1. Can you set the stage? How did you first connect with Verizon Ventures and why did you choose Verizon?
We were introduced to Mark Smith through Verizon Wireless executives and he saw Payfone’s potential right away. In 2011, we were able to assemble a three-way deal between Verizon Wireless, American Express and Payfone that was groundbreaking in its scope. Verizon integrated American Express’ Serve, a digital payment and commerce platform, and Payfone into its phones and tablets to let consumers pay by tapping their phone to a payment device at a store or make online purchases on their phone. We loved the idea of having Verizon Ventures’ perspective as we made strategic decisions to advance the company.
2. Payfone works with financial institutions as well as mobile network operators to provide safe and secure transactions with its Identity Certainty Platform. Can you share some results you’ve seen thus far?
We’ve had a tremendous amount of growth during the second half of this year. Since June alone, we’ve grown our number of authentications processed by 340%. This puts us on track to process over 3 billion authentications next year. This volume is pretty amazing, but when you consider the sheer volume processed daily by our Tier-1 bank customers and the strong market need we are seeing for our mobile identity solutions, the number begins to make a lot of sense. We’ve seen a strong demand from the financial services industry through Early Warning, whose bank customers need to know whether they are interacting with clients or criminals trying to exploit mobile security weaknesses.
3. In a previous blog post about the growth of mobile payments, we discussed how mobile specific vulnerabilities are a concern when fostering consumer trust. What are some specific challenges hindering mobile wallet adoption and how can these issues be addressed?
Designing mobile payments systems from the ground up has allowed unprecedented gains in designing for security. Advances in tokenization have been especially beneficial in the fight against fraudsters. The problem, however, is the “front door” – ensuring a phone is provisioned into a mobile wallet on to the right person’s phone. Challenges with this process have led to elevated fraud rates in many mobile payments wallets. We joke that with advances in tokenization, we have created the most secure way to pay with someone else’s money.
Industry leaders share our concern. In a survey we sponsored with Let’s Talk Payments, 65% of those surveyed thought recent media coverage of Apple Pay fraud would affect the likelihood of consumer adoption of mobile wallets. Responses further indicated the two least effective methods of authentication for mobile wallets were mobile phone numbers as unique identifiers and identity verification during initial card provisioning.
We found the results of the survey very encouraging, as the respondents were calling for a solution where financial institutions, mobile network operators, and security companies like Payfone work together.
4. In your experience, what's the best way to work with an investor like Verizon Ventures?
Having direct integration with Verizon’s network is key for a company like Payfone. When you are in the security business, having only one mobile network operator is not enough and you need to have visibility with a significant population. Our partnership with a telecommunications company like Verizon is crucial for our success, and Verizon Ventures facilitates our relationships with internal business units to ultimately help us deliver a great solution to our customers.
5. What's next for Payfone in 2016?
We recently announced international expansion to the U.K. and Canada next year, starting a pilot in each region. We selected these markets based on our strong partnerships and significant demand for our services due to the growth of mobile banking and wallets. Provisioning cards on mobile wallets and protecting customers from social engineering fraud is not limited to the U.S., and this is resulting in demand. We look forward to kicking off the pilot in Q1 of 2016.
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