Imagine three entrepreneurs having coffee in Starbucks, shooting the breeze, looking to dream up a new venture, and suddenly finding inspiration in the coffee giant’s hugely successful mobile ordering and payment app. Then picture the trio successfully launching on the back of that spur their own wallet app, one that in just over two years manages – in Britain at least – to rope in more outlets than Starbucks’ own platform.
It’s an appealing tale that also happens to be very true, as Michael Rolph, one of the trio behind the venture, called Yoyo Wallet, vividly recalls: “It really did start with that coffee in Starbucks. We got very enthusiastic about the fact that Starbucks was the first to come along and show a way in which you could create a mobile experience that your customers actually used. That kind of went against the grain of every single mobile payments story that had come before it. PayPal, Google, Visa, O2….there’s quite a litany of wallet failures. But Starbucks had made something work and our conclusion was that they made it work because they were the first ones to come along and realise that it’s not about payment. It’s about the experience. It’s about seamlessly blending payment with loyalty.”
Further exploration of the Starbucks platform by Rolph and his partners, Alain Falys and Dave Nicholson, led to their questioning much more deeply the nature of the relationship between retail and consumers in a mobile app driven world: “Do you see, for instance, a world where consumers have multiple different retailer apps like Starbucks? Of course not. It’s like saying everywhere you shop they give you a unique physical wallet, for you to use specifically at that store – it just doesn’t make any sense.
“The other thing that struck us was it felt like the industry was trying to replace your piece of plastic with a mobile. But making payments via mobile for the sake of it adds little to no value to either the retailer or the consumer. We wrote a different question on the board: how do you make mobile relevant for retail?”
Starbucks struck gold with its insight into what consumers really wanted out of a mobile wallet experience but also important was the technological solution it developed to support its app, one which allows consumers to pay with their very own Starbucks mobile QR code. By using QR code the company opted for a software oriented approach for its app over Near Field Communication (NFC) protocols, a set of short-range wireless technologies that enable communication between devices when they’re touched together, or brought within a few centimetres of each other. Rolph says: “By going with QR code scanning Starbucks wasn’t tied into this NFC protocol that was limiting the amount of data you could capture, analyse and treat around transactions. We thought that was really interesting.”
Rolph, Yoyo’s chief revenue officer, is certain that we’ll all be using our mobiles to pay in the end but not because of the need to pay by mobile, rather a desire for a more personal relationship between retailers, brands and consumers; a transaction experience that is more than just payment: “With the consumer going digital, you know who they are, where they are and what they like. With all that data and insight, retailers and brands can really look to automate a personalised loyalty experience, relevant offers and discounts and timely communications.
“That vision led to us wanting to do what Starbucks has done but better and for all retailers. Yoyo is about creating a better transaction experience in a mobile-first world, one that means everybody thinks mobile first and leave wallets firmly in pocket.’”
Mobile in an on-demand world
Indeed the vision Yoyo’s founders have is so tightly elucidated that they are not shy of placing it within the context of the evolution of retail industry. As Rolph explains, the industry’s history stretches back to the creation of product, which then became a focus for exchange and local commerce – think of the rise of speciality, local stores in the late 1800s and early 1900s. That model gave way to the mighty department store and catalogue shopping, with the rise of mass distribution and warehousing that followed next encouraging a further proliferation of channels including the discounters. With the advent of the internet in the 1990s, e-commerce took the industry by storm, leading to the ‘Amazon era’.
For Rolph, mobile has the potential to command the next major phase: “Mobile, in theory, encompasses everything that’s gone before, wraps it all in. It’s about local commerce, distribution of products, it’s location-specific around collections, and obviously it’s all online. It’s wherever you want it, and whenever you want it. Think about the growing importance of on-demand, specifically look at the Uber model, of how it’s taken that vertical and created an on-demand economy of the taxi. We think that mobile has exactly the same role to play for retail.”
With that mobile-driven on-demand future in mind Yoyo in February acquired Q App, a solution that allows users to avoid queues by ordering and paying for drinks via their smartphone. Yoyo is merging Q App’s technology into its new pre-ordering feature ‘Jump the Queue’: “With it I can order my coffee while I’m walking along and go and collect it. Or maybe I’m sitting in the sports stadium at the New York Knicks or the Mets game and I don’t want to get my seat to get my hotdog or my beer – I want it delivered to my seat. So, I use the Jump the Queue feature to get something delivered to my seat. How great is that?” he says chuckling.
Considering the high profile, megabuck failures in the short history of mobile wallets, and recent, more successful entries into the space like Apple Pay and Samsung Pay, Yoyo’s founders have certainly set their sights very high. Yet their track record suggests it’s not beyond them to meet their goals. Rolph previously ran merchant acquisition teams at Barclaycard, First Data and PayPal; Nicholson is co-founder of peer-to-peer lending pioneer Zopa, while Falys, Yoyo Wallet’s CEO, ran Visa’s commercial card division and founded OB10, the world’s largest e-invoicing business. “You can have a grand vision but the thing that defines success is grand execution,” says Rolph, and so far things appear to be going rather well for their venture.
Launched in early 2014 with backing from Imperial Innovation, the technology transfer arm of London’s Imperial College, the Yoyo app was first rolled out across food and drink shops at the college’s South Kensington campus. It is now available for use across 40 UK universities and close to 100 corporate head office catering locations – for now the company is solely focused on creating a series of “private marketplaces” within colleges and corporates. Transaction volumes are currently running at over 350,000 a month and, in terms of the number of retail outlets it can be used, Yoyo claims it is now bigger than the Starbucks app. Its progress has been such that KPMG last year ranked Yoyo as one of the top 50 emerging companies in the global financial technology space in its annual Fintech 100 listing. And at the recent Money2020 conference in Copenhagen – Rolph was an attendee – Yoyo was ranked among the top 50 companies in the 2016 FinTech50 listing.
Just like the Starbucks solution, Yoyo uses QR codes to process payments, with users able to collect points from retailers which can be later redeemed or shared. For the retailer, Yoyo’s key selling point is access to purchasing data and enabling tracking and targeting of customers more effectively. Rolph is keen to stress the importance Yoyo attaches to data security: “When somebody sets up a Yoyo account, what they are creating is an identity represented by the card payment. It says the merchant has the right to take money from my account in exchange for the product or service being bought. We’ve really focused on tokenising identity so that when you transact with Yoyo, you don’t actually share any personal or financial information – we are not storing any card or payment information on the device or in our back end. Tokenising identity, at a personal level, is critical – it’s what the industry wants to see happening. You don’t want to be exchanging all your personal information every time you transact.”
An especially attractive feature of the Yoyo solution is the way the platform integrates with EPOS systems. It’s something that has proved to a big barrier for mobile payment: “You have to integrate to point of sale systems. That requires you to become a system integrator, which in turn means you have to have a big, expensive team of engineers that is constantly integrating and then continually making sure your integration is in a steady state. We flipped that with Yoyo by creating an API that any EPOS company in the world can integrate with their software. Once you’ve done that initial integration, you can be rolled out across all versions of that software.”
Yoyo’s going global
To date Yoyo has raised $15m, of which $10m came in a Series A round last April with backers including Imperial Innovations and Taavet Hinrikus, co-founder and chief executive of P2P money transfer service TransferWise. Another raiser is in the pipeline for later this year but for now the company is using funds secured to support expansion into new markets, product development and beefing up of its technology.
Rolph says the short term target is to have 80 UK universities and over 400 corporate catering operations on Yoyo’s books and tangible expansion of the company’s footprint into other retail verticals and new markets including the US, Singapore and Ireland by year end 2016. In Singapore it has already partnered up with a local catering company and should be live there later this year. In Ireland its first client is Dublin City University – a relationship developed with the help of the Bank of Ireland.
Last December Yoyo quietly began piloting its app in the US. Rolph is keeping the identity of the US partners under wraps for now, saying only: “It’s with a few of organisations that are in line with our target sectors: education and corporate catering. One of the things we’ve discovered as we’ve gone around the world, not just to the US, is that we are doing something no one else has done anywhere in the world. We have a very fast building pipeline of universities and corporates that want to get up and running with Yoyo. The key for us is to be ruthlessly efficient and focused on our game plan. There are always opportunities – I can think of probably a dozen different opportunities we’ve had across different markets in Europe.”
Casting his eye over the current mobile wallet landscape, Rolph recognises Apple Pay and Samsung Pay are highly innovative but he has some strong reservations: “They do enable you to use your phone as if it was a piece of plastic – I certainly see there is room for that. But do people think of using their device over a piece of plastic? I think there’s enough evidence to suggest that, actually, that’s not quite working out how people would have hoped. So I see these guys continuing to invest in their own proprietary mobile payment system, trying to kick the world and say it’s a wallet, but it’s not. It’s mobile payment. That’s all it does.
“I think what we’ll start to see is the industry getting a little bit disillusioned with the apparent lack of take up on the consumer side with those sorts of things. We’ll see the industry, led by the retailers, all waking up to the fact that it has to be more than just payment. There are three classic retail problems: the first is ‘Who is my customer?’ The second is, ‘How do I create personal engagement?’ The third is, ‘How do I sell more?’ Those are the classic retail problems. Mobile, in itself, is not solving those problems specifically but it is definitely creating a broader problem, which is how to make it work within a retail transaction experience. You have to answer that question.
“It’s very clear what we think about the future of the space: it’s a personalised mobile market place. Your Yoyo Wallet experience is going to be unique to you in the environment in which you operate, and that means consideration of where you live, where you shop and what you buy. It’s about opening whole new insights for retailers so that they can then personally communicate things that are relevant and in context and so encourage customer loyalty. Ultimately, they sell more. And for the consumer, it’s like, ‘This is great, my wallet is on my side. It’s showing me things that I’m interested in, that I can buy and save money on.’ That’s what we’re about.”
Rolph hopes that over the long term the Yoyo app will be so successful people think of it as no different to the way they handle their physical leather, that it becomes everyone’s go-to wallet: “We think what we’re doing translates globally and early signs from the markets we’re already in and ones we’re opening up in suggest Yoyo will do that. We’re talking to consumers and retailers in every corner of the world where smart technology and smart mobile are at the forefront. We’re identifying problems, potential drags. We know this is about creating a new experience that has got to be better than the status quo. There is no reason why, five years down the road, we won’t look like a global organisation that’s supporting customers in the global marketplace.”