“Kohls Pay – The app is designed for speed at checkout. The developer is Omnyway Inc., a 7-year-old startup cofounded by Bill Melton, well-known in the payments industry as a founder of point-of-sale terminal vendor Verifone.”
13th Annual Field Guide to Innovative Payments
It’s May, and that means it’s time for our annual exercise to seek out and describe the nonbank players, apart from the big networks, that are rewriting the rules for the digital exchange of value.
Since 2004, Digital Transactions has traced the course of payments innovation through its nimblest practitioners—the startups, the fintechs, the smaller networks, the nonbank arrivistes—and their services and products, their strategies and tactics, their successes and pratfalls. In 2009, we distilled what we were learning about these innovators into a handy guide inside the May issue, and called it a “field guide” to what were then known, somewhat cheekily, as alternative payments.
Well, the guide worked out so well we decided to update it every May. And so you now hold in your hands the 13th edition. Last year, we dropped the “alternative payments” rubric and renamed our effort as a guide to innovative payments. We think the new adjective better fits our purpose in sorting out the varied new pathways the nonbanks, and yes, banks and major networks, are forging for the payments business.
The guide is as much about strategies and tactics as it is about emerging technology and new markets. We invite you to read this guide much as you have since 2009, with an eye to how it might inform your decisions, sharpen your competitive instincts, and bring to light, perhaps, some developments you had not encountered before—as well as spotlight some potential partners.
Digital Transactions generally defines an innovative payment system as any network or consumer interface (a mobile app, for example) that enables payments in a way that relies on or stands apart from a major network and/or stands between that network and the consumer in an important way. We emphasize consumer-facing payment systems, but of course many, if not most, of the systems profiled here market themselves to merchants to maximize acceptance of their products.
Information for the listings comes from news reports over the past year, company Web sites and spokespersons, and financial filings in a few cases. We mention pricing for the merchant and consumer when it is relevant and publicly available. The “Year Founded” line refers to the year the particular service was founded, not the parent company, except in those cases where the two coincide.
Parent: Ant Financial Services Group
Headquarters: Pudong, Shanghai, China
Field Notes: In North America, Alipay has been adding in-store acceptance in tourist-heavy locations and in other non-face-to-face payment channels. The app, which has been wildly popular for years, now claims some 1 billion users worldwide. The big news for U.S. merchants is that the fast-growing commerce platform Shopify (fourth-quarter gross payment volume of $19.1 billion, more than double year-over-year) now offers a gateway allowing its sellers to accept Alipay directly, rather than through third parties.
Parent: Amazon.com Inc.
Founded: 2007 (including predecessor services)
Field Notes: Amazon has steadily introduced Amazon Pay around the world. As of March 2021, the service was available in 18 countries plus the United States. Transaction fees for Amazon Pay, which is extremely popular with Generation Z and Millennials, are comprised of a processing and authorization fee. The processing fee for Internet and mobile purchases is 2.9% of the transaction total and the authorization fee is 30 cents. The processing fee for purchases made through Alexa, Amazon’s virtual assistant into which Amazon has been integrated to facilitate voice-assisted shopping, is 4%; the authorization fee is 30 cents.
Amazon One (Pay By Palm)
Parent: Amazon.com Inc.
Field Notes: Amazon One debuted at two Amazon Go stores in Seattle last September as the world grappled with the Covid 19 pandemic and demand for contactless payments was skyrocketing. To open an Amazon One account, a consumer inserts a credit card into an Amazon One terminal, then waves her palm over the device so it can be scanned and her palm print linked to her credit card. When entering an Amazon Go store, the consumer scans her palm at the turnstile. Upon exiting the store, the consumer’s credit card is automatically billed for the items in her cart.
Parent: Apple Inc.
Headquarters: Cupertino, Calif.
Field Notes: The big news for Apple Inc.’s 7-year-old mobile-payment technology is its apparent flirtation with QR codes, first reported last summer by the 9 to 5 Mac blog. Ever tightlipped, Apple did not comment on the report. Eventual adoption of the codes would allow Apple Pay to play more naturally in overseas markets such as China, where QR codes are ubiquitous for mobile payments. Meanwhile, QR code acceptance in the U.S. market began to take off late last year with chainwide acceptance by the drugstore giant CVS and other merchants. The move would add another channel alongside Apple Pay’s historic commitment to the iPhone’s NFC chip, an element over which the company has historically exercised tight control.
Parent: Satoshi Nakamoto
Field Notes: Cryptocurrencies are having a big year, and, with a market cap exceeding $1 trillion, Bitcoin is the biggest of the cryptocurrencies. Major payments players like PayPal and Square are now heavily promoting Bitcoin, with Square making it easy to acquire the digital currency through its Cash App product (see the Cash App entry) and PayPal launching a service that lets PayPal users buy with crypto while merchants receive their local fiat currency, eliminating any risk of value fluctuation. And Bitcoin, though king of the cryptos, remains notoriously volatile. It was trading at $63,000 at mid-April, nine times its value a year earlier, and nearly six times its value only six months before. Merchant acceptance remains spotty, though the promotion from PayPal and Square—and the work of companies like BitPay (next entry) may fix that—and it remains a favorite of some hedge funds and other investors.
Parent: BitPay Inc.
Field Notes: Cryptocurrency-wallet provider Bitpay has had a busy year. In June, it issued a prepaid Mastercard backed by the user’s digital currency. In November, it launched BitPay Send, a mass-payout service allowing companies to pay gig workers and contractors with crypto. It followed that up in December with a deal with Slide Mobile allowing users to earn rewards in dollars for spending their crypto holdings with Slide’s network of 150 merchants. Then, in February came a deal allowing holders of the BitPay prepaid Mastercard to load the card into Apple Pay for mobile payments. And only last month it joined a crypto-patent effort led by Square Inc. The company’s mission is to ease cryptocurrency usage for consumers and merchants alike. If activity is any guide, it’s getting closer to its goal.
Parent: Square Inc.
Headquarters: San Francisco
Field Notes: This peer-to-peer payment app, which features a Visa debit card and also lets users buy and sell stocks and Bitcoin, reached 36 million active users in December, up 50% in one year and 12 times the number four years ago. Perhaps even more important for Square, the 7-year-old app accounted for $377 million in gross profit in the final three months of 2020, or fully 47% of gross profit for the entire company and up from 27% a year earlier. The trend extended at least into January, with gross profit for the month 164% higher than in January 2020. The app has also allowed users to exploit the remarkable runup in Bitcoin in recent months. By allowing users to buy Satoshis, or fractions of a Bitcoin, Cash App enables purchases of affordable bits. As a result, more than 3 million users bought or sold the currency last year. And for now, about 10% of Cash App users are adopting Bitcoin.
Parent: Fiserv Inc.
Headquarters: Sunnyvale, Calif.
Field Notes: Clover, which Fiserv acquired along with First Data Corp. in 2019, provided a big boost to Fiserv’s 2020 fourth-quarter earnings, posting $34 billion in volume for the quarter, a 25% year-over-year increase. In late 2020, Verizon Communications Inc.’s Verizon Business unit began offering the Clover Flex mobile point-of-sale device to its business customers. A handheld point-of-sale terminal, Clover Flex accepts all forms of payment, including contactless scan-and-go and tap-and-go transactions. Verizon Business will equip the device with a SIM card to facilitate payment acceptance through its telecommunications network. The deal gives Verizon clients access to Fiserv’s merchant services for online, mobile, in-person payment acceptance and debit and credit processing.
Parent: Coinbase Inc.
Headquarters: San Francisco
Field Notes: Coinbase’s big news this year was its public listing on the Nasdaq. It was an explosive debut, with the company finishing its first day on the market with an $85-billion valuation, greater than any other financial exchange. The stock’s popularity tracks that of Bitcoin, the principal cryptocurrency, which by spring had soared to heady heights exceeding $60,000, nine times its value a year earlier. Coinbase now claims more than 43 million users, up from more than 30 million a year ago, and features a Visa-branded debit card that also works within the Google Pay wallet. The company allows users to buy, sell, or manage their holdings any time via the company’s apps.
Parent: Cumberland Farms Inc.
Headquarters: Westborough, Mass.
Field Notes: Cumberland Farms’ payment app soldiers on, though the big news is that ZipLine, developer of the private-label debit-payment product the Cumberland Farms app is based on, was sold to Professional Datasolutions Inc., a c-store software developer and services company. PDI said the acquisition would enable it to bundle ZipLine’s payment service with its Marketing Cloud platform. In January, PDI signed a deal with c-store operator EG Group to bring the private-label debit service to its approximately 1,700 locations. The biometric log-in feature for the updated app works with any iOS or Android smart phone that has a fingerprint sensor, or facial recognition, as with the latest iPhones. The app enables users to pay for in-store purchases at any of the more than 600 Cumberland Farms locations in eight states, find a store location, track rewards progress, and view savings from using the app.
Parent: Dunkin’ Brands Group Inc.
Headquarters: Canton, Mass.
Field Notes: Just before Covid-19 put the economy into lockdown last year, Dunkin’ announced the national expansion of its deal with the Shell Fuel Rewards program. That enables Fuel Rewards and DD Perks Rewards members at certain levels to save 10 cents per gallon of gas every time they purchase five Dunkin’ beverages. Dunkin’s mobile app supports NFC contactless payments in addition to its longstanding QR-code payment feature. In 2018 Dunkin’ struck a multi-year agreement with CardFree Inc., its long-time software partner for the mobile app, giving it a perpetual license to the app software. Dunkin’ is using the software for its digital initiatives that include catering, delivery, and curbside pick-up.
Parent: ExxonMobil Corp.
Headquarters: Irving, Texas
Field Notes: In October 2020, ExxonMobil Corp. added QR-code and NFC-enabled tags to its fuel dispensers. On iPhones, for consumers without the ExxonMobil app, the contactless connection prompts an Apple App Clips feature to display a portion of the full-fledged app without requiring the consumer to download it at that moment. Instead, a small part of the app is activated—the payment part. Once the transaction is authorized, the app clip shows the status of the transaction and a prompt to get the full-fledged app. Customers with Android phones are prompted to download the app, which they can use to pay for fuel with Google Pay in the app. The tags only work with iPhones or Android phones. Consumers who want to pay with a contactless-enabled credit or debit card tap the card against the standard NFC reader on the pump.
Parent: Alphabet Inc.
Headquarters: Mountain View, Calif.
Founded: Android Pay, 2015; Google Wallet, 2011
Field Notes: The newest version of Google Pay, which Google began testing last November, rolled out in March. The redesigned app is centered on users’ relationships with people and businesses. Users who connect their bank and card accounts to the mobile wallet can gain insights into their spending patterns. Users can also track the individuals and businesses they transact with most frequently and find offers and loyalty information organized around conversations. The new app also offers the ability to scan Gmail and Google Photos accounts for receipt data. Later this year, Google plans to enable users to apply for what it describes as “a new kind of digital bank account with trusted financial institutions.”
Parent: Grabango Co.
Headquarters: Berkeley, Calif.
Field Notes: Grabango Co. gained attention in the fall of 2020 when supermarket chain Giant Eagle Inc. selected its checkout-free technology to introduce cashierless service to its GetGo Café+Market convenience stores. Grabango’s technology uses computer vision to track when an item is removed from the shelf or a refrigerated case. Small cameras hidden in the ceiling, within a casing similar to a fluorescent light fixture called a G-rail, follow consumers as they move through the store grabbing items. When a consumer who has downloaded the Grabango app enters the store, the app automatically begins tracking items as she picks them up and keeps a running tally. To complete the purchase, the consumer scans a code, generated by the app, on a Grabango terminal, thus bypassing the checkout counter. The system charges the purchase to a credit or debit card the consumer has registered in the app and sends a digital copy of the receipt to the app.
Parent: Gulf Oil LP
Headquarters: Wellesley Hills, Mass.
Field Notes: Gulf Pay enables consumers to pay at the pump without inserting a credit or debit card into the pump’s reader. The app uses tokenized and encrypted card data. Gulf Pay is built on technology from P97 Networks Inc., a Houston-based petroleum-services company. Gulf Oil has more than 1,800 Gulf gas stations.
Parent: Klarna Bank AB
Field Notes: Buy now, pay later providers have had banner sales as even more budget-minded consumers took to online shopping during the 2020-2021 pandemic. As one of the well-known installment-payment providers, Klarna is a good example of the segment. It raised $1 billion in equity funding earlier this year. And in late 2020, it struck a deal that saw its service integrated into Verifone Inc. point-of-sale terminals for in-store use. But Klarna is not the only provider experiencing growth. Competitor Splitit Payments Ltd. said its merchant sales volume increased almost 180% in 2020 to $345 million as various agreements increased merchant acceptance. Affirm Inc., which offers point-of-sale financing, became a publicly-traded company. Afterpay Ltd. launched in-store installment payments last autumn. Global BNPL volume is forecasted to increase to more than $680 billion in transaction value by 2025, up from $285 billion in 2018, according to Kaleido Intelligence Ltd., a London-based research firm.
Parent: Kohl’s Corp.
Headquarters: Menomonee Falls, Wis.
Field Notes: The Kohl’s Pay app allows customers to redeem offers, rewards in the chain’s Yes2You program, and Kohl’s Cash in one barcode-based flash. But it faced a huge challenge last year as Kohl’s closed all of its approximately 1,100 stores in response to the coronavirus outbreak. By April, all stores had reopened except for one each in New Jersey and Oregon, while a store in Texas had closed permanently. The app is designed for speed at checkout. The developer is Omnyway Inc., a 7-year-old startup cofounded by Bill Melton, well-known in the payments industry as a founder of point-of-sale terminal vendor VeriFone.
Parent: The Kroger Co.
Field Notes: Launched two years ago, Kroger Pay is available for iOS and Android devices and uses QR codes for payments, as Kroger does not accept NFC-based general-purpose mobile wallets such as Apple Pay or Google Pay. Still, in the summer of 2020, the grocery giant said it was testing contactless payments at some locations, including some mobile wallets and NFC-enabled cards. Kroger Pay is part of a multifaceted loyalty program dubbed “Rewards” that includes a debit card, digital coupons, and personalized offers. Consumers accrue loyalty points when using Kroger Pay and can receive additional points when the payment method is the Rewards debit card or a general-purpose prepaid card that also carries a Kroger store brand.
Parent: MagicCube Inc.
Headquarters: Santa Clara, Calif.
Field Notes: New Field Guide entrant MagicCube is trying to establish itself as a major player in the PIN-on-mobile field using commercially available, off-the-shelf devices. It provides the software to enable NFC payment acceptance using software installed on regular iPhone or Android devices. That’s minus any special hardware. MagicCube’s effort received a big boost in December when Visa Inc. granted a security compliance allowance to MagicCube’s iAccept technology. With iAccept, which MagicCube said earlier this year would become available in Brazil, a seller can equip an off-the-shelf mobile device to accept NFC cards and process PINs with nothing more than software. Now, with Visa’s certification, the technology can work on all four major payment networks. Visa also invested an undisclosed sum in the company in 2020.
Parent: EasyPark Group (pending)
Field Notes: At 22 million active users, ParkMobile is the largest of the apps that let drivers find and pay for parking in city centers, airports, stadiums, college campuses, and other busy places. But like all of its competitors, it’s had a challenging year in the face of reduced traffic and dwindled need for parking at places like hotels and sports stadiums. In March, Sweden’s EasyPark Group announced a deal to acquire ParkMobile from owners BMW Group and Daimler Mobility AG. Terms were not announced for the deal, which was expected to close by the end of June.
Parent: PayPal Holdings Inc.
Headquarters: San Jose, Calif.
Field Notes: PayPal has added a slew of new services to its platform in the past year. The company now accepts cryptocurrency at checkout, has expanded its QR-code payment option to CVS Pharmacy stores and small businesses, and launched a Visa-branded credit card for its Venmo peer-to-peer payment service that features a QR code for P2P transfers in addition to an NFC chip for merchant acceptance (see the Venmo entry). The company also sees opportunity in China by investing in GoPay, a payment service it acquired late in 2019. The deal leaves PayPal as the only non-domestic company operating a domestic payments service in China. In 2020, PayPal added nearly 73 million net new active accounts, reaching 377 million by year’s end, up 24% over 2019.
Parent: Revolut Ltd.
Field Notes: Long available in Europe, the so-called neobank Revolut launched in the United States in March 2020 with an app that lets users obtain either a plastic or virtual debit card, freeze or unfreeze or otherwise control the card from a mobile phone, convert from one currency to another, and flow wages directly into the account. But its U.S. ambitions range farther than that. In March, it launched business accounts in all 50 states and submitted an application to the Federal Deposit Insurance Corp. for a banking license.
Parent: Ripple Labs Inc.
Headquarters: San Francisco
Field Notes: In 2020, Ripple announced it would add instant person-to-person payments capability and one-click checkouts to Payburner, a digital wallet for XRP. The new features include an integration with PayID, a cross-network routing standard introduced by the Open Payments Coalition, a group of 46 payments companies that includes Ripple. The standard attaches an identifier that allows transactions to flow to and from accounts without the need for bank-account numbers. To receive instant payments through the streamlined checkout, online merchants must have a Payburner wallet; buyers need only to be able to spend XRP. Ripple XRP transactions are logged onto a Hash Tree, a data structure for rapidly checking differences between parts of a file, as opposed to a blockchain.
Parent: Samsung Electronics Co. Ltd.
Headquarters: Seoul, South Korea
Field Notes: Samsung Pay, which rolled in the United States in September 2015, allows consumers to make purchases using compatible phones and other Samsung devices. The mobile wallet supports contactless payments using near-field communication and magnetic stripe–only payment terminals by incorporating magnetic secure transmission. Samsung Pay can be used for fares on New York City’s MTA and Portland’s TriMet transit systems by selecting a default card, then tapping the phone on the mobile-pay location on the turnstile or ticket validator. Samsung Pay users can also earn cash rewards when making purchases at select merchants, such as Grubhub, Hello Fresh, and Sam’s Club. Consumers can also purchase, send and receive gift cards directly from the app.
Secure Remote Commerce (Click to Pay)
Parents: American Express, Discover, Mastercard, Visa
Field Notes: Secure Remote Commerce is not so much a brand as a behind-the-scenes digital-payment mechanism developed by EMVCo, the standards body controlled by the global payment card networks. Referred to as “click to pay” by the networks, SRC’s purpose is to replace the clutter of payment brands on e-commerce checkout pages with a common buy button that offers a unified and simple purchase process. With e-commerce booming, the simplified checkout is getting a workout. Total U.S. online sales came to an estimated $207 billion in the fourth quarter, up 33% year-over-year, according to the U.S. Census Bureau.
Parent: Starbucks Corp.
Field Notes: In 2020, coffee king Starbucks Corp. announced new ways for its loyalty program members to earn points, or stars, in the Starbucks Rewards program without paying with a registered Starbucks physical card or card loaded into the Starbucks mobile app. Program members can earn one Star per dollar spent when paying with a credit/debit card, cash, or mobile wallets at company-owned stores in the United States and Canada. Program members can save alternative payment methods in the Starbucks app to earn stars when paying. At the close of the first quarter of Starbucks’ 2021 fiscal year, ended December 27, 2020, 90-day active members in the Starbucks Rewards program in the United States totaled 21.8 million, up 15% year-over-year.
Headquarters: Leeds, England
With sports venues re-opening, Tappit has been a roll, striking several deals with professional sports teams to implement its contactless mobile payment application. The company’s latest deal with Major League Baseball’s Cincinnati Reds to offer contactless mobile payment in the team’s stadium follows tie-ups with the Kansas City Chiefs and Jacksonville Jaguars of the National Football League. The company also has deals with two professional soccer teams in England—The Manchester City Football Club and Birmingham City FC, as well the Abu Dhabi HSBC Championship, a European Tour golf tournament, and Dubai 7s Stadium in Dubai. Tappit’s contactless payment solution supports mobile payments and provides users’ event analytics.
Parent: Target Corp.
Field Notes: Target began accepting Apple Pay, Google Pay, and Samsung Pay plus EMV contactless cards in 2019, preparing its checkout lanes well in advance for the touchfree demand associated with the Covid-19 pandemic and in-store shopping. The discount retailer’s preferred payment method is its RedCard family. The group includes a private-label credit card and cobranded Mastercard credit card issued by TD Bank, and a Target-issued decoupled debit card as well as the Wallet feature of Target’s mobile app. RedCards, which give holders 5% off on Target purchases, can be loaded into Wallet for payment and coupon redemptions at Target stores, and they also provide free shipping with Target.com purchases. RedCards accounted for 21.5% of Target’s 2020 sales.
Parent: TouchBistro Inc.
Field Notes: As one of the much-in-demand cloud-based point-of-sale system providers, TouchBistro, like many of its competitors, has continually offered services in addition to central payment processing. In 2020, TouchBistro acquired TableUp, a loyalty-marketing application provider, in a deal driven by restaurant requests for ways to market and offer customer incentives as restaurants began reopening. It also offers a tableside ordering system, table management, a customer relationship management app, an employee management app, and reporting capabilities. That’s in addition to menu and inventory management. Such services became more important to hospitality operators in the past year as they turned to touch-free ways to interact with diners.
Headquarters: San Jose, Calif.
Field Notes: PayPal’s peer-to-peer payments app finished the fourth quarter of 2020 with almost 70 million users and $47 billion in volume, a dollar figure that was up fully 60% over the same period in 2019. Volume is expected to grow even faster with PayPal’s move to implement Pay with Venmo for online merchants. And in February, PayPal threw the door wide open for applications for its new Visa-branded Venmo credit card, which the company has had in the works since 2019 and had started issuing to select users in October. Issued by long-time PayPal partner Synchrony, the card includes a QR code, a rewards structure, and, through the Venmo app, the ability to track and schedule purchases and cash back, view spending trends, and share and schedule payments. While P2P volume earns slim margins, the new card, with its widespread Visa acceptance, is expected to pull in interchange revenue for PayPal and Synchrony that will allow the partners to tap into Venmo’s rapid growth.
Parent: Walmart Inc.
Headquarters: Bentonville, Ark.
Field Notes: Walmart Inc.’s strategy to differentiate its Walmart Pay wallet is to keep the wallet’s technology simple. Instead of using near-field communication to initiate transactions, Walmart Pay users scan a secure QR code displayed at checkout with their smart phone. As the QR code is scanned, it sends a signal to Walmart’s server telling the server it is okay to use Walmart Pay for that particular purchase. The signal itself does not transmit any financial information. Walmart Pay works with any valid major credit card that’s saved to a Walmart account, or one or more Walmart gift cards. The cards are listed as payment methods within the app and customers can choose which card or cards get used at checkout.
Headquarters: Shenzhen, China
Field Notes: WeChat Pay’s North America presence is all about enabling acceptance for users, especially those hailing from China who vacation in the United States and Canada. To that end, WeChat Pay has struck several deals, such as one with 7-Eleven Inc. in Canada. Citcon USA LLC provides a service for merchants that enables WeChat Pay and other China-based wallets to be used at North American merchants. Earlier in 2021, Citcon launched a service offering a single integration for more than 100 wallets, including WeChat Pay, which is part of the Tencent empire, which integrates a number of popular digital services, including social media. It depends on QR codes rather than on near-field communication, the standard major U.S. wallets like Apple Pay and Google Pay have adopted. That makes WeChat Pay easy for merchants to install and appeals to China’s huge population of smart-phone aficionados.
Parent: Early Warning Services LLC
Headquarters: Scottsdale, Ariz.
Founded: 2011 (as clearXchange)
Field Notes: Zelle, the person-to-person bank-centered payment service, made waves when it announced in early 2021 that an integration with The Clearing House Payments Co. LLC’s Real Time Payments network would allow Zelle transactions to be cleared and settled on that network. With the integration, senders’ financial institutions will see faster availability of funds on Zelle transactions and Early Warning will be able to access features of RTP such as request for payment and bill pay. For its part, TCH will benefit from Zelle’s ability to route transactions via simple yet secure tokens like a phone number or email address. Zelle closed 2020 with 1.2 billion transactions, totaling $307 billion sent. Zelle says these are increases of 58% and 62% year-over-year, respectively. At the beginning of 2021, 850 banks and credit unions offered Zelle, with thousands more represented in the Zelle network through consumer use of the Zelle common mobile app.