Mobile Wallet App Whips Out the Plastic

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Mobile wallet apps for smartphones have been panned as high-tech gimmickry, but the folks at Pasadena’s Wipit Inc. think they’ve found a low-tech way to make them relevant.

The company makes a mobile wallet app that comes with a prepaid debit card. Customers can use the card to make purchases at a store, say, or withdraw cash from ATMs. The app can be used to pay bills and transfer money. Wipit’s app and card product is designed for people who don’t use bank accounts.

Wipit in September raised a round of series A funding and is now eying expansion. The company’s app had been available only to customers of Irvine wireless carrier Boost Mobile, which offers prepaid cellphone plans mostly to those with poor credit or low income. But Wipit got a wider rollout in the last couple of weeks; the app is now available to anyone with an Android smartphone.

“We’re trying to make sure we can serve the underbanked in a broad way,” said Richard Kang, Wipit’s chief executive. “There are lots of customers who are not on Boost.”

Kang hopes to attract customers of other prepaid carriers, such as Metro PCS and TracFone, as prepaid customers are less likely to use bank accounts. But he also said there are millions of potential Wipit customers who have more mainstream wireless phone plans from the likes of Verizon Communications or Sprint Corp.

That premise helped draw an investment last year from Core Innovation Capital, a Hollywood venture capital firm that invests in financial technology companies that focus on unbanked and underbanked customers. A. Arjan Schütte, Core’s managing partner, said he expects Wipit will find many customers as it expands service. For example, there are many customers of mainstream wireless carriers who pay their monthly bills in cash or pay upfront deposits on their accounts because of bad credit. Those customers could be a good fit for Wipit.

“There are absolutely many millions of Sprint’s customers who look like prepaid customers,” Schütte said. “From that perspective, we think there’s a ton of opportunity.”

Beyond Boost

Customers can use the Wipit app to check their balance, deposit checks, pay bills and make domestic or international money transfers, while using the debit card to withdraw cash from an ATM or make purchases, much like any other prepaid debit card or credit card.

Kang would not say how many customers have downloaded the Wipit app. According to Google’s app store, the Boost version has been downloaded between 10,000 and 50,000 times, while the version available to all Android users has been downloaded fewer than 1,000 times. Kang said Wipit has not advertised the wider release of the app, but would do so at some point this year.

Wipit makes money by collecting a few pennies on each debit card transaction and by charging fees for many of its services. Customers pay $4 to deposit a check and between $2 and $5 to pay each bill.

That might sound like a lot, but a check-cashing shop might charge as much as 3 percent of the face value of a payroll check – that’s $30 for a $1,000 check. For bill payments, Wipit’s fees are about the same as those at Western Union and other businesses where customers can pay bills in person.

Wipit’s selling point is that its services either cost less or are more convenient than those offered by brick-and-mortar businesses that draw customers without bank accounts. For example, customers can deposit a check by taking a picture of it with their smartphone. It costs less than at a check-cashing shop and saves a trip. The customer gets instant access to the amount deposited, and can make purchases or withdraw cash from an ATM using the Wipit debit card, or use the money to pay bills through the Wipit app.

“Cashing checks, paying bills – most under- or unbanked customers do all this at retail,” Kang said. “They take multiple trips; there’s a lot of time spent walking or on the bus. If you look at each of our services, we’re offering a value proposition of either cost savings or convenience.”

Airwaves

Other mobile wallet applications are on the market, most notably Google Wallet from Google Inc. and Isis Mobile Wallet from Isis, a joint venture of wireless carriers Verizon, AT&T Inc. and T-Mobile.

Those apps are chiefly designed to let customers make payments with their smartphone rather than swiping a credit or debit card. They use a technology called near-field communication, or NFC, which allows a smartphone to send payment information through the ether.

Wipit, however, makes use of old-school technology: a standard debit card. Kang said that’s not because Wipit is out of the loop, but because NFC isn’t that useful to his customers. While debit cards are accepted almost everywhere, very few merchants are equipped to accept NFC payments.

“We could have followed the pack and offered an NFC product,” Kang said. “But we decided not to because we are focused on offering a meaningful value proposition to consumers. The fundamental challenge with Isis and Google Wallet is there’s no inherent value proposition.”

Schütte said he’s betting on Wipit because its product solves problems – high fees and a lack of access to electronic payments for people without bank accounts – whereas Google Wallet and Isis don’t.

That’s a sentiment shared by Marc Freed-Finnegan, a former Google Wallet executive who’s now chief executive of San Francisco startup Index Inc. He told Fast Company magazine in November that it’s not clear consumers need a new way to pay.

“Payments work pretty well today,” Freed-Finnegan said. “I take out my card and I swipe it – it’s pretty fast and easy.”

There’s evidence that even Google agrees. The company in November released a debit card that links to Google Wallet accounts, allowing customers to pay in places that don’t accept NFC payments.

Schütte said if other mobile wallets are to take off, they’ll have to do likewise and give customers cards.

“NFC is dead,” Schütte said. “People are slow to change behavior. So anyone who is going to rule in mobile needs to be able to bring in a customer’s current behavior, and that’s the swipe.”