News leaked this morning that Facebook is working on a payment platform that would make paying on your phone for something as easy as creating an account on a new site via Facebook Connect.
It was heralded as a PayPal competitor by some, and others speculated that it might be bad for payments upstarts like Braintree. That was a natural assumption given Braintree’s whole MO is frictionless mobile payments like the ones it’s pioneered via clients like Fab, Uber, and HotelTonight.
TechCrunch has already explained why that’s not the case: Facebook isn’t going to be processing payments, just helping autofill billing information. In other words, it still needs all these payment vendors. But what no one has teased out yet is the interesting role that Braintree is playing in the background of all of this.
The customer in question that is piloting the program is JackThreads, an existing customer of Braintree. Ready confirms that Braintree actively worked with Facebook to make the experience great and the functionality is built on top of Braintree.
This is not an exclusive relationship; Facebook will be working with other leaders like PayPal and Stripe too. But it’s notable that Braintree is the one working on the pilot. Reached by phone this morning, Braintree CEO Bill Ready says he has bent over backwards to help Facebook build this. In fact, the AllThingsD article speculated that Fab would be another natural partner for Facebook’s payments product. Ready would welcome that too. Fab is, as luck would have it, another Braintree customer.
Plenty of people have opined on what this means for Facebook, but what’s in it for Braintree? Ready is serious when he says — as he has for more than a year now — that he wants to wake up in a world where you can buy something on your phone with one touch in a hassle free and secure way. He doesn’t care if that experience is on Uber’s app, or Fab’s mobile site, or Venmo Touch, or Google Checkout or via Facebook. As long as Braintree is powering it all. “I’ve been on a crusade for a long time to create a super frictionless mobile purchasing experience,” he says. “We have our own horse with Venmo Touch. But to have Facebook build a super frictionless payment experience on our platform is also key in my quest to make it super simple to make mobile purchases.”
As anyone who has experienced an Uber hangover knows, frictionless purchasing frequently leads to buying way more stuff, which helps Braintree and its customers. (Although we’ve argued before, if it’s too frictionless, it could create a consumer “My three year old picked up my phone and bought what?” backlash as well.) Mobile’s ability to unteather ecommerce from computers has already lead to a stunning surge in online shopping for those who’ve embraced the kind of functionality that Ready champions.
If you peel away all the layers and statements, there’s an interesting dance of competition going on here. Facebook will be working with PayPal and Braintree, but it’s also hoping to steal some of that “buy with us” real estate from both. Unlike Stripe, both PayPal and Braintree also have their own digital wallet offerings jockeying for that space as well. And broadly, all of them are trying to push against an Apple and Amazon mobile payment hegemony.
As the smaller payments provider, but one of the largest of the upstarts, Braintree is playing this game well. It clearly wants to become the default payment platform on mobile, and is willing to help nearly anyone else make mobile payments easier in the process. The strategy plays well with the Kentucky native Ready’s “aw-shucks” manner, and Braintree’s agnostic point of view as a Chicago-based Valley outsider.
The agnostic help-all-comers strategy also sheds light on why Ready kept the Venmo brand name, rather than operating the payment processing engine and the consumer-facing mobile wallet under the same name.
But even though it’s enabling other mobile wallets, the Venmo purchase is still key to Braintree’s future. As TechCrunch, AllThingsD, and others have noted, Facebook’s strategy here is to ultimately sell you better ads. By knowing what you bought, it can know how effective its ads were. To many people — particularly those who already distrust Facebook — that’s creepy as hell. Even Facebook executives have noted they have a trust problem; not exactly a strong position to grab the most sensitive data someone has. And many people feel similarly about giving Google their financial information. Enter Venmo as another ad-free alternative that doesn’t have tentacles into any other parts of your life.
Ready knows people have different comfort levels and convenience desires when it comes to paying for stuff. He’s hoping to help power the perfect Venn diagram of those opposing desires for everyone.
As a side note, it’s hard to know how big of an impact Facebook will make on the payments space, given consumers’ trust issues and existing efforts from PayPal and Braintree to make mobile payments frictionless as is. Compared to the other three horsemen of the Web — Amazon, Apple, and Google — Facebook is most definitely playing from behind. It’s a shame for Facebook that the Facebook Gifts launch didn’t go better; they’d have a lot more credit cards to enable.