the process is very manual. You need printed statements and receipts. We just make that process a lot more frictionless.
X: It’s sort of surprising that you can’t do this with PayPal already, or with your bank. It seems to me that payment companies and financial institutions are dropping the ball on innovation.
RA: We have a slide in our PowerPoint deck that mirrors what you just said. Payment companies in general are still innovating, but it’s a difficult landscape. There are a lot of compliance and regulatory issues. Moving money around is not something to be taken lightly.
I think where PayPal has failed to innovate is that 10 years ago, when they first started, the original idea was to allow people to send money via handheld PDAs. There was a very limited market for that, for a variety of reasons. When eBay exploded, they realized there was a really big opportunity in allowing people to accept payments online for things they’d sold. As the company evolved into this merchant processor, it began to look a lot more like its customers than like the people it served. Its customers ended up being the merchants. There is very little reason to innovate now because they are doing a pretty good business just allowing people to sell things online. From a user perspective, it has completely failed to innovate. It’s not really a functional, clean, easy-to-use way for people to collect money online for normal things.
X: Most of the use cases you’ve been describing, like collecting frat dues or paying the rent for a group of roommates, are things that are relevant to a lot of young people, but I’m wondering if you think WePay also has appeal for people in older demographics.
RA: One of the reasons we started with those use cases is simply because that’s what we know best. We know how to market there. Fraternities actually deal with a tremendous amount of money. That’s a great way for us to grow, but over the past year we’ve become more cognizant of the fact that this problem permeates all age groups. So we’re trying to identify more verticals that we can move into. School clubs, PTAs, Boy Scout and Girl Scout troops, professional associations like Kiwanis and Rotary and the Shriners are all dues-taking organizations. So we are getting smarter about what verticals we can go after. It’s not just limited to 20-to-28-year-olds.
X: A lot of money must be passing through WePay or sitting in WePay accounts already. To handle all that, did you basically have to become a bank?
RA: The process is pretty terrible. To become a chartered, licensed bank is a multi-million dollar proposition. But we have a partner bank on the back end that we work with, Bancorp, which has been truly instrumental in helping us get the product off the ground. At the end of the day, we are offering FDIC-insured bank accounts. What we get from them are the back-office financial details. The technology is built by us, and we leverage their position as a safe, secure, chartered bank to hold the deposits and issue the debit cards.
X: How hard was it to find a bank that would work with you?
RA: That was probably our biggest challenge. There are a handful of innovative banks. Most consumers don’t know their names, but they are doing innovative, early-stage things that are providing startups like us with the opportunity to deliver a great product to consumers, and Bancorp is one of those. There’s a startup in Boston, Perk Street Financial, and they’ve been instrumental in their case as well.
I’m a pretty outspoken critic of the general lack of innovation in financial services. If banks were doing their jobs properly, I don’t think you would have a Mint or a PayPal or a WePay. The services fit so naturally into what banks are doing; Mint is just a better online banking experience, so you can see what’s happening with your money.
X: Can you see one of those innovative banks like Bancorp buying WePay someday? Is that your exit scenario?
RA: I don’t know what our exit scenario is. We want to build a big company. Whatever that means in a couple of years, we’ll see.
X: Do you have any stories about people using WePay in ways that totally surprised you?
RA: There are fun ones that are relatively straightforward—roller derby, for example. There is a pretty large number of people on roller derby teams, as it turns out. One of the other interesting uses is for joint spending accounts between girlfriends and boyfriends who don’t want to go to the trouble of opening an account and calling it a joint bank account. There are a lot of commitment issues there. With WePay, you can set it up in a second and tear it down in a second, and put money in it for date night or whatever, and having an ongoing record of the expenses.
Another one is social savings—people saving together. People will have a trip in mind for seven months down the road, and they’ll send a recurring bill for $20 a week, and at the end of the year they’ll have $2,000 to go on a big group trip. Donations have also totally taken us by surprise. There are a lot of people collecting donations for friends who are having trouble paying their mortgages. You don’t have to be a registered non-profit to start accepting donations this way. After the earthquake in Haiti, we saw a ton of Haiti support groups pop up. Will.i.am from the Black Eyed Peas had this fund for paying people’s mortgages, and he actually used WePay to collect donations for that. That was a cool use case.
X: What’s the next year going to be about for you? Do you have milestones that you’re working toward that would help convince investors to put in a larger Series B round?
RA: We have some internal milestones, but I think generally the investors want to see that there’s a market out there for the product. It’s like pornography—you know it when you see it, meaning that you know when you finally see the product-market fit. By the end of this year we’ll have pretty solid data about how big the market is, and who wants to use the product. We have a pretty long runway, and we are really focused on getting the product out there and getting it into people’s hands.
