The payment wars have been raging for the better part of a year with upstarts like Square, Stripe, and Braintree all nibbling away at PayPal’s entrenched but unpopular hegemony.
Stripe and Braintree have been the two most similar in the battle– both try to up the PayPal ante by being more customer friendly. Stripe excels with developers for easy integration; Braintree excels with white-glove customer service and strong mobile commerce chops.
Last year, Stripe pulled an early coup with its instant underwriting capability that allows customers to start taking payments right after signing up– no waiting on a merchant account required. Braintree quickly regrouped and launched a competing feature.
Well, now it’s Braintree’s turn to jump ahead in the feature wars. Last year, the company bought Venmo, a small digital wallet company in New York that didn’t have a huge footprint, but had a rabid following among early adopters, hailed for its mobile-first smarts.
While Stripe aims more at sellers than buyers, Braintree CEO Bill Ready has never been coy about his intentions with Venmo: He wanted to build a mobile digital wallet that could make one-touch purchasing as easy across his whole network of customers as it is on Uber or HotelTonight. Finally, he’s delivering on that promise today with the launch of Venmo Touch.
Well, sort of. It only has a handful of member companies so far. This isn’t a total slam dunk for customers. Sure they get access to more than 35 million stored credit cards– which compares pretty favorably to PayPal’s 100 million, given how young Braintree is. But PayPal has long irritated companies because it injects too much of its brand into the experience too much. While Braintree still doesn’t take you away from the merchant’s property to pay, it’s necessary for Braintree to brand this product a little bit so users understand why other sites have their credit card information.
Interestingly, it’s going with the Venmo brand, not the Braintree brand. This may introduce a bit of a brand soup problem that SixApart had with Moveable Type and Typepad; or Intuit has with Quicken, QuickBooks and TurboTax. But as Ready noted yesterday, while Venmo’s brand recognition may be small it’s known by early adopters. Braintree meanwhile sounds like an online education company and is known mostly to companies.
Done right, this is a massive opportunity for Braintree to differentiate itself. It has seized onto the mobile commerce bandwagon, enabling almost too frictionless purchase experiences on apps like Uber, HotelTonight, Fab, Airbnb, and others. It’s processing $6.5 billion in payment volume now, of which nearly $2 billion is on mobile devices. Mobile commerce overall in 2012 was about $10 billion, so Braintree is already processing a significant chunk of the market.
How do you create a network effect in payments? Wooing developers is a good start, but you have to own the easiest way to pay. That’s, after all, why PayPal is still so dominant on the Web despite 10 years of practically no innovation. The network effect may prove more pronounced on mobile because any payment friction can kill a sale.
This is potentially good for developers who’ve been concerned that platforms like Apple, Amazon and Facebook are becoming too dominant. After all, Apple and Amazon’s biggest innovations in tablet and mobile devices was the one-touch purchasing and Apple intends to develop this further with its own digital wallet. Its big advantage: It already has all the credit cards already in the iOS world.
And consider a big reason that Karma sold its mobile gifting app to Facebook: It wasn’t just hundreds of birthday messages left on Walls; it was all those credit cards on file.
If Braintree can get all of its merchants on board it can offer something pretty compelling that doesn’t come with the downsides of playing inside a platform. It only wants to do payments.
Of course, there’s a downside to that too. If Braintree does this too well, it no longer has PayPal and Stripe to worry about– it’s suddenly competing with Apple and Amazon.