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Companies to Watch: Cardfree (January 2013)

January 2013

The San Francisco startup led by m-commerce heavy hitters is keeping its mobile wallet focus on merchants.

By Adam Perrotta, Assistant Editor

As mobile wallet providers continue to jockey for position ahead of what many see as a looming “wallet war,” San Francisco-based startup Cardfree is taking a merchant-centric approach, leveraging a leadership team that has worked on mobile programs for some big-name retailers. The strategy: to offer a white-label wallet solution that engages customers across multiple channels and gives merchants a key role in the wallet experience when it launches early this year.

Big Names, Big Plans 

Cardfree is led by a group of industry veterans with impressive resumes in the retail-based mobile arena. Company CEO Jon Squire previously served as chief marketing officer for CorFire, where he led Dunkin’ Donuts’ mobile strategy. Squire also spearheaded payments and mobile wallet initiatives during his time as senior vice president of payments at mFoundry, most notably working with Starbucks on the company’s mobile app launch. President Dustin Young spent more than seven years at InComm, where he helped launch a number of mobile initiatives for clients, such as Walmart, Target and Best Buy. Cardfree Head of Product Chuck Davidson led mobile efforts for Starbucks as category manager, innovation. Additional company executives include Sen Wen, head of architecture, who also has worked on mobile for Starbucks, and Head of Marketing Diane Hong, who has served on retail accounts with several advertising agencies.

Jon Squire “We’re big believers that if you lock yourself in (to one technology) you’re going to fail. The technology at POS has to be agnostic.”

—Jon Squire, Cardfree

“You don’t normally see a group that comes together with so much experience in both the merchant and online side,” Squire tells Paybefore. The team’s collective experience enabled Cardfree to “understand merchants’ pain points and look at the wallet space with a merchant lens on, as well as to know how to grasp the mobile medium and roll out a product that brings in a new efficiency.”

Investors are taking notice. By the time Cardfree opened for business in November, the firm had closed on $10 million in Series A funding led by Jeffrey Katz, founder of Mercury Payment Systems, who now serves as Cardfree’s chairman of the board. Katz saw Cardfree’s leadership team as “uniquely positioned with the knowledge, experience and connections to continue to lead innovation in the [mobile wallet] space,” he says. “Creating a merchant-centric mobile solution aligns with my view of where the market is headed.”

Merchant-Centric Approach

While other mobile wallet efforts are led by mobile network operators (Isis, Weve), technology firms (Google Wallet, PayPal’s in-store payment initiatives, QSecure Inc.’s Imago wallet) and card networks (MasterCard’s PayPass Wallet Services, Visa’s V.me), Cardfree says it enables merchants to launch their own wallets, branded and tailored specifically for their customers. This strategy enables

Getting to Know

Marketplace Names: Cardfree

Location: San Francisco

Organized & Open for Business: November 2012

Line of Business: Mobile commerce

Secret Sauce (What differentiates Cardfree): 

Unparalleled experience: We are the only team that deployed the two largest mobile commerce programs in the United States to date, including one that has consistently been called the “gold standard,” the Starbucks Card Mobile.

Full commerce capabilities: Unlike other providers that are focused purely on payments or other single-point solutions, Cardfree offers full commerce capabilities from messaging, gifting, offers and promotions, loyalty, payments and order-ahead. Our platform is the only one-stop solution built specifically for merchants and is flexible enough to work a la carte and with existing systems and programs.

True focus on driving ROI: As the only team to have deployed two national mobile commerce programs, we have unique insight on what works from both an end-user and operations perspective. With these lessons learned, we rigorously work to meet business objectives and design mobile applications that engage end-users as well as provide incremental revenue and operational efficiencies to merchants.

Founding Team: Jon Squire, Dustin Young, Chuck Davidson, Diane Hong, Sen Wen     

Funding: $10 Million in Series A Round

Ownership: Private

Business Philosophy: Be frictionless. Merchants shouldn’t be required to invest in new hardware or systems to deploy mobile commerce solutions today.

Business Model: Licensing plus transactions (depending on size and functionality).

Something You Might Not Expect: Well-designed mobile commerce programs can be a revenue generator and not a cost. They can increase loyalty, frequency, ticket size and new customer acquisition.

retailers to maintain their central relationships with their consumers, rather than relying on an outside party’s wallet to act as intermediary. “The merchant is the brand that resonates with the consumer,” Squire notes. “Ultimately, the merchant owns the experience with the consumer and the consumer wants to interact with the brand.”

For merchants, an out-of-the-box, white-label mobile wallet solution limits the need to establish as many relationships with various tech providers and other outside firms to launch a wallet product. Cardfree’s existing partnerships with companies—including data provider Restaurant Sciences and online and mobile order-ahead provider Snapfinger—mean these connections are already in place, leading to a clearer return on investment for merchants and thus an easier sell to bottom-line-driven retail executives, according to Cardfree. “The struggle for merchants [looking to launch a wallet] has been to understand what the revenue channel is and what’s the ROI,” says Squire. Despite such concerns, however, the number of retailer RFPs looking for mobile wallets indicates that demand is out there for a product that is easy to implement, puts the merchant in the driver’s seat and shows a clear path to revenue, he adds.

Cardfree initially is targeting larger retailers that interact with customers frequently, including fast casual and quick-service restaurants, convenience stores and gas stations. The company expects to announce its first merchant partners this month.

Multichannel: A Must

A hallmark of Cardfree’s approach is to give equal focus to the full gamut of payment channels. “There is a gap in the market for seamless merchant solutions that integrate mobile, online and POS,” Katz noted upon investing in the company. This need for versatility expands to technology as well. While the dust has far from settled in the debate over NFC versus QR codes or other cloud-based solutions at point of sale, Cardfree is taking an agnostic strategy, giving retailers the ability to incorporate whichever POS technology they choose into their wallets.

“We’re big believers that if you lock yourself in, you’re going to fail,” Squire says. “The technology at POS has to be agnostic.”

And the company’s multichannel approach extends beyond the payment aspect entirely; Cardfree considers its wallet’s ability to deliver loyalty programs, targeted offers and consumer data to be just as important as enabling payments. “Payments, while an important part of the equation, are just a part,” notes Squire. “It’s the pieces like loyalty and offers that engage the customer to come in and actually transact.”

‘Wallet Wars’?

While talk of wallet wars may earn headlines, many industry experts don’t expect a winner to emerge any time soon, if ever. In the meantime, Cardfree says, its solution offers merchants a way to drive sales, manage offers and control data today—something that an eventually dominant third-party mobile wallet might not provide. “Merchants have no notion that third-party wallets will let them control their data,” says Squire. “Because we’re trying to do that, we’re building a solution that will be complementary to those third-party wallets.”

Cardfree executives feel the company can play a complementary role even to the other merchant-focused wallet ventures on the block, including Merchant Customer Exchange (MCX), which is being developed by a coalition of some of the biggest names in retail, such as Walmart, 7-Eleven and Lowe’s. To work with MCX, Squire says, Cardfree could provide the nuts-and-bolts technology across multiple commerce channels that MCX might not want to get bogged down in. “If there is a [wallet wars] winner, we’ll provide our merchant clients with integration to that winner.”



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