Exciting new payment tool turns your phone into a credit card machine
Just a few days ago, I was complaining to a friend that South Africans seem to be behind the curve on tech innovation, that we don't seem to be developing exciting technologies like the Americans do. Well, here to put me in my place is entrepreneur Stafford Masie, with his fantastic new Thumbzup pebble payment device. Masie points out, quite rightly, that BEE quotas mean that many talented and skilled white South Africans are not going into corporate jobs, but instead are looking elsewhere for opportunity. This is creating a pool of top talent that can be tapped by smart entrepreneurs to develop exciting products like this.
Masie's newest venture is really a great idea. A payment system that anyone can use to accept credit card payments at a minimal cost is a really fantastic idea, and if the implementation is right (as it no doubt is in Masie's hands), this is going to be big. – FD
ALEC HOGG: There've been some interesting developments in the technology field and most of them, we see from abroad. However, now in South Africa we have an innovation that hopefully, will take on the world. The former General Manager of Google South Africa, an entrepreneur, and the man behind Thumbzup is with us in the studio – Stafford Masie – with a product, Stafford, which I was shown the other day. We've had people showing us beers before, here in the studio. We're now going to get something called a Thumbzup Pebble.
STAFFORD MASIE: Yes, the payment pebble. We've launched this with Absa and its four years in the making. There's been lots of blood, sweat, and tears. We didn't think we could make it. We failed dramatically in the first two, two-and-a-half years. However, as with all innovations, when you invent… I always say there are two types of innovators, the inventive ones and the innovative ones. The innovative ones take what's there, make it better, and they optimise. For example, building a mobile applications business. It's not your phone. It's not your network, but you build a great company. When you're an inventor entrepreneur, the road's much harder because you don't have a White Paper, you don't have a reference site, you don't have reference material, and you have to invent from nowhere. Essentially, what we have now is a culmination of all of that effort and because of an amazing team (not myself) based in Centurion in Pretoria, and some very highly skilled people.
We have the Payment Pebble and what it essentially is, is a miniaturised derivative of a Point of Sale which, when you get the pebble in your mail and you plug it into your phone, it literally changes your phone into a Point of Sale device. Think about the plumber, the electrician, that person who shows up at your house and always leaves a piece of paper for you to pay them. The reason that happens is that folks don't have the ability to afford card acceptance machines. The cheapest ones are R3000.00. The monthly fees are very high. It's not mobile enough. We've therefore come up with the Payment Pebble, which is essentially, card acceptance and its R50.00 per month. R50.00 per month gets you the pebble, it gets you a replacement pebble for year one and after year two, it collapses down to R20.00 per month – great terms. At the bottom of the pyramid, folks that traditionally could not accept electronic payments, suddenly can now.
ALEC HOGG: When I go into a restaurant now, the guy will come to my table with a handheld that he swipes the card through and that I know from my own businesses, costs around about R800.00 to R1000.00 per month plus a percentage of the transaction.
STAFFORD MASIE: It's usually about R7000.00 per unit.
ALEC HOGG: As much as that?
STAFFORD MASIE: Yes, so this is all of that for R50.00, plugs into the 3.5mm audio jack of your phone. If you have an Android, Apple, the latest Blackberry, or the latest Samsung, you plug this in and it literally converts that entire stack into what you see in the restaurant. It's more mobile. You can throw it into your cubbyhole. It comes in a beautiful pack from Absa. You don't have to be an Absa Bank individual or business (Absa distributes it), but anyone with any account there… If your business bank account is with Standard Bank, FNB, or Nedbank, that's okay. You can get the Payment Pebble and we'll recon the funds going into your account pretty much the next day – into your business account.
GUGULETHU MFUPHI: Walk us through it, then. If you, Mr Plumber comes by…
STAFFORD MASIE: It's very simple. You get it in the box. It comes in a beautiful experience box. It has a pamphlet. We didn't just build it to be cheap. We built it to be feature-rich. We built it so that it was dumb enough for somebody to take, plug in, and it simply worked. That was rather hard engineering. There are derivative competitive products that do Bluetooth. You pick up your phone and you wait for this thing to Bluetooth-handshake with your phone. The reason we avoid that is it's a great technology, but it's not a solution for someone who isn't a phone expert. The pebble essentially just plugs into your phone and once it's plugged in, you launch the mobile app. There's no configuration. There are absolutely no settings for you as a merchant. It will identify itself as Fix It Plumbers, and you can take card payments. The user then puts their card into the pebble. They can either swipe…
It supports Mag and PIN, it supports Chip and PIN, and when they do that, when the successful pin has been entered, you can then send a receipt via SMS, MMS, or email. With the receipt, it's not just a plain receipt. It's a rich receipt, so when you get the receipt from the plumber it won't just have the details around the transaction – the EMV details – it will also have a little Google maplet, showing you where the transaction occurred. The plumber can plug this into so pretty much any device. Thereafter, the identity lives in here. That plumber can lose his phone or lose his tablet. Take someone else's phone – as long as we support the operating system – download the Absa app, plug it in, and securely do a payment. It's incredible.
ALEC HOGG: Stafford, I spoke to Michael Jordaan (MJ) – who you know very well and you've had some good debates with him over the years – and he was saying 'well, that's cool'. He doesn't work for FNB, so he didn't have an axe to grind there. He said 'yes, good luck to Stafford, but we're working on other stuff and it's going to blow this out of the water'. What's happening in this space? Do you have a 'first to market' advantage?
STAFFORD MASIE: Yes, we do. Look, it's a device. At the end of the day, 'first to market' is a benefit. We're about to launch this device in Australia too – imminently. The nice thing is that it's made in Randburg. Yes, Michael and crew (the folks at Mxit) are looking at new electronic wallets. That's okay. I think we'll probably work with Mxit in some way or form with the pebble. We'd love to work with them because part of the pebble's value proposition is not just for the plumber. Many mobile application developers out there are developing applications that can't accept payment. What we've done with the pebble is that we've made an API (Application Programming Interface) available for third parties out there. If you're writing an application and you want to accept card payments in your application, you literally just write it to those few lines of code, and your application can speak to the pebble.
If you have a ticketing app that runs on… We see that as a brand new market. This is not just about the pebble being 'first mover'. It's the ways in which we ourselves will augment the pebble organically, which will create many new addressable market points.
ALEC HOGG: How did you find these guys?
STAFFORD MASIE: Do you know what's interesting? I always tell this story. Perhaps it's politically incorrect, but I'm going to tell it anyway. I love black economic empowerment because there are many white guys who are extremely talented, and can't find jobs, especially in Pretoria. It's incredible. We have astrophysicists, we have marine biologists, we have a couple of professors, and these blokes can't find jobs in the formal economy out there in South Africa. They're therefore sitting over there. They're defence-invested, so they're ex-Denel folks, ex-military, and Department of Defence guys – very highly skilled. All we're doing is we're taking a coagulation of these human beings, throwing them at the impossible, and what they've been able to do is incredible. Just coming back to that Michael Jordaan thing – because I want to clinch the nail – I think that where Michael and the folks are with electronic wallets…they're with NFC-based payments where you tap your phone.
I think those things are interesting, but that's not where the consumers are. Consumers out there have credit cards – the card works really well – and I think that when you start innovating in this world of next-generation payments, you start understanding what the banks have put in and how valuable that is. Banks are there for thousands and thousands of years. It's one of the hardest industries to innovate around, but more so because the consumers have moved along with them. They've brainwashed us into doing payments in certain ways. I don't think people want electronic wallets. I don't think we all want to do payments in an Mpesa way. We all have cards. Cards work really well. You jump on a plane, you land in Italy, put your card in a machine, and it works. If someone comes here from overseas, it works. What we think is that consumers are going to continue adopting card and we built a device to leverage that, and not to mitigate that. Again, we'll integrate with all these newer types. We are where the consumer is at today.
GUGULETHU MFUPHI: It almost sounds as though you're explaining the future to us. We saw what recently took place with Tencent and Alibaba, their credit card online payment system, and how government reacted to that. Are we finding that our regulatory system is adapting to this future you're highlighting?
STAFFORD MASIE: Yes and no, but I think the challenge is… Let me put it from a negative perspective. The folks who are innovators hate the rules and regulations, but when you start looking at these rules and regulations, things such as PCI for security, EMV for transaction standards, these things exist because they protect the consumer. They don't really protect the institute. They're really there to protect the consumer. If you look at the rules and regulations, they're the underlying framework that creates an ecosystem of risk and liability, which is well accepted globally. If you put your card into that machine in Italy – provided that card machine is certified – it's a registered bankcard, and you put it in there…if fraud occurs, you're protected. You get your money back immediately. All that convenience that we feel in the consumer space, which makes us love our cards, does not exist in the 'new payments' world.
Do we want the legislative requirements to change and allow more innovation? Absolutely, but I think that as innovators out there, we should look at these things less as being in the way and things that we need to conform to, because as I said it's thousands of years of evolution underlying the financial services industry. Those things don't exist there just because banks want to get in the way. Those things exist because there's an ecosystem of risk and liability that has evolved. It's very mature. The secret sauce here is not to try to mitigate that or disintermediate that. It's actually to leverage that.
ALEC HOGG: At R50.00 per month, it's very disruptive. Are you finding that the reaction from clients or potential clients has been up to what you expected?
STAFFORD MASIE: It's phenomenal. One of the challenges we have is making sure we don't collapse under the weight of our own success. When you're a start-up, you have two challenges. One is obviously to monetise very rapidly. The second thing is when you've suddenly hit the damn wall, do you have the rubber dingy or are you sitting on the Titanic, and can you leverage this wave? I think we're doing it well. I think Absa's doing it very well in the way they're going about it. They've launched in KZN. We've had…I won't say the numbers, but the numbers are very impressive. They're way above what we expected. The average transaction values going through the pebble is incredible, so we're very happy. I think what we'll see in the next few years is anywhere between two-hundred-and-fifty-thousand, and seven-hundred-thousand of these devices in our market alone.
ALEC HOGG: How does that compare with installed capacity?
STAFFORD MASIE: There are ninety-thousand devices in total in South Africa.
ALEC HOGG: Ninety-thousand in total, and so you can do almost ten times that. Is that because of cost and convenience?
STAFFORD MASIE: It's simply because… If you look at a card machine today, its businesses that are physical structures, that have plugs in walls with telephone cables running out of them and that can plug into these big devices that enable these devices to do the card acceptance. The addressable market out there is enormous and we don't even understand how big this is. The competitor who is closest to me in terms of 'profile of company' is probably Square in the United States. There's a company that when they launched, within two years they had almost four million merchants – aggregated. That spoke to the latent demand. Think about it. Every business out there right now, is struggling with payments – the small businesses out there. It's not just your home; it's even governmental services…people who have to go out and do revenue collection, and structured businesses. If you look at folks such as SABMiller, they spend so much money on protecting and moving money in their distribution supply chain.
They literally have 'bakkies' going out with helicopters and guards as they pick up money when people paid them at the distribution points. If we don't solve this problem, people die, and this is a very real challenge out there. The opportunity is enterprise. The opportunity is for the small and medium business. The opportunity is to embed the device. If you ask me 'what's the future? What's next with the pebble', we have to support contact list payments. That's definitely on the road map where you don't have to just dip your card, swipe your card, or tap your card with a contact list card. That's big in Australia. We're launching in Australia this year, so the pebble has to support that. If you'd asked me, what the next step is…I'd like the pebble to go away. I'd like the pebble to be in everything. I don't believe in the pebble 'of things'. I believe in the pebble 'in things'. It's still a bit clunky. It's an external device plugging into a phone.
Wouldn't it be cool if every mobile phone in the world had a little sliver in it to accept a card payment, and everyone had the capability? Imagine if every one of you had the ability that PayPal had versus the need to use PayPal. My vision is to destroy PayPal. The fact that PayPal exists is because Internet enablement on the Internet – transaction enablement on the Internet – has broken. The reason they exist is because it's clunky, it's hard, and they solve that hardness. I believe that if we can give you a value proposition where it's your card and it's your card machine… Imagine the power. Imagine you going to an airline website saying 'I want that seat on that day' and instead of putting your credit card details into a website, the details shoved down to your phone electronically/wirelessly. It says 'hey, you're trying to buy this on Kulula'. Yes. 'Where's the pebble or where's your card' and you make a card-present transaction, in your hand. You are PayPal. You don't need the service on the outside. That's our vision.