Big financial institutions are under attack as so-called "fintech" startups chip away at their business with low-cost alternatives. Toronto's Dream Payments has a different approach: It's aiming to help the established giants, not hurt them.
The startup, a dreamchild of veteran entrepreneur Greg Wolfond and backed by Montreal venture-capital firm Real Ventures, this week launches a mobile payment solution for retailers that is less costly than offerings from established players such as Moneris and Global Payments, and both safer and more comprehensive than disruptive alternatives such as Square or Stripe.
Far from upending established players, Dream has their stamp of approval: Telus is offering the device at about 70 stores across Canada, expanding to its full network of 800-plus stores in the new year; back-end payment processing is being handled by one of Canada's big banks. "The truth is there's a really good business helping the big guys fight this fight," said Mr. Wolfond, who is an investor and adviser to the company's board.
Dream also has the blessing of debit-card payments company Interac, which sees its technology as a way to ensure debit-card-obsessed Canadian shoppers continue to use their bank cards to buy. "Dream has figured out a way to enable [chip card]-based payments on a mobile device that actually aligns well with our strategic imperative" to keep debit cards convenient to use for retail payments, said Barry Campbell, vice-president of client management and marketing with Interac. "We think [retailers] will be excited about it."
North American retailers handle more than $4-trillion (U.S.) in payments annually, and a small but fast-growing fraction of that – $55-billion last year, up 70 per cent from 2013 – goes through mobile devices. The promise of a continued shift to mobile has drawn a range of players, from Apple to Square, to compete with the established payments giants. "The mobile point-of-sale terminal market is exploding," said Real general partner Janet Bannister. "There's a huge opportunity to better deliver these terminals to small business."
Dream's offering enables merchants to process transactions on smartphones or tablets and handle payments on separate small chip-card-reader devices made by Korean manufacturer Bluebird. Dream's device sells for $99.99 (Canadian), plus per-transaction fees of 25 cents for debit card transactions and about 2.75 per cent for credit.
Dream says its combination is unique: Upstarts such as Square only offer card-swipers, which are less secure than chip-readers, and can't handle Interac payments in Canada for that reason. Offerings from established players such as Ingenico cost merchants tens of dollars a month per device, in addition to transaction fees. Dream's software is managed through the cloud and can be adapted to be used by a range of devices and a range of payment processing firms.
"We take the complexity out of payments," said Christian Ali, Dream's vice-president of business development.
Mr. Wolfond, who once ran publicly traded 724 Solutions, conceived of the idea behind Dream about two years ago. His Kili Technology Corp. and mobile platform consulting firm DonRiver Inc. originally developed Dream as a joint venture but soon decided to spin it off as a separate firm, with DonRiver co-founder Brent Ho-Young becoming CEO.
Also joining the management team were chief financial officer Alex Walker, former CEO of electronics manufacturer SMTC Corp., and veteran mobile and financial technology executives Long Van and Anant Tailor. Dream has raised $6.5-million in seed funding to date and is now in the market to raise another $10-million in a Series A financing.
"It's a great team that understands the payment industry, and they have a very ambitious, big play," Ms. Bannister said.