Digging Deeper with Paydiant: The Mobile Wallet Behind the Curtain

June 2, 2014         By: Andrew Barnes

Andrew Barnes’ series, “Digging Deeper” is based in Silicon Valley and focuses on key startups and innovators, and how they are disrupting digital payments and commerce. 

Three rounds and $42MM in venture funding later, it looks like David may have finally whacked Goliath.

Paydiant, located in greater Boston, has staked a very clear claim to be known as the preeminent mobile wallet technology provider, or as we have agreed to call it “commerce enablement using mobile devices” (Everyone really hates that “wallet” word).

”We believe we have accomplished what some of the big guys, Google, Isis, and Square have failed to do over the last 3 years. Namely, we’ve gotten a large number of very large retailers to select our platform as the basis of their mobile wallet. And, it’s a well-known little secret that those other big guys have had to write big checks to get retailers just to try their stuff. We haven’t had to do that either.”

Paydiant’s marquee partners include MCX who licenses their technology to create the MCX platform for over 70 of the nation’s largest retailers, FIS, Discover, Vantiv, Heartland, Diebold and others. Sample direct client relationships include Capital One and Subway.

So what’s the deal? Why should we take note? Andrew gets to the meat of the issues with Paydiant Co-founder Chris Gardner, and talks about beating the big guys, building retailer’s brands, along with hands-on success in the convenience store and retail petroleum vertical.


Andrew Barnes: Can you tell me about your work with MCX and powering their wallet?

Chris Gardner: They’ve contracted with us to be their mobile wallet platform, so we’ll be powering mobile payments and potentially, a variety of value-added services like mobile loyalty, mobile offers and redemption, big data reporting, and analytics. When we talk about the wallet space, (and believe me we’re looking for a better term) payments are only a piece of that. MCX was originally founded to provide a counterweight to the big card networks and help retailers manage and lower their payment processing costs, but I think we all recognize that the wallet is a marketing platform as much as anything.


MCX has the who’s who of retail petroleum and convenience store operators including 7-Eleven, QT, ExxonMobil, Shell and many others. Can you talk a little about use cases for that specific vertical?

When you think about how things look in a retail petroleum and convenience store context, you see two drivers. Loyalty is very important because they want people to be loyal to their particular petroleum provider. Gasoline as you know is a very low margin business and so they need to make up for it in frequency, and the way to get more visits out of an individual consumer is to make sure they’re exceedingly loyal. Whether it’s fuel perks or other things, all of that translates really nicely to mobile. Being able to use mobile to create loyalty at the pump is a key driver.

Additionally, driving that user to create a larger basket of higher margin goods is key for the petroleum c-store guys. First, develop customer loyalty and then use the mobile marketing platform to get them to come in and make purchases in the c-store. Unlike QSR, which is focused on remote mobile ordering, with fuel, it’s about loyalty and getting a bigger basket by getting them into the store.

Each retail segment that we work with has a slightly different mix of what the wallet means to them and what they’re going to focus on. So maybe calling it a wallet is not the best way to convey the concept, but it will certainly be different depending on the segment you’re talking about.


With petroleum and c-stores, you’ll have c-store operators who are changing the petroleum brands based on their fuel supply contracts. It’s a muddled area because different channels of trade and changing fuel supply contracts can cause the branding to be split. How do you handle that?

That’s right, the linkage between the pump and the c-store, which can be so powerful with mobile, can be challenging. It definitely becomes more challenging to draw if it’s not a shared brand. For example, if the sign on the station is Shell then you can do a number of things whether it’s franchisee or company operated. You can use the Shell umbrella to link those activities and link the offerings together. If it’s really a split brand scenario, it becomes more difficult. That’s true for more than mobile. That’s true for advertising and even general marketing when you issue coupons and other promotions. There’s no real magic bullet there.


What about the super jobbers, the big marketers?

A lot of these guys are not necessarily providing point of sale hardware and or technology capabilities like mobile. But I would offer that especially for the scenario that you’ve outlined, there might be a big opportunity for them. That said, I don’t think we’ve seen them do it in any meaningful way yet. You do, however, see the larger brands like Shell, BP, Exxon, doing things with mobile. Cumberland Farms on the corporate c-store side is absolutely working with mobile and tying it all together nicely. Then the combined company stores, for instance the RaceTrac and the QuikTrip, are working on it as well.

When you have a consistent brand, you can rally your marketing dollars around it, mobile or otherwise. When it’s truly split it becomes harder. I see an opportunity where a comprehensive mobile and marketing strategy becomes an opportunity for the super jobber to create lock-in for their services as opposed to the relying on just the fuel contracts which are largely about commodity pricing.


Chris, I sense that being a mobile engagement platform is how you want to be viewed in the marketplace.

Yes, that’s right. I kind of joke about “wallet” not being the right term. That’s the term most people use these days to kind of talk about it. Whether it’s writers, analysts or even our customers and prospects.

That said, something like “mobile commerce” is a lot closer to what we’re doing. You know, when you think about what we’re offering, the real value is people buying one more item, and making one more visit to their stores. And the way you do that is with a combination of payments, offers, loyalty, reporting, analytics, and other value added services. Not just any one of those by itself.

That’s our challenge from a marketing perspective. But for now, I think wallet is still probably the best way to describe what we do. I think, Andrew, you’re exactly right. This is “commerce enablement” using mobile devices.

With today’s marketing dynamic, it’s all omni-channel because it all needs to work together. You use the mobile to drive web traffic, or you use the mobile to drive store traffic. The lines are becoming blurred but it is undoubtedly moving towards mobile because that’s the way we all interact with each other, with retailers, etc. today.


Are you comfortable being only the mobile component of an omni-channel strategy, or do you have aspirations to be more than that at some point?

Yeah, we’re absolutely focused on mobile today. The good news for us is all these retailers have decided to go mobile. Whatever channel — whether it is quick service, departments or grocery –everyone says that they need a mobile app now and it needs to do XYZ.

The biggest retailers are putting out RFP’s and they have 12 different functional requirements on them, right? I need to be able to pay at the pump, I need to be able to pay in the c-store, I need a website, I need a loyalty program for mobile, I need a loyalty program for plastic, I need a coupon redemption for mobile, I need coupon redemption in store, I need a reporting and analytic platform, and I need an upgrade to my point of sale.

The fact of the matter is that no company can fulfill all of that today — Paydiant or anyone else. These are big projects that span multiple industries so we’re perfectly comfortable going in and tackling the mobile components of this and we’re also very good at partnering with others to help deliver the total solution. Anybody that claims they can do all of that and do it really well is blowing smoke. There’s just too much going on. You can’t be all things to all people. You do need to focus, and we’re perfectly comfortable focusing on mobile today.


You say that you are good at partnering, can you give some partner examples?

MCX is a partner because they license our technology to create their own platform. We also have a number of companies that are licensed to resell our technology including FIS, Discover, Diebold, Vantiv and others. We are very partner-centered organization and it’s quite consistent with our white label strategy.


How do you co-exist with mFoundry over at FIS? Is there overlap?

There’s really no overlap. The mFoundry guys as you may know were many of the folks that built the original Starbucks app way back. Starbucks has since pulled that in-house and mFoundry was recently acquired by FIS – one of our most important partners. Now they’re part of the FIS mobile team, and they are a bunch of very, very good and smart guys in mobile and mobile retail.

It is that team who is building the solution for Orange Leaf based on our platform. We work very closely with those guys and quite frankly, they are some of the best in the business in developing retail and mobile banking solutions.


Conceptually, you are a layer below what they’re doing. You’re the infrastructure upon which they’re building UIs and so forth for the client, correct?

Yeah, that’s accurate. For example, for Orange Leaf, they’re building all the UI and the customer-facing stuff on top of our platform. Now there are cases, for example with Subway, where we’re building the whole mobile solution for them, but it is just as common that a partner is handling the front end.


Because you are a white label and platform technology, the average consumer doesn’t see you. Where would we look to see if Paydiant is really getting traction and making some hay? How would we know?

We believe we have accomplished what some of the big guys, Google, Isis, and Square have failed to do over the last 3 years. Namely, we’ve gotten a large number of very large retailers to select our platform as the basis of their mobile wallet. And, it’s a well-known little secret that those other big guys have had to write big checks to get retailers just to try their stuff. We haven’t had to do that, either.

We’re getting paid by retailers because we believe that our value proposition is different. We’re teaching the retailers how to leverage mobile for their own good and leveraging their own brand as opposed to others in the space mostly interested in running an advertising network on the back of their data and their customers.

Look at the 70 odd retail brands that are part of MCX and then the big retailers that we’ve landed on our own including Subway, Orange Leaf, and a bunch of others. I think as we close out 2014, certainly in terms of retailer presence, we expect to be the front runner. We’ve taken a very different approach but we certainly expect to have more traction than any of those guys. For example, Square just shut down their wallet and I expect you’ll see some of those other big guys exit the space as well.

It’s hard work for the big guys, especially if your initial premise is, “Hey, it’s got to be my app.” It’s a more compelling value proposition to the retailer to say, “Hey, let us help you build your brand,” instead of, “How about you help me build mine?” That’s how we’ve approached it from day one and I believe it will prove to be the most popular model, without a doubt.


Are those your competitive beer muscles talking? Where do you see them having a chance of competing with you?

That’s not to say none of the big guys will get any traction, in fact, I suspect some will, but we don’t really compete with them. For example, PayPal is doing quite well with SMBs and smaller businesses. Those smaller businesses are not going to have their own app, their own wallet, and all of that stuff. There’s absolutely an opportunity for someone to roll-up the guys who don’t have the wherewithal to do it on their own. There’s an opportunity to provide a platform for them to all do that.

And that’s not to say that the PayPal’s and the Googles of the world won’t get a large retailer here and there, but we do think that the white label model will be the one that wins the majority of the retailer wallet business.


Do you ever hear that you are too small? Are folks comfortable knowing that when they come to you they’re going to get the attention that they need as opposed to dealing with a larger organizations that doesn’t specialize?

To be honest, we don’t hear that much at all. I mean, clearly, we’re a small company, but we’re nimble and we smother our customers with love. What we hear from them is, “Hey, you don’t even have an app at the App Store so we’re not worried about you taking over our brand.” The fact is, when we work with our customers, we don’t even ask their app to say “Powered By Paydiant.” We take this white label approach very, very seriously.

This is also our third payments company. In our careers, we’ve all done 7 and 8 figure complicated software deployments for the biggest companies in the world so we’re confident in our ability to deliver, and I think we give our customers confidence that we can deliver for them. But in the end, the fact that we are not trying to disintermediate their brand seems to be the most important thing of all.


Where does the actual payments piece fit into this?

To be clear, we care very deeply about the payments piece. I mean, we all have come from payments backgrounds. Payments have to be secure, work every time, and be scalable. The first feature that we released on our platform was the payments piece.

That said, we don’t care what the underlying account is one bit. If it’s a Visa card that’s great, if it’s an ACH transaction, that’s great. If it’s a PayPal account, that’s great too. To our customers, we look more like a mobile payment “switch” to whatever payment providers they want to work with. When we approach these retailers, we say, “Who are you processing payments today with? Oh, that’s great, we already have a connector to them.” That’s how we work.


Okay, enough business, let’s talk eats. I’m so used to talking with Silicon Valley types it will be great to get a view of the greater Boston world, and your favorite restaurant out there.

It’s in the ‘burbs, but Blue Ginger in Wellesley, Massachusetts is absolutely awesome.


Thanks Chris. This has been great.

I’ve really enjoyed it as well Andrew.

About Paydiant
Paydiant provides a cloud-based, white label mobile wallet platform that includes mobile payments, loyalty, offers, cardless ATM cash access, offer redemption and related commerce services. The platform enables merchants and banks to deploy and manage their own mobile wallet solutions under their own brand and within their own mobile apps. Unlike other solutions, the Paydiant platform works with existing handsets and point of sale (POS) systems – so consumers, merchants and banks can enjoy all the capabilities and benefits of mobile wallets today and tomorrow.

Where’s the Money?

Investors include: Stage 1 Ventures, Sands Capital, General Catalyst Partners, North Bridge Venture Partners

About Chris Gardner, Co-founder, Paydiant
Chris’ background spans a variety of tech areas including online billing/payments, digital media, customer self-service, document management and speech recognition. Prior to co-founding Paydiant, Chris was CMO at ExtendMedia, a digital media content delivery and commerce platform software company; SVP of Products/Marketing at m-Qube, North America’s leading premium SMS mobile payments provider (acquired by Verisign). He was also the VP of Products/Marketing at edocs, Inc., an e-billing, payments and customer self-service company (acquired by Siebel Systems).

barnesAndrew Barnes, Managing Director, Emerging Payments
Barnes is a self-confessed payments “geek” and recognized entrepreneur working in Silicon Valley. He leverages his track record in business development and his network in startups, retail, and FI’s to analyze opportunities and solve market challenges in payments and mobile commerce. Barnes has held executive positions internationally with Sprint, Global One, and 2Roam Mobile. He founded the National NNN Investment Group, and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from WASEDA in Tokyo 早稲田大学大学院 and a BA from Penn State.  He can be reached at @AndrewinSV and Linkedin.