P2P player wants to mimic cash's anonymity
A Cleveland startup’s play in the crowded and noisy P2P market is to nudge the transaction as close to digital version of paper money as possible — without Venmo’s social tools or Zelle’s email model.
Mezu has launched a “instant withdraw” feature that supports Mezu balance transfers to bank accounts without fees. The company is targeting young people and consumers that have bank accounts, but have not built a substantial personal cash flow.
“People who need instant withdrawal are the ones who are paying for withdrawals,” said Yuval Brisker, CEO of Mezu.
The pricing would appear to be a swipe at Venmo, though Brisker positions Mezu as a P2P service that tries to remove identifiers, making the transfers similar to a cash transaction, whereas most P2P services rely on the connection between senders. Venmo did not return a request for comment.
“For people in the 18 to 35 group, every dollar counts; if you’re paying rent and want to pool funds into a bank account, you don’t want to pay fees to do that,” Brisker said.
Mezu's core technology is designed to address perceived privacy concerns around P2P apps. Mezu uses a location-based code, or token, to open a window for a transfer within a few feet of the parties for a few moments. There’s also a drop button for tips and donations with a longer window of a few weeks. The company has attracted financial backing from Draper Triangle Ventures, the Ohio Innovation Fund and JumpStart Inc.
It does not use a social feed to explain or describe payments, nor does it use email addresses, which Brisker considers an identifier.
“We’re moving close to a full digital cash solution, with no exposure of personal information,” Brisker said. “It’s a sign of the times … people want to use cash but be able to do it in a digital setting."
While not charging fees for withdrawals, Mezu is developing other financial services and premium options that will charge fees, though Brisker didn’t elaborate beyond that. “We are giving out a lot of things for free, but there is a plan to monetize what we’re doing,” Brisker said.
That diversification strategy would be similar to other P2P apps, which tend to be loss leaders. The apps focus initially on transfers but eventually try to use the P2P rails and enrolled base to offer more extensive fee generators, such as insurance disbursements, or recurring payments for subscriptions, or B2B payments for small or micro merchants.
Apple Pay has used marketing to try to build a more sustainable use of P2P for more uses; while Zelle’s strategy has always been to use P2P as a base for other financial services. As popular and recognizable as PayPal’s Venmo is, it’s still not turning a profit and PayPal is seeking ways to embed Venmo into retail shopping and other venues that can produce possible revenue streams.
“Venmo isn’t making money for PayPal yet and nobody appears to worry about that, although if PayPal gave free a.m. withdrawals perhaps some would start to worry,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group, who said Mezu could also face AML compliance challenges.
Brisker did not provide details on KYC or AML, though the company does collect some information from users during registration that are not part of the actual transaction.
When users create a new account or update any personal information, Mezu verifies the submitted information against third-party identity verification systems, and requires customers to use the same name, birthdate and address as their government-issued ID. Mezu also has transaction limits of less than less than $3,000 combined for a seven-day rolling period and less than $500 for any single transaction to an anonymous person.