PayKey has won an impressive number of awards from the payments industry plus the backing of major investors for its social media P2P payments technology. Guy Talmi, PayKey’s Chief Marketing Officer, tells Robin Arnfield that the Israeli fintech has signed up six banks to use its technology and has almost 100 banks in its order book.
PayKey’s white-labelled Mobile Payment Keyboard enables consumers to send money to other people from within any social media app such as Facebook Messenger, Twitter or Whatsapp. They can also conduct other mobile banking transactions such as balance enquiries or instant deposits to savings accounts.
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By GlobalDataSenders have no need to know their recipient’s banking details, as PayKey is a contact-to-contact solution. However, recipients do need a bank account.
PayKey’s technology partners include Temenos, Accenture, KPMG and Mastercard. It is a participant in Mastercard Start Path Global, Mastercard’s support programme for fintech start-ups.
“PayKey is paving the way to a new generation of mobile banking and personal finance,” Amy Neale, Vice President of Mastercard Start Path, tells RBI in an email. “Through its design of the world’s first payment keyboard that bridges the gap between applications and social networks, PayKey will make banking easier and more efficient.”
PayKey and Integration
PayKey says its keyboard “seamlessly integrates with mobile banking apps, enabling users to initiate and complete transactions without having to leave the social interaction and switch to a different app”.
Integrating with a bank’s mobile banking app at the API (Applications Programming Interface) level, PayKey’s technology is intended to help banks compete in social media payments with digital wallets and third-party platforms such as Venmo.
Banks customise their PayKey keyboard with their branding, and design the payment flow and specific transaction feature set for their clients’ PayKey-based payments.
“We started out initially with P2P transfers, but we’ve expanded PayKey into additional consumer banking functions,” says Talmi. “Some of our bank partners have implemented a menu-based user interface so they can offer additional features such as balance transfers or cardless cash withdrawals. Our roadmap calls for us to keep adding functions to PayKey.”
For example, PayKey could be used to send a friend a one-time code for withdrawing the funds one has sent them from an ATM.
Security – encryption and authentication – and data communications are handled by PayKey’s bank partners, Talmi says.
“Our role is to provide a better user experience via our keyboard,” he says. “We offer very fast API integration with banks’ mobile platforms.”
Investors
In November 2016, PayKey raised $6m in Series A funding from investors such as CommerzVentures, Mastercard, Santander InnoVentures, Digital Leaders Ventures, and Magma VC.
PayKey has raised a further $6bn in its Series B funding round which closes in September 2017 and aims to raise a total of $10m in this new round.
PayKey’s industry awards include coming first in Temenos’ April 2017 Innovation Jam, and winning the Citi Mobile Challenge EMEA and the BBVA Open Talent Wired Money Award in 2016.
“We think PayKey is an excellent business with huge potential,” a BBVA spokesperson tells RBI.
“The awards and investments are recognition from the industry that we’re doing something right,” says Talmi. “With our technology innovation, we’re reaching a market that has a growing demand for solutions. The growth of Venmo and the recent launch of Zelle in the US are an indication of the momentum in the P2P payments sector.”
Talmi says PayKey commissioned a survey of 500 UK millennials about their attitudes to P2P payments.
“Our survey found that, despite the hype about non-bank P2P providers, people still trust their bank, and their first choice for payments is to use their bank,” he says. “The move to non-bank social payment solutions is because the current bank offerings aren’t intuitive and contextual, and require consumers to leave their social media app to do P2P transfers from their bank’s app or website. If you provide consumers with a payment solution that works on any social network and that also works with their bank, it will be a winner.”
Collaboration
“We’re currently working with six banks,” says Talmi. “Norway’s Sparebank 1, Singapore’s UOB (United Overseas Bank), Colombia’s Banco Davivienda, and Turkey’s Garanti Bank (in which BBVA is the majority shareholder) have already launched our keyboard. Westpac is going to put our keyboard on its Android banking app, and we have another bank poised to go live with PayKey very soon. Right now, there are nearly 100 banks in our order book pipeline. Our experience is that banks have very active innovation teams who are looking for innovative new technologies.”
In March 2017, Westpac added PayKey to its iOS-based banking app with the launch of the Westpac Keyboard. However, in July 2017 Apple forced the Australian bank to remove its Westpac Keyboard functionality from iOS, the Australian Financial Review (AFR) reported. The AFR said that Westpac’s keyboard extension had been downloaded by “tens of thousands of customers”.
A Westpac spokesperson told EPI that the bank plans to add PayKey to its Android app “in the future”. Currently, UOB’s PayKey-based UOB MyKey is only available for Android devices.
Apple’s move against Westpac caused surprise in the payments industry, as, according to Celent analyst Stephen Greer, there are no restrictions on using custom keyboard extensions on the iPhone.
“It’s likely Apple’s own aspirations to own the payments space, which isn’t good for PayKey,” he says.
“The problem for PayKey is that their initial release invaded Apple’s keyboard territory, and I can’t see Apple allowing third parties to embed a branded keyboard on its keyboard without charge,” Richard Crone, CEO of US-based Crone Consulting, says. “Apple isn’t a charity, so, if banks want to embed their own keyboard in iOS, then they will need to pay ‘rent’ to Apple.”
“PayKey works in accordance with Apple’s guidelines,” says Talmi. “These guidelines don’t prevent offering a payment functionality.”
Talmi points out that PayKey doesn’t handle consumers’ payments. “Our bank clients manage the payments,” he says. “We just provide a better user experience for initiating a transaction, and are tightly integrated with the bank’s mobile app. We collect the data from the end user such as text or numbers on our keyboard which we provide to the bank’s app.”
The ‘cool factor’
“I find PayKey’s technology user-friendly and convenient,” says Brad Margol, Principal at US-based consultancy AZ Payments Group. “PayKey is a step forward in user experience for P2P bank-driven payments, and has that ‘cool factor.’ Other rivals like Zelle and Venmo work outside the social messaging apps.”
“Integration with social media platforms isn’t a component of Zelle,” a Zelle spokesperson tells RBI.
“Security doesn’t seem to be an issue with PayKey,” adds Margol. “PayKey uses bank authentication and so security is up to the bank or PayKey partner. PayKey is convenient when you are sitting around with your friends or having a text/app conversation with someone. But I don’t think it will be used for online purchases or bill payments. The demographic – young adults/millennials – that PayKey is going for will take to using it, but they can’t be unbanked, unlike other P2P apps such as Venmo.”
“There’s room for both bank-provided P2P transfer apps and third-party apps, and there are distinctive characteristics in terms of users and applications for each approach,” says Crone. “Guy Talmi’s point about consumer trust in banks is valid. But, if banks want to offer ubiquitous coverage for their P2P apps, they need a stand-alone consumer app. For example, Zelle, which is owned by banks, doesn’t have complete ubiquity, so Zelle is building a consumer brand.”
Social ledger
“Venmo is the market leader in social P2P payments and is so far ahead that it’s hard to see anyone being able to catch up with it,” Crone says. “Venmo is seeing 130-150% growth per quarter and is running at $60-70bn in transfers per quarter,” he says. “Zelle and its predecessor ClearXchange have higher average transaction values but don’t have as many users.”
In 2016, banks participating in ClearXchange/Zelle Network processed over 170 million P2P payments in 2016, totalling $55bn in aggregate transaction value.
Crone says the key issue for PayKey and Zelle versus Venmo is that Venmo posts P2P transactions through a social ledger. “Venmo acts as the social network for tracking what your friends do with their payments when they decide to make these payments public,” he says. “Young people post their payments on Venmo, for example when they share an apartment with friends and want everyone to know they’ve paid their share of the rent or the electricity bill.”
PayPal is introducing Pay with Venmo, a feature that will let consumers pay merchants from their Venmo account. “I think e-retailers will make Venmo their preferred payment method, in the hope that the consumers will then share their purchases with their friends on Venmo’s social ledger and generate a following for the retailer,” says Crone. “This will enable PayPal to monetise Venmo as it will be helping retailers to promote their brands on social media.”
Not only would Venmo receive a fee from merchants for Venmo payments, but it could also be paid for allowing consumers to post their purchases on its social ledger.
Crone says that there is a real opportunity for banks to emulate Venmo’s social ledger and monetise their P2P payment services in a similar way. “If banks can play in this social media space, it would provide a new ancillary revenue stream – fees for social media marketing – that could be far more lucrative than interchange,” he says. “But the hard part for the banks is trying to either create a new social network that competes with Venmo or embedding payments like PayKey does inside an existing social conversation or network and then giving the consumer the ability to post their purchase to their social network.”
