You’ve heard it before: Mobile is the future of computing. At the same time, trends indicate that commerce is rapidly shifting from the world of brick-and-mortar to online retailers. Combine these two trends and mobile payments begins to look like a more and more important battleground for the companies that wish to remain relevant in the next phase of the digital economy.
We have seen a variety of solutions from the likes of Venmo (owned by Braintree), Stripe, Google, PayPal, ISIS, LevelUp and others. Today, the category got a bit more crowded with the addition of Lemon, as the company is introducing a new platform agnostic mobile payment tool called Lemon Network. The tool will leverage the existing Lemon Wallet platform which has more than 3 million active users who have uploaded an average of two payment cards, plus three additional ID or “other” cards.
The company also announced the addition of former Braintree founding employee and VP of Sales Jenna Wyer as its Chief Sales Officer – Wyer has been with Lemon for approximately one month.
The key to success in mobile payments is eliminating friction. The less information a consumer needs to manually enter at the time of checkout – whether that be a credit card number, billing address, or even username and password as login credentials – the more likely they are to complete the transaction. Venmo Touch and Braintree, which power Uber, AirBnb, Fab.com, LivingSocial, Hotel Tonight, Trunk Club, Task Rabbit, and other popular apps offers perhaps the definitive experience in the category. Once users signup and enter their payment credentials in one app within the network, they never need to do so again with any participating merchant.
But Lemon believes that the company went too far in eliminating user control. With Venmo, a user must use the same card and same billing address across the entire network. And when a card expires or is lost the user must remember in which app it originally uploaded that inform and make the necessary change there. Lemon aims to solve this issue by combining the power of its existing mobile walled with the ease of a mobile payment network. [See update below.]
At the time of checkout within a Lemon Network-powered app, users can simply click on the image or description of any payment card stored in their Lemon Wallet to designate it as their payment method of choice. It’s one more step beyond “set it and forget it,” but with this step comes a wealth of flexibility not available elsewhere in a mobile friendly manner. Paypal’s solution is arguably the closest, but it is considered clunky and unappealing by developers and consumers alike. Most importantly, Lemon’s user experience design still eliminates the need to manually enter payment details using a small mobile keyboard. Individual merchants can choose to require additional information, such as a credit card CVV code, Lemon pin number, or select details of the user’s billing address, but Wyer predicts that the majority will not.
There is no fee for either consumers or merchants to use Lemon Network, nor will there ever be, according to the company. Rather, Lemon will continue to focus its monetization efforts around the paid Pro version of its app which is priced at $4.99 per month (or $39.99 per year). Lemon Network, then, is simply an ancillary benefit to keep both freemium and Pro users more engaged in the platform.
For merchants, a key distinction between Lemon and every other mobile payment network in the market is that Lemon doesn’t offer payment processing. It is simply a repository of user payment credentials that can be seamlessly transferred to whichever payment platform the merchant already uses. When looking to onboard new merchants, this dramatically reduces the barriers to adoption and even makes it possible to integrate with multiple payment networks – Uber, for example, currently integrates both Braintree and Google Wallet.
Another big differentiator is that Lemon is fully platform agnostic, including hardware type, mobile OS, mobile carrier, and payment processor. The company is only limited by its current US focus, but it is looking to expand internationally later this year, with an initial focus on Latin America.
Lemon Network can be integrated with minimal effort beyond simply “dropping in an SDK,” according to Wyer. Nonetheless, Lemon faces a demanding and intensive sales and education process before building out a substantive merchant network.
Wyer sounds up for the challenge, however, saying:
“I was really lucky at Braintree to get to work with Uber and AirBnB and countless other startups in their earliest stages, educating them on the do’s and don’ts of payments. I’m thrilled to get the opportunity to continue doing just this at Lemon. When we originally drew up the concept of the Network, it was to help solve the pains of mobile payments for the Lemon consumer. But as we talked through the problems that consumers have, we obviously noticed that merchants have very real problems that we think we can solve as well.”
The biggest obstacle, at least initially, according to Wyer, in building Lemon Network is individual merchants’ sensitivities to local demographics. Interested merchants will often ask the equivalent of, “How many people do you have in this area?” If the answer is underwhelming, then integration can be shelved until a later date.
“The answer to the chicken and egg problem, for us, is about branding,” Wyer says. “Consumers know our brand and we’re adding 1,000 new cards per hour. We think that merchants will quickly follow suit.”
Lemon users have the choice of opting into the Lemon Network, with those who choose not to simply maintaining access to the current card and receipt storage solution. While there are obvious benefits to participating, there are a few things that consumers should be aware of before opting in to this or any other payment network.
First, Lemon passes a user’s payment information to a merchant at the time of transaction over SSL encryption. How the receiving company then handles that data, including whether its stored long-term or deleted immediately is the decision of the merchant. Thus, the security of this information once transferred is not Lemon’s responsibility. The company simply requires that its merchant partners be PCI compliant. According to Wyer, mileage varies among companies. Newer, more tech savvy firms like Uber tending to pass this data directly to a payment processor without storing it on their internal servers, she says, while legacy companies can at times be much less conscientious. Also, in the initial version of the product there is no option for a user to revoke merchant access to their payment credentials, although Wyer promises this is near the top of the product development roadmap and will be coming soon.
We can expect a number of additional updates in the next few months, the new CSO says. The company is currently finalizing plans to launch a referral incentive program which will reward current users for sharing Lemon with new users that sign up. The structure of these rewards has yet to be determined, but the company is currently negotiating a gift card partnership and also exploring the possibility of offering users coupons to preferred merchants. Finally, Wyer let slip that the company is working on a bitcoin integration, but would not divulge more details than that.
Lemon currently has approximately 25 employees, most of which work out of its Palo Alto headquarters. The company raised $8 million in a Series A round led by Starbucks CEO Howard Schultz’s Maveron, along with participation from Draper Fisher Jurvetson, The Social+Capital Partnership, Lightspeed Venture Partners, and CampVentures.
Payments is nothing if not a competitive space. Lemon isn’t competing directly for processing business giants like Braintree, Paypal, and others, but it is certainly encroaching on a large portion of their broader value proposition. In the future, it’s likely that he who controls the most consumer payment data will be considered king. Today, looking beyond the credit card companies, that’s PayPal, Amazon, Apple, and Google, with startups like Braintree, Stripe, and Square giving chase.
Ultimately, it will be the company that can offer the most universal, dependency free solution and that can engender the most user trust will most likely win this crown. While still an underdog, Lemon just made a compelling case for why it stands up well against its competitors under such examination.
Update: After this story was published, PandoDaily received the following clarifications from Braintree about:
- Users can add multiple cards to Venmo Touch and use them across the entire network.
- When a card expires, a user can enter the entire updated card info in any app in the network, and then add the updated info to any other app in the network with a single touch.
[Image credit: Lemon]
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