When Roam Data Inc. promoted Ken Paull from his executive vice president role to be its new CEO in late September, he knew he would be steering the company through a complicated and growing mobile payments landscape with numerous sellers and buyers.
The Boston-based mobile payment service provider has grown with terminal maker Ingenico SA’s financial support and numerous agreements with independent sales organizations and major resellers such as Atlanta-based First Data Corp. and Dallas-based Chase Paymentech LLC. Roam Data specializes in mobile card readers, software and gateway services.
Paull has more than 20 years of experience in the payments industry, but his five weeks as CEO at Roam Data has put him on a fast track to witness all of the happenings and all of the hype surrounding mobile payments.
PaymentsSource: The movement to offer a mobile card reader device similar to what Roam or Square offers has expanded to larger companies and acquiring processors. Is this a potential threat or an opportunity for smaller companies providing this technology?
Paull: Early on, many companies were trying to patch a service together by using two or three vendors – one for a card reader, another for an application, and another for gateway services. We are seeing many of them circle back now because they are finding that approach is really not working because it is just too much to keep up with. Plus, it makes it hard to be on the leading edge when you are not in control of the environment.
PaymentsSource: But some have tried to manufacture hardware and develop software on their own?
Paull: Some have tried to develop their own application interface and hardware, but have found it difficult to maintain in their budgets, or find trouble keeping up with where the market is going.
PaymentsSource: From where your company is sitting, were you able to foresee that merchant acquirers may eventually come back toward a company like Roam Data to provide needed services?
Paull: We definitely could see it, and we find ourselves in an exciting place now because we build our hardware, applications and gateway services to all be white-labeled. We have the ability to unbundle pieces of it [company services], if companies still want to try to do some portion of it in-house.
PaymentsSource: What do companies that try to develop this kind of technology in-house eventually encounter that would cause them to change their minds?
Paull: It really is just a matter of time before a company hits dead-ends because there is so much involved in developing payments hardware and software. We know of one acquirer that set out on its own two years ago, and still has not launched their product.
PaymentsSource: Do you sense the payments industry has less cooperation amongst its players than in the past because the new technologies create a renewed sense of competition?
Paull: It [less cooperation] probably is happening more now, but that could change. The economy has caused downsizing at larger companies and that makes it difficult to have resources and to continue innovation. It is especially hard for acquiring banks, because they have to advance mobile banking, not just mobile payments. Those companies and banks will be turning to third parties for help.
PaymentsSource: Mobile really is changing the payments landscape because it is moving so fast. You must spend a fair amount of time educating clients about how mobile pay works?
Paull: There is a lot of innovation taking place at warp speed. It is moving so fast that there is not that much mobile commerce expertise out there. They said e-commerce development was fast, but mobile is much faster. E-commerce called for the creation of many rails to make it work, but mobile is leveraging those same rails.
PaymentsSource: A lot of companies can’t keep up?
Paull: Each company likely can’t have separate innovation teams to work on Android devices and iOS devices, or working on legacy-feature phones in international markets. Plus, there is heavy demand for technology innovators and it is difficult to retain those people who are innovating and doing cool things. A larger company may smother and pigeon-hole a person like that, and they would look to move on. It means that larger companies have a need for our type of business. We are really in the early stages of demand for such services from non-acquiring banks.
PaymentsSource: How about the payments industry as a whole? Can it possibly engage in a technology-driven ecosystem that could easily change annually?
Paull: I believe the payments industry is accustomed to more change than most other industries. There has always been some sort of growth engine, whether it was introducing prepaid cards, or debit cards or gift cards, or the creation of the Payment Card Industry security standards, and whole new types of terminal technology. Every year, it has been one new thing after another. This industry shows an amazing ability to adapt to new technology.
PaymentsSource: How are the banks situated for technology advancements, particularly the mobile payment tech that Roam Data provides?
Paull: Banks fall into two different groups – the ones that own infrastructure and the ones that outsource for services. Mostly, I think banks are just now starting to catch on to what is happening in mobile payments. The acquirers get it, but the ones who aren’t acquiring may not. But they have small businesses they serve on the issuing or commercial sides, and they have to understand that, with mobile payment technology, we are experiencing a land grab here. Most of the banks have no mobile payment offering yet, so we are in a whole new area here.
PaymentsSource: Do you believe the industry will continue to follow the lead of the major card networks, as it has in the past?
Paull: I think this technology [mobile payments] has gotten ahead of where the networks and payment schemes are. They are trying to jump in and get ahead of it. Yet, I believe the networks are glad to see additional merchant categories and the new transactions that mobile brings and they had not seen before. The networks don’t want to stifle mobile payment technology, but they do want to set guidelines and security around it.
PaymentsSource: It’s a different playing field without network policies establishing the ground rules?
Paull: Without all of those formalities and guidelines in place, it opens the doors for potential competitors. The PayPals of the world become more of a threat in a wide, open market. The schemes are getting more focused on that.
PaymentsSource: Even so, with an open market, it seems that several of the newcomers have underestimated what it takes to create scale in payments. Would you agree?
Paull: There are so many different parties involved now with so many different interests. Some, it seems, have created programs while not knowing where they are going with it. No matter who does the math, we can’t figure out how Square makes money under its current business model. The key for them will be the next step, or what can they do to get value out of their customer base?
PaymentsSource: Finally, what’s new on the horizon for Roam Data?
Paull: We have our hands full, and it’s all about focus at this point. We have an 80/20 rule that says about 20% of what we pursue ultimately turns out worthwhile, and the other 80% turns into something like a science fair. We have to make sure that what we are working on is worth it.
PaymentsSource: Do you have an example of something currently worthwhile?
Paull: We have an NFC antenna device that is in pre-production that will go in the audio jack of a non-NFC mobile phone handset. And we have a chip-and-PIN mobile card reader device that we are working on with Ingenico and plan to have prototypes at the Cartes conference in Paris next week. As for NFC, though, we believe the jury is still out on how it will work on mobile devices. We are watching it very closely.