Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Canadians may be used to paying banking fees, but Nat Cartwright wants to offer them an alternative. Ms. Cartwright is chief operating officer of Payso, a mobile payment startup she co-founded in Vancouver late last year with chief executive officer Jake Tyler and chief technology officer Guru Atlu.
Unlike online money-transfer services such as the one offered by Interac, Payso's is free. Many users of the company's smartphone app are social organizers who often collect cash, Ms. Cartwright explains.
Let's say a hockey team captain needs to gather $150 from each of her 10 players. After she sends a Payso request to their phones, team members click "pay" and enter a password. The app, which stores all money in a digital wallet, keeps track of and reminds anyone who hasn't paid.
Launched in January and available only to Canadians, Payso is one of the country's first peer-to-peer payment services, Ms. Cartwright notes.
"We don't think it's something people should pay for, and we think that we can provide a better user experience," she says of her company, which has three full-time employees besides its founders. "We'd like to get a strong user base going, and we think that by doing so, we can push the financial institutions to provide better services, and we can offer possibilities to partner with them to do that."
Payso isn't just free; it offers new users $5 to try the app. But Ms. Cartwright admits that gaining people's trust won't be easy.
"The biggest challenge is with users and explaining to them why we would offer a free service for transferring money," she says. "Because I guess if it sounds too good to be true, it usually is."
As she points out, other nations have embraced free social and mobile payment. South of the border, Venmo – recently acquired by PayPal Inc. – processed $700-million (U.S.) worth of payments in the third quarter of last year.
Payso has spoken with many Canadian banks and with social media companies that want to get into the business, Ms. Cartwright says. To be closer to banks and other payment-services providers, it recently decided to relocate to Toronto and keep some of its development team in Vancouver.
Nat Cartwright is chief operating officer of Payso, a mobile payment startup she and two other entrepreneurs founded in Vancouver late last year. (Ben Nelms for The Globe and Mail)
What is Payso's business model, and how can its service be free? When you make a payment to a friend, the app charges it against your credit card as a purchase, not a cash advance, and puts the money in a Payso digital wallet, Ms. Cartwright explains. The recipient can forward that money to another friend or cash it out to any Canadian bank account.
The company covers credit card fees and cash-out fees that its bank charges, Ms. Cartwright says: "We do that because we see value in creating a user platform with engaged users, and we're less interested in monetizing at this stage." But down the road, Payso could make money by doing things like offering loans through its app, she adds.
Payso, which uses third-party providers for its banking back end, is a secure platform, Ms. Cartwright says. Rather than store credit card information, it associates a number with the card that can be used only against a Payso charge.
"It's very difficult to communicate that with people," Ms. Cartwright says of Payso's security measures. "Even though it is a free service, it does take people time to sign up and to create an account and to learn about this new product, and it's a behaviour change."
The Challenge: How can Payso build trust for its mobile payment service?
THE EXPERTS WEIGH IN
Leanna Falkiner, chief operating officer, EvoQ Corp., payment solutions and retail banking strategy consulting firm, Toronto
How they've gone about their marketing is where I think they're having some issues in attaining trust. There has to be some kind of clear and compelling reason why consumers want to choose Payso as compared to some of the other mobile apps.
As an individual, I give greater value to something when I pay for it. I think what they tried to do was say, "It's free, so if it's free, more people are going to use it." But I don't know if that's actually enabling their success.
If I'm going to pay someone to try my app, what type of clientele am I going after? I wonder if their marketing dollars might be better invested to say, "Twenty-five cents of every transaction to charity," or something like that.
How customers build trust online is through transparency and ease. Canadians, if you think about it from a financial literacy perspective, from a payments maturity model, we're extremely savvy. You're not in a market where you have people who are going to be high risk takers.
So you have to understand the target market and then tailor your marketing to them to say, "Okay, recognizing that these are the behaviours that are prevalent within the consumer payments environment in Canada, how do I capitalize on that so I'm drawing the right type of clients to my system so once they use it, they're going to have such a positive experience and word is going to start to spread and it's going to become a bit viral?" Which is ultimately what they're looking for. I'm just not sure that they've socialized their product in the right way.
Michael Garrity, chief executive officer and president, Financeit, cloud-based financing platform, Toronto
I can think of three things right off the start. No. 1 is to provide social proof of this service being used by other people. On Google they have their Android app rating; they've got a four-and-a-half (out of five) but only 17 votes as of mid-May. It may be that a bunch of early people think it's really great, but also it could be that no one's really using it and it's just the founders who've gone in there and been the 17 people.
Secondly, they're asking people to share financial information on their app but they don't even have the name of any of their management on their website. Transparency of players in the financial services industry is crucial for building trust. I would suggest that they pull back the curtains in the Emerald Palace and tell people a little bit more about who they are so the experience of their team and who's around them would be evident to anybody that wants to look them up.
Third, start looking to put together some enterprise partnerships. For example, what if they partnered with Tim Hortons, one of the most recognized and trusted brands in Canada, so your friend could buy you a cup of coffee? You're building trust by aligning yourself with an existing brand that has done some due diligence on your company.
Larry Lubin. president and CEO, BlueRush Digital Media, specialist in financial-services digital solutions and marketing, Toronto
My first impression is the idea is great and the value proposition is there; free is always a good thing. But I don't think they're doing enough that really hits you over the head to build the trust factor.
I find their website a little bit too simple. I would prefer to see key videos that explain what Payso is very simply. Then they need to describe the alternatives and show how their thing is so much better.
As for security, the site has some information that shows it's safe, but you can't really expect people to read that.
On the Interac website there's first a video that shows what it is and what it does. It's brilliantly thought out. That style is exactly what Payso needs. Show us some use cases, and right up top.
THREE THINGS THE COMPANY COULD DO NOW
Make details about your management, board and investors easy to find.
Seek enterprise partnerships
Associating yourself with a trusted brand will help ease doubts.
Follow Interac's lead by showing Payso's convenience and security in moving pictures.
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Interviews have been edited and condensed.