Mobile Wallet

Since acquiring Venmo last Summer, Braintree has been relentless in its mission to fix the mobile payment experience for all parties involved. The company was already enabling some of the most frictionless checkout experiences within individual apps and ecommerce portals like Uber, AirBnb, Fab.com, and others. With the acquisition of the popular mobile wallet platform, Chicago-based Braintree began integrating these payment experiences, offering consumers the option of seamlessly one-touch payments across a variety of merchants using Venmo Touch as a universal credential. Eventually, it opened the floodgates to all US merchants, even those not on its payments platform.

Today, Braintree is completing the final piece of the puzzle by inviting card issuers and mobile banking providers to integrate with Venmo Touch. It’s first partner in the space is Simple, an alternative mobile banking platform which has been wildly popular despite still being in limited beta.

“We had a number of banks reach out to us and ask to make their card the default card with Venmo Touch,” Braintree CEO Bill Ready says. “We were very thoughtful about who we wanted to work with, and asked ourselves who understands banking in mobile context. Simple was seemed like the obvious choice. When we told the rest of our team about the partnership, ten or so engineers came up to me asking if I could get them an invite.”

The risk card issuers face is that in-app mobile commerce encourages a set it and forget it mentality. This means that once consumers input a default credit card into an app or ecommerce site, they’re highly unlikely to go through the frustrating process again to switch to a different card. This means that card issuers have only one shot to get that coveted placement. Venmo increases these stakes, but through today’s newly announced integration options, it also offers card issuers the chance to become their clients’ default card across a vast payment ecosystem.

Collectively, Braintree reaches more than 40 million consumers in 40 countries across its network and processes more than $10 billion in payments annually – in 130 currencies – $2 billion of which come through mobile devices. This makes it nearly 50 percent the size of PayPal, in terms of users, a gap that it’s closing quickly. In addition to Uber, AirBnB, and Fab, it also powers the checkout experiences of Hotel Tonight, LivingSocial, OpenTable, TaskRabbit, and has a partnership with mobile commerce vendor Branding Brand, which works with many traditional retailers like Costco, Crate and Barrel, and Calvin Klein.

Braintree is far from the first company to attempt the creation of a universal payment network on the Web and across mobile. PayPal has been at it for more than a decade, although the industry giant has long since lost the trust of both consumers and the banking sector by way of onerous fees and a cumbersome user experience.

“Banks hate paypal. They really view them as the enemy,” Ready says. “The reason being that they drive people away from banks, and away from using their credit or debit cards – where banks make their profit – instead encouraging them to use their paypal balance. We’re not trying to cut anyone out of the space. We’re just trying to make it easier for merchants and consumers to connect.”

Even mobile wallet offerings directly from Visa and Mastercard obfuscate the relationships between consumers and banks, making them similarly unpopular within the industry. Braintree is aiming to be Switzerland, and at least to date, has maintained the credibility to do so.

Others have suggested that Apple, Google, and possibly even Amazon, by virtue of their mobile platform dominance, are likely candidates to enter the payment network race, either through building one organically or acquiring their way in. Braintree’s CEO downplays the likelihood of such moves, noting that merchants would likely resist payments offerings from these giants given their history of instituting heavy tolls on all commerce within their mobile platforms. Ready further points out that his company has already partnered with Google on the wind down of its Google Checkouts product.

Braintree’s startup competitors each face their own limitations. For Square, the company’s consumer network pales in scale compared to that of its merchants, bringing up the classic chicken and egg problem. For Stripe, the primary issue is one of scale, as industry sources suggest that it processes roughly one tenth the volume of payments as does Braintree. Neither appear adequately positioned to challenge Braintree’s comprehensive offering in the near term.

In other words, the mobile payments and virtual wallet market is still ripe for the taking and Braintree is looking like a strong frontrunner.

Global business to consumer (B2C) ecommerce grew 21 percent in 2012, crossing $1 trillion for the first time in history – with nearly $365 billion of this amount coming from the US. But despite the ubiquity of mobile devices, a paltry 3 percent ($12 billion) of this online spending in the US is attributable to mobile payments, according to Forrester research. This pales in comparison to the approximately 30 percent of ecommerce traffic coming from our always accessible pocket computers. Friction-reducing solutions like Braintree’s Venmo Touch, or possible stealthy alternative payment platform Clinkle, appear to be the key to closing this gap.

Simple, for its part, bringing its own disruption to the mobile ecosystem with a modern alternative to traditional banks. The company has onboarded 35,000 users, as of one month ago, a number that has grown by more than 100 percent year-to-date, according to co-founder and CFO Shamir Karkal. There are approximately 215,000 more would be users still on a waiting list, Karkal says, all of which should get access to the platform in the next month. But it will likely be until year’s end before Simple exits beta and shuns the wait list for good.

Braintree’s partnership has the potential to drive massive awareness to Simple, and thus could further exacerbate its wait list problem, if you choose to call it that. There is, after all an undeniable velvet rope effect that occurs when users are forced to wait for a popular service. That said, the company runs the risk of declining in appeal or an underwhelming experience once a user does finally get onto the platform, although neither appears to be the case thus far.

Together, Braintree, with its Venmo Touch platform, and Simple give a glimpse of the mobile commerce future that awaits us all – one in which consumers no longer need to carry physical credit cards or cash and have to do little more than think about completion a transaction to make it a reality. As Sarah Lacy wrote previously, “Husbands will soon be freezing wives’ phones instead of their credit cards.”

Braintree has raised $69 million across two venture rounds from backers including New Enterprise Associates, Accel Partners, RRE Ventures, and Greycroft Partners. The company hasn’t won the mobile payments market yet, but its well ahead of its competition and its setting clear standards for what consumers, merchants, and now banks will demand of any competitors that follow suit. Mobile payments is all about simplicity, ubiquity, and trust. That’s a hard trifecta to pull off, but Braintree continues to prove that it’s possible.

    1. Accel Partners
      Past Investor
    2. Mike Dudas
      Employee
    3. chuck templeton
      Past Investor