Blog: The SXSW Reminder for Payments Startups
It’s that time of year again, when the next generation of world innovators and thinkers make their pilgrimage to Austin, Texas, in search of entrepreneurship glory, to redefine a growing range of industries, and even create new ones.
As an Austinite who founded a payments company in this town well before it was trendy to do so, I’m very proud not only to see the trend continue and grow, but also to see Austin become a hub for payments innovation, even after the SXSW parties wind down. With companies anchored here pushing innovative payment products forward—PayPal, Apple, Google, Visa, NetSpend (TSYS), and our own Rêv to name a few—huge interest from VCs and private equity shops worldwide, and a giant research university in the center of town, Austin’s payment startup activity is at an all-time high.
Although it’s great to see so many new players emerge at every SXSW gathering, entrepreneurs or would-be entrepreneurs should keep in mind some basic but key considerations when it comes to launching a new payments product. Come to think of it, this mantra isn’t bad advice for payments veterans either. And, the letters in SXSW will help keep it top of mind:
Solve a real problem, shared X a lot of people and Scale the solution quickly to Win.
It’s pretty simple, but easier said than done. Take, for example, two startups I met at this year’s event. Both are less than a year into development. The first is trying to deliver access to 401K products to small businesses with two to 50 employees that currently have limited options to provide this type of employee benefit. The startup is using technology to manage enrollment more efficiently and more affordably than traditional players. The other startup is trying to be the middleman between you and your billers (remember PayMyBills.com?). It’s still figuring out the technology and trying to do so in the midst of competitors already in market. The first came to Austin and raised $3 million in Series A investment from experienced payment VCs, while the other is still looking for its seed round. No surprise.
While both are targeting large market opportunities, they have very different plans and degrees of readiness to make it work. Having tested technology ready to deploy, as the first startup did, helps win over investors. The second startup may have identified a real and sizable problem, but it lacks clarity on what technology it will use to solve it.
In a highly regulated environment with many 800-lb. gorillas roaming the space, fintech entrepreneurs have a significant hurdle right out of the gate just getting to the point where they can have the opportunity to prove their models. It’s nice to see that such a challenge hasn’t discouraged many from trying. Even established tech companies with no payments experience are getting into the game. Social media giants, such as Snapchat and Facebook, have jumped in. Although they have reach and scalability available, that doesn’t guarantee success. Even they’ll need to prove they’re solving a real payments problem first. The point being, as an industry we must focus on SXSW: solving real problems shared by lots of people, where technology can scale a solution quickly to win.
For us at Rêv that means focusing on millions of travelers looking for a better way to exchange and protect their money while on the go, with proven in-market solutions. Several of our 800-lb. global financial and airline partners seem to agree with us on that.
Bertrand Sosa is the co-founder and president of Rêv Worldwide Inc., a global payment solutions company focused on next-generation prepaid products in the travel and mobile markets, leveraging proprietary multicurrency payments processing technology. Prior to Rêv he co-founded prepaid debit pioneer NetSpend. In 2004, Bertrand was awarded the regional Ernst & Young Entrepreneur of the Year Award for his entrepreneurial efforts building NetSpend. He can be reached at [email protected].
In Blogs & Viewpoints, prepaid and emerging payments professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed are not necessarily those of Paybefore.