working with other carriers on Project Verify, a security tool that it sees as a way to better protect mobile banking and payments.

Project Verify is designed to "not just use SMS but use your device, use the signals that have been sent to the network … customer information, AI, machine learning and blockchain technology," said Pavan Challa, director of product management at Verizon. "We want to build this multifactor authentication into the solution that's going to eliminate most of the fraud that's going to happen today."

Project Verify, which also includes AT&T, T-Mobile and Sprint, was announced in September and is expected to go live in March 2019 as an app that the carriers preload onto customers' phones. If banks and mobile wallet makers want to improve their security beyond SMS authentication, they may want to consider putting Project Verify up front.

Tech firms take over pot payments

Because of the legally hazy status of marijuana sales in the U.S., most mainstream banks and payment networks don't want to be a part of it. This creates an opportunity for third parties to add a digital option for the largely cash-based legal marijuana dispensaries.

One option is CanPay, which developed a closed-loop debit network for cannabis stores, and is live in 17 states and Puerto Rico. CanPay works with approximately 25 banks to create a private debit network and uses ACH transactions to process the payments, not the Visa and Mastercard rails.

The CanPay purchasing experience resembles that of using the Starbucks or Dunkin' Donuts app — the app uses a one-time token and PIN, and a QR code that the cashier scans from the smartphone's screen.

“We want to provide a stable and transparent payment alternative for retailers to be able to offer to their retail customers,” said Dustin Eide, CEO of CanPay. “It’s seamless, just like a Starbucks experience.”

Alipay follows tourists into U.S. stores

Signage for Ant Financial Services Group's Alipay, an affiliate of Alibaba Group Holding Ltd., is displayed outside a store in Hong Kong, China, on Tuesday, Nov. 1, 2016. The urgency to prepare regulatory environments for fintech is growing as banks begin offering digital services such as biometric authentication and as mobile-payment systems such as Apple Pay and AliPay are introduced around the region. Photographer: Anthony Kwan/Bloomberg

Anthony Kwan/Bloomberg

China’s Golden Week started on October 1 and with it, global cities and merchants were boldly promoting Alipay in an effort to capture Chinese tourist dollars. At the same time, merchants are building out a competitive acceptance network that could someday rival the major payment card networks.

Golden Week in China is a semi-annual consumer holiday. The first Golden Week coincides with the Chinese new year, which begins in January or February. The second Golden Week starts with China’s national day, which celebrates the formation of the People’s Republic. For the fall holiday, approximately 700 million Chinese consumers were estimated to travel domestically and overseas.

In the U.S. and other markets, merchants and acquirers have quickly and loudly rolled out the welcome mat for Alipay and its rival, WeChat Pay, to encourage Chinese tourists to spend money in their shops. Across the globe, Chinese tourists are making themselves well-known for their heavy spending habits, which tends to dwarf monies spent by other tourist groups. Since Chinese citizens are restricted by their government in terms of how much cash they can travel with, encouraging the use of Alipay and other mobile payment tools is a way for merchants to help the tourists get around this restriction.