Why Mobile Payments Will Take Off


On July 3rd, Felix Salmon wrote a piece on why he thinks mobile payments will never take off.  As a consumer in the current marketplace, it might be easy to agree with his thoughts.  Haven’t we been talking about mobile payments for years?  Shouldn’t I be able to pay with my phone everywhere by now?

In technology, there is always an assumption that change and disruption happens quickly.  When you’re dealing with fragmented POS hardware providers, VARS, banks, ISOs, smartphone carriers, smartphone hardware manufacturers, and more, change is a process.  ISIS and Google Wallet went all-in on NFC and later realized, like the rest of us and TechCrunch, that Nobody F***ing Cares.  LevelUp started with non-integrated scanners and local merchants in a few cities, and have now integrated with the major POS companies like Aloha and Micros.  Pay With Square is limited in scope because of its pairing with the Square Register, but they have found scale in with large partnerships with Starbucks and others.

But along with these tests come realizations: the QR code is the least common denominator and therefore best current use case for mobile payments.  Mobile payments without built-in offers, loyalty, incentives, or rewards will struggle to gain adoption because the status quo, cash and credit cards, is not an inherently broken experience.

Salmon uses the following arguments to shovel dirt over what he perceives to be a mobile payments casket:

1.  Paying with your phone is harder than plastic.

To argue this point, he uses sparse anecdotal evidence of failing to get Square Wallet to work a couple times.  I find it more tedious and time-consuming to whip out your loyalty card, then your credit card, and then wait for the receipt which you put in your pocket.  Most mobile payments offerings combine payment, loyalty, and receipt into one action, saving the customer time.  Through research, we have found that closing a transaction with a credit card takes 11 seconds, while a QR code-based mobile payment takes on average 7 seconds.  QR can achieve speed and simplicity.

2. I get self-conscious or embarrassed to pay with the phone

While it is true that one mobile payment experience with an awkward, untrained cashier can create apprehension in subsequent visits, I challenge anyone to watch a line at sweetgreen or Starbucks for 20 minutes.  At Starbucks, 10% of their customers pay with the phone.  At sweetgreen, they have achieved twice as many people paying with their app.  Those paying with their phones are almost always excited to do so, as if paying with the phone is a holistic, positive experience.   I’ve talked to Starbucks app users who now go out of their way to visit Starbucks because of the app’s ease of use.  Still, the uneven experience needs to be tackled.  Deeper POS integration and ubiquity will do a long way towards solving any stress people may have flashing their phone at a register.

3. There is no incentive to switch – a few cents off a macchiato isn’t enough

If a caramel macchiato costs $4.00 at Starbucks, a 10% loyalty construct could save Felix $0.40 per day if he becomes loyal to that coffee shop.  If he gets a macchiato every morning, he would save around $100 each year from the loyalty program.

Surface-level discounts are just the tip of the iceberg when it comes to savings over time.  Merchants can now target customers for discount, so paying with your phone just once at your local coffee shop or regional fast casual chain can put you in line for a re-engagement offer or birthday gift down the road.

4.  In less developed Africa, paying with M-Pesa and Zaad is becoming popular because they are more convenient and more reliable than paper currency

I respect this argument.  In less developed countries where paper currency fluctuates and building a credit card-based infrastructure is too expensive, mobile payments will certainly drive faster adoption than in developed countries with more stable currencies.  Money transfer is difficult and even broken in many countries, in stark contrast to the United States.

Good enough isn’t good enough.

Five years ago, purchasing books at your local Borders was seen as “good enough.”  Ten years ago, having a Nokia brick phone was viewed by many as being “good enough.”  If the status quo in payments is being deemed “good enough” by the public, it’s a clear indicator of opportunity.  Innovating payments is naturally difficult and slower moving, but as success is found scale will occur.  For a taste of what’s to come, check out this infographic on the near future of mobile payments.

Why Mobile Payments Will Take Off

On Clinkle

Opening Graphic

The average preferred stock seed funding round in the US is $1,360,000.  Andreessen Horowitz, Accel Partners, Intel, Intuit, Peter Thiel, Diane Greene, Jim Breyer, Marc Benioff, Owen Van Natta, Mendel Rosenblum, Ross Perot Jr., and more bestowed $25MM on Clinkle, a super-hyped Stanford-bred startup with a college beta test under its belt.  Clinkle just raised the largest seed round in Silicon Valley history.  Some will chuckle at the raise and make immediate comparisons to Color, but the one thing this investor group smartly realizes is that the mobile payments war is not going to be won by a small, scantly-funded startup making the likes of PayPal, Square, Apple, and Google sweat.  The mobile payments war is going to be won by a company with a war chest.  $25MM qualifies.

Just as VCs picked their horses in the LBS space (Foursquare, Gowalla, SCVNGR, Loopt, Whhrl, Where) and the public transportation space (Uber, Hailo, Lyft, SideCar), mobile payments has finally come into focus.  The current players, in one way or another, are:

LevelUp – Google Ventures, T-Ventures, Highland, Balderton, Transmedia, Deutsche Telecom
Lemon Wallet – DFJ, Maveron, Lightspeed, Social+Capital Partnership
Square – Citi Ventures, Crunchfund, Starbucks, Branson, Kleiner Perkins, Visa, Sequoia, Rizvi Traverse, Khosla, First Round, Angels
PayPal – Self-Funded
Google – Self-Funded
ISIS – AT&T, Verizon, T-Mobile

Clinkle – Accel, A16Z, Intel, Intuit, Angels
MCX – Merchant-funded
Apple, Facebook, Amazon (potential entrants) – Self-Funded

The space is still in its early days, and as Google Wallet, PayPal, ISIS, and MCX have proven, there is no slam dunk win.  When news of Clinkle’s funding surfaced, I decided to try to wrap my head around what features might be included in Clinkle’s app.

Rumored Features in the App
1. Send money to any person, on any phone, at no cost (Venmo functionality)
2. View store menus on your phone and skip the line by pre-ordering (OLO functionality)
3.  Pay with your phone using a credit card funding source at stores, gain loyalty points, and unlock deals at your favorite places (LevelUp functionality)
4. “Clinkle Cash,” a separate bank inside the app (PayPal functionality)


Do One Thing, and Do It Well
Clinkle comes to the mobile payments table with amazing advisers, a growing team of developers bred in Stanford’s computer labs, and a sizable chunk of change in the bank.  In the Jim Collins book Good to Great, he encourages businesses to ‘do one thing, and do it well.’  In his well-documented Hedgehog Concept, the fox keeps launching new ideas to kill the hedgehog, but the hedgehog evades him by doing one effective move…rolling into a thorny ball.  It seems like Clinkle might be attempting to be everything to everyone in the mobile payments space, and therein could spell its downfall or rapid adoption.  Are smartphone users looking for simple, easy payment, or are they looking to use one app for everything currency-related?  Will Clinkle be able to execute on all these ideas at once?  Only time will tell.


Growing Payments Networks
The difference between growing a social network on a college campus and growing a payments product on-campus are the layers of infrastructure inherent in payment systems, software, and hardware.  Mobile payments players are swimming in a sea of entrenched payment processors, POS companies, issuers, hardware manufacturers, and more.  Unless you find channel partners, merchants acquisition is 1-by-1.  There are hundreds of POS systems sitting on local merchant counters, and integration is both costly and time-consuming.  The rumored ‘Aerolink’ concept and their partnership with Verifone may be step 1.

At this point, there are more questions than answers with Clinkle, and we await their official launch to learn more.  The recent funding shines a bright light on startups in the space, but also pressure to perform quickly.

On Clinkle

Conference Networking Strategies for Sales Teams

As I sat on the plane on my way back to Boston from the Restaurant Leadership Conference in Scottsdale, AZ, the things I did right and wrong washed over my brain.  Why did I spend too much time sitting in the second general session?  Should I have spent more time in the dining area?  Why didn’t I set up more meetings before I left for the conference?

Sales teams come to conferences with one goal in mind: pitch as many people as you can.  The restaurant industry, like many others, is a tight-knit group that needs to see a company’s representatives face-to-face for multiple years to have confidence the company will be around and innovating for many more.  The first year, you attend, shake hands, and collect business cards.  The second year you get a booth, reconnect with the industry, and close a couple deals.  The third year you lead a panel and close the early majority.  The best way to ensure you get to speak with as many potential clients as possible is to build a cohesive strategy weeks before landing at the conference site.


1. Get an Attendee List – If you’re a sponsor of the conference or getting a booth, ask for a list of attendees.  Once you get that list, Google their email addresses using the most common email structures: John@thelevelup.com, JValentine@thelevelup.com, John.Valentine@thelevelup.com, John@thelevelup.com, Valentine@thelevelup.com.  One of those email structures will hit the Google jackpot about 80% of the time.  Shoot these attendees an email letting them know what your booth number is.  Tell them to stop by.  Ask for their cell number so you can text them if you miss the prospect’s booth visit.  Let everyone know you simply want to shake their hand and meet them in person.  There is no better sales driver than face-to-face meetings.

During the Conference

1.  Send Prospects an Email Mid-Conference – Half the conference has passed and you still haven’t connected with a bunch of your prospects?  Send them a 2-line email letting them know you want to shake their hand and say hi.  You’ll be surprised by the quick, positive responses you get back.  Even the biggest industry stars have downtime, and some conferences are a bore.  Email them right before a scheduled break.

2.  Do NOT Sit Through Educational Sessions – The biggest mistake any salesperson can make at a conference is to sit through entire sessions.  Let’s be honest, over 90% of them are not even tangentially related to your business.  The only sessions you should completely attend are those of your competition.  Competitive intel is always important to know for prospect objections.  Walk into the session 10 minutes before it is scheduled to start, sit down next to a potential prospect, and have a short conversation to learn more about them and their business.  When the session is about to begin, politely excuse yourself to the bathroom and head out.

3.  Eat Twice During Every Meal Period – Dining areas are the #1 place to start a good conversation.  Why waste a meal period with one just one conversation?  Fill up your plate with half the food you would normally eat, sit down and chat up your table-mates, exchange business cards, excuse yourself, grab a clean plate, fill it up half way again, sit down at another table, and commence conversation number two.  If you’re eating dinner, you can squeeze in a third conversation with desert.

4.  Always Have a Pen On-Hand – You MUST write notes on every business card you receive.  Suggested notes are as follows: location you met the prospect, date, interesting tidbits, names of other decision-makers in the company, where her daughter is attending college, and anything that could bring a positive memory to mind.  Trust me, you’ll quickly forget who most of the people in your card stack are by the end of the conference.  Don’t get caught without material for a follow-up email.

5.  Bring More Business Cards Than you Think You Need – Business cards are like money in the conference industry.  Without a thick stack of your own, you won’t get anything back.  Oh, and have a business card that stands out.  Square cards, metal cards, and cards with creative fonts tend to be memorable.

6.  Hang out at Meeting Places During Downtime – If I’m not supposed to be anywhere for a while, I’ll hang out in the lobby or at the lobby bar (if the conference takes place in a hotel).  These locations and other landmarks are where people gather for meetings.  One person will inevitably arrive before the other, and they don’t like to appear lonely so they’ll make small talk with whomever is around.  You.  Take advantage.

7.  Remember, Your Product Comes Second – You will get absolutely nowhere if you pitch the product before introducing yourself and sharing something interesting about yourself.  Business owners are in [insert exotic/awesome location here] to kick back, learn a couple things, and connect with their industry friends.  You want to become a friend rather than another sales guy at the conference.   I sometimes spend 10 minutes befriending owners and let them ask what company I work for without prompting.  That way, you know they’re truly interested.


1.  2-Day Rule – Don’t send emails or make calls to conference prospects until a couple days have passed.  Let the amateurs bombard the prospects with emails as they hit ‘delete’ without ever opening them.  A well-crafted email a few days after the conference with an eye-catching header will elicit a read.  That’s all you can ask for.

Conference Networking Strategies for Sales Teams

Top 5 Restaurant Mobile Payment Apps

In 2012, QSR, Fast Casual, and full serve restaurants had no compelling reasons to build an iPhone or Android app.  The key design elements featured in most of the current food service apps on the App Store and Android Market are: (1) location listings, (2) a non-integrated loyalty program, (3) store contact information, (4) directions, and (5) basic social media links.  Consumers can find these elements with relative ease online, so why download an app for that functionality?  The simple answer: they won’t.

To Build or Not To Build?
Building a basic, run-of-the-mill mobile app is worse than not building one at all.  Every restaurant strives to boost their image on online review sites, seeking the maximum number of stars possible.  The Apple App Store is just as unforgiving.  Each app receives a rating from one to five stars depending on the reviews given by the app’s users.  A 1-star or 2-star average not only discourages your customers from downloading the app, it tarnishes your brand’s image.  All restaurant brands need to start thinking about building an app experience they can be proud of, an experience that delights their customers.

Why is 2013 different?
2013 is ushering in a new wave of restaurant mobile applications pairing the basic information provided in first generation apps with innovative in-app ordering and mobile payment features.  A simple smartphone payment mechanism that integrates directly with a straightforward loyalty program is the new gold standard in mobile apps.  Customers interact with this new generation of apps every single time they enter the store.  Restaurants have an exciting new opportunity to build seamless interactions between the customer, their smartphone, and their physical assets.  The “second screen experience” lauded for television is coming to the cafe, cupcake shop, and late night burger joint down the block.

Mindshare is Moving Mobile
As Americans spend more and more time staring at the 3-inch screens they take out of their pocket, a new advertising medium is being created.  Those little app icons on a smartphone’s home screen are like billboards on I-95; those logos are all smartphone users see.  The first page of search results on Google sees 94% of the impressions.  Although Apple won’t release equivalent stats for the iPhone home screen, I can imagine the results are similar.  The more you use an app, the closer to the home screen is gets.  Restaurant brands have a short time window to stake a claim on their customers’ home screens.  These 5 innovative restaurant brands are being rewarded for building and launching their own mobile payment apps:

1.  sweetgreen (60 ratings, 5 out of 5 stars)

sweetgreen app store review sweetgreen pay screen sweetgreen splash screen

sweetgreen, the DC-based salad concept and healthy living thought leader, has big plans for national expansion.  After raising $7MM in March 2013, Founders Nicolas Jammet, Nathaniel Ru, and Jonathan Neman have plans to take their 16-location chain nationwide.  sweetgreen engaged the team at LevelUp to build a mobile payment and loyalty app to serve as a foundation element connecting payment with their POS, loyalty program, and customer analytics.  In the two months the app has been live, paying with the sweetgreen app has become part of their culture.  Customer response has been overwhelmingly positive, as highlighted by the 5-star rating and the tweets below:

Tweet1 tweet2 tweet3

Highlighted Features:
1. QR code mobile payment (funds transferred through credit/debit card)
2.  Automatically accruing, custom loyalty program (Spend $100, earn $10)
3.  GPS-enabled store locator
4. Animated rewards tab
5. Built-in charitable giving element
6. Status progression
7. QR code scanning feature to add promotional credit
8. Interactive menu

To get in touch with the team at LevelUp and learn about how they can build your restaurant brand a customized app, fill out this form.

2.  Starbucks (72,802 ratings, 3.5 out of 5 stars)

Starbucks App Store ReviewsStarbucks Empty Rewards Screen  Starbucks Card

The Seattle coffee giant launched their mobile payment apps in January 2011.  Conceptualized as a mobile version of their Starbucks card, the apps currently see 3 million transactions a week and have over 10 million active users.  By the end of 2013, they expect 10% of total transaction volume to run on mobile.  Starbucks has more customers paying with their smartphones than any other brand in the country.  Starbucks built in Apple Passbook integration in late 2012 to allow iPhone users even easier access to Starbucks in-store.

Highlighted Features:
1. Bar code mobile payment (funds transferred through loading and re-loading a gift card)
2. Information on all coffee roasts
3.  Store locator
4. Rewards tab (with free beverage on your birthday after one purchase)
5. Ability to gift credit to others
6. Interactive Menu

3.  Dunkin Donuts (464 ratings, 3.5 out of 5 stars)

IMG_3024 (2)Dunkin ScreenDunkin Offers

Dunkin Donuts followed Starbucks by releasing their own mobile payment application in August 2012.  The app features a similar gift card funding feature to enable payment along with Apple Passbook integration and the ability to gift drinks to friends.  Touted as “the app that keeps you running,” the Dunkin app has seen many early adopters start using it for their coffee everyday.

Highlighted Features:
1. Bar code mobile payment (funds transferred through loading and re-loading a gift card)
2. Offer listings and redemption
3.  Store locator
4. Ability to gift credit to others
5. Interactive Menu and nutritional information

4.  Pinkberry (128 ratings, 2.5 out of 5 stars)

Pinkberry App RatingsPinkberry App Account Balance  Pinkberry Store Locator

Pinkberry released their Sweet Rewards App in October 2012, allowing customers to get their frozen treats faster and receive accumulating rewards int he process.  They feature a simple “purchase 10, earn 1” loyalty construct that works well for them considering their limited menu and similar purchase prices.  To encourage their customers to download the app, Pinkberry is giving away a free froyo with toppings when customers use the app to pay for the first time.

Highlighted Features:
1. Bar code mobile payment (funds transferred through loading and re-loading a gift card)
2.  Automatically accruing, custom loyalty program (Buy 10, get 1 free)
3.  GPS-enabled store locator
4. Sliding flavor-finder
5. eGifting option to send friends gift cards
6. Facebook, Twitter, and Foursquare sharing feature

5.  Freshii (Not Yet Rated)

 Freshii App Ratings Freshii Main Screen Freshii Pay

Freshii released their mobile payment app to the iTunes App Store on August 3, 2012 and have been making various iterations since.  They haven’t yet done a major marketing push with the app, and the app hasn’t received any ratings.  The app is full-featured, and has a wide array of special features like: veggie collected, rankings, a locator for charging stations, QR code scanning, and more.  Their challenge now is to roll out a marketing program to get their customers excited and motivated to use the app.

Highlighted Features:
1. QR code mobile payment (funds transferred through loading and re-loading an account)
2. Features with specials of the week and workout tips
3.  Store locator
4. Rewards tab (with free beverage on your birthday after one purchase)
5. QR code scanner /charge stations listing / rankings for “veggies collected”

Top 5 Restaurant Mobile Payment Apps

#RaiseTheRim, Or $272MM of VC Money on a Basketball Court

Last Wednesday was an amazing day in the Boston startup community. Around 150 people in the startup industry came together at Basketball City to support TUGG and work up a little sweat.  Thank you to Harvey Simmons and the rest of the EverTrue crew for putting on one of the best events of the year!  We were even treated to a defensive clinic put on by MA’s own Scott Brown.

As I looked around and took in the atmosphere, I came to the realization that the entire event, and to a bigger extent everyone’s livelihood, is funded by venture capital.   Many of the startups are funded by VC, the service providers are paid by startups, and investors and incubators dish out the cash and debt.

The 28 startups represented at #RaiseTheRim have raised about $272MM in aggregate.  Venture capital not only gives startups who need capital to scale a better chance to succeed, it also allows the brightest young minds to work on the most challenging and  innovative ideas.  Incredible.

Service Providers

HB Agency, Invest Northern Ireland, StartUp Institute, Cambridge Innovation Center, Willis, GCAi, Bridge Bank, Smashfly Technologies, and TUGG.


Healthbox and Atlas Ventures.


Jana – 9.18MM
DataXu – $45.8MM
Simple Tuition – $17.9MM
CoachUp – $2.2MM
Dailybreak – $8.51MM
Yesware – $5MM
InsightSquared – $5.5MM
Rakuten Loyalty
Abine – $5MM
Promoboxx – $2.25MM
VSnap – $750K
PerkStreet Financial – $15MM
RunKeeper – $11.5MM
Social Betworks
The Motorsport Lab
StarStreet – $600K
ConnectEDU – $24.7MM
Silicon Valley Bank
Rue La La – $22MM
LevelUp – $40.8MM
EverTrue – $6.5MM
Uber – $49.5MM

#RaiseTheRim, Or $272MM of VC Money on a Basketball Court

I Just Paid Facebook $7

The day before Facebook’s IPO was Thursday, May 17, 2012.  It was also the day when at least five of my friends called to ask for my advice on the buzzworthy offering the next morning.  Should I buy?  How many shares?  I’m on Facebook all day, so why wouldn’t Facebook be a good investment?  $40 seems like a cheap price, right?  I knew better.

Irrational Exuberance

A casual trader on E-Trade since I became enamoured by CNBC while in high school, I’ve been told by some of the best traders to buy when a stock is hated most by the market and sell when a stock is celebrated.  I used this methodology to short RIMM from $60 per share all the way down to $10.  I was convinced of irrational exuberance in the case of Facebook.  Friends who never placed a trade in their lives were dropping $5,000-$10,000 on a stock they didn’t truly understand.  An investment with an $80 billion market cap and trailing 12-month revenue of $4 billion didn’t seem like a solid long-term investment.  I told myself I’d dip my feet into the $fb waters if they could find compelling ways to get the average user to enter a credit card on their website and actually pay them money.  Facebook knows it won’t be able to keep their nose above $40 billion on boxy desktop website ads alone.

The Engagement

In early August, I proposed to my girlfriend of two years.  We created a life event on Facebook to share the good news with all of our friends.  The post caught on like wildfire.  When the dust settled, the picture of the ring garnered 180 likes and 62 comments.  The life event drove 36 likes and 11 comments.  Facebook’s EdgeRank algorithm saw the initial popularity of the post and blasted it to the top of our friends’ new feeds, allowing its popularity and exposure to compound.  I sat back in my chair, remarking how posting a life event on Facebook is the equivalent to posting an announcement in the local newspaper ten years ago.  Back then, I definitely would have paid $10 for an ad in the local paper.  Today I wouldn’t think of paying anything to my paper, as its viewship is waning and doesn’t include my demographic.  But would I pay $10 for the ability to make a special post on Facebook that I can customize and highlight?  Possibly.  A popular Facebook post does plenty to get the desired effect.  To pay Facebook anything, I would need something more.  More placement.  More posting options.  The ability to target certain friends.

Promoted Personal Posts

On October 3rd, Facebook launched Promoted Personal Posts.  Boom!  Called it!  For $7, anyone could now promote a post so that more of their friends see it.  I anticipated new posting options and features with the promoted option, but when I clicked the “promote” link on one of my posts, I wasn’t able to alter or enhance it in any way.  $7 would simply give me more exposure.  

Anxious to see how promoting a post could increase viewership, I entered my credit card information on the website and hit the gas on the following post:


Let’s be honest, this is not one of my best posts, but I wanted to see what Facebook could do to drive views.  I received 8 likes and two comments by the end of the week, one of which simply brought attention to the sponsored nature of the post.  I had a few of my friends track the promoted post’s location in their news feed, and they reported that it returned to the top of their feed periodically during the entire week.  Once the campaign ended, Facebook sent me an email breaking down the post’s viewership:


My $7 bumped views by 2.7x.  Not too bad for less than a 10-spot, but I’m not sure when I’d personally use the promote function.  I don’t care who comes across my random posts and links.  I don’t care who stalks my photos and albums.  I was certainly excited to share the news of my engagement to all of my Facebook friends, but EdgeRank did a solid job of that already.  I suppose I might use the promoted post feature if I had a new pet-sitting business and wanted to make sure all my Facebook friends saw the post.  Having a yard sale?  Sending out a party invitation?  Yea, I’d might promote those too if I was desperate.

Mashable ran an article asking its users if they would promote a Facebook post announcing a new job or sharing pictures of family and friends, and only 8% responded they would.  8% isn’t insignificant, but Facebook will have to do better than news feed placement amongst friends to make $7 worthwhile.

So What Now?

Facebook’s value is partially contingent upon how much money it can wring from its one billion+ users.  Promoted Personal Posts is one step in that direction.  Physical gift-giving is another.  While I don’t think Promoted Posts is a silver bullet, the feature is another avenue for Facebook to drive revenue from users.

I enjoy the news feed because it shows me posts from friends I follow or care about.  EdgeRank works.  Well.  Almost too well.  I fear sponsored spam will start popping up on my news feed regularly, a result I tried to avoid by “liking” as few pages as possible.

I expect Facebook to post weak earnings on the 23rd, mostly due to users migrating to mobile in droves.  Mobile revenue will increase steadily over time, but the key to their success will be how they use that small screen to drive dollars.  Good luck young buck.

I Just Paid Facebook $7