Gabriella Griffith caught up with Droplet co-founder
Droplet co-founder Steff Aquarone
to find out more about Droplet and how the Birmingham-based mobile payments business could shake up ecommerce forever.
So Steff – where did the idea come from?
Around November 2011, my co-founder Will Grant and I sat down and looked at all of the business sectors which we felt hadn’t yet been completely upended by the web. We have both been involved in creating businesses for a number of years and Will has worked in tech his whole career – we wanted to create a “go big or go home” business.
We realised that the world of banking and finance was ripe for disruption for all sorts of reasons. The dominance of the banks needed to be challenged, giving users an empowered choice when it comes to using their money.
We decided to start with payments. Consumers are used to dealing with third parties when it comes to making payments and aren’t put off by new situations so we thought that was the best place to find traction initially.
And Droplet was born. What exactly does the app do?
It is a mobile payment app. You top up the balance on your phone and use it to send payments to other people or merchants. The elements of this kind of service that other financial companies charge for, we have made completely free for both users and merchants. Our service is not based on credit or debit cards, the balance is held by Droplet not your bank.
How have you offered the service for free?
We feel that all payments will eventually become free. It’s the way disruption happens – there is no cost in moving an amount of data around. The attraction for merchants however is not just around the cost. Our business has a much broader vision than simply payments.
A bigger problem for merchants is the need to think about mobile technology. They are aware that consumers are treating their mobiles as a hub of interaction and merchants want to offer something in that arena. The trouble is trying to get people to download their own apps – this is hard unless you’re a huge company like Sainsbury’s. A 1% adoption of a proprietary app is deemed as successful.
Droplet is going to build on the payment service. It will also act as a platform for third parties to build their own functionality by releasing third party API. For example, if a theatre uses Droplet to accept payment of tickets, it can build a function on Droplet that will also allow users to order drinks from their seats during the interval.
It means merchants don’t have to build their own apps and persuade people to download them in order to offer extra functionality. Customers will theoretically already have Droplet to make the payments. The payments service is free but we’ll charge a subscription for the value added functionality and we’re rolling out the third party service in March.
Why let others build the functions on your app?
When you add two sided functionality to an app, for both merchants and users, it can really compromise the users experience by clogging it up. This way you only add the functionality if you need it. Also, we don’t think we’re clever enough at all of the other things that our merchants do, to come up with great ideas for extra functions.
It also helps the third party developers because they are normally commissioned to do something for a client, or creating something purely speculatively. We at Droplet will have a large, in-depth picture of where the opportunities are and we can present them to developers. We can guide and de-risk their investment.
What differentiates Droplet from companies in the same space like iZettle or Square?
These other companies are innovating in a great way but on the existing credit card system. As hard as it is to create something separate as we have done, we can now do so much more than the existing credit card system would let you do. The only data you can move around on them is the value of the money and the authorisation. You can’t add extra data like your licence plate or favourite drink.
We can add value around the transaction – no-one else has been stupid enough to create something completely new. We did say go hard or go home!
How do you think Droplet could affect eCommerce?
Some people will appreciate it because it is free but it comes down to the user experience. Traditional eCommerce sites offer PayPal or credit/debit card options. Offering an alternative like Droplet is great because its free, quicker, easier and more secure. There’s no need to get your credit cards out and use the numbers.
What is more interesting is that eCommerce is changing and the mobile is becoming an important bridge. Anything that an online retailer wants to do on mobile they can do on the Droplet platform and it won’t require customers to download the merchant’s app – they just need Droplet.
Do you also receive revenue from interest on the money held by Droplet?
It’s not our most interesting revenue stream but we are making a bit on interest. Our early stage merchants have shown some promising behaviour. We expected that they would load up the money and then get it out straight away but they have been leaving it in there and using it to pay other merchants. It’s definitely interesting for us.
Have you gone to a lot of effort to make sure the system is secure?
Well we spent six months building the app and six months making it secure. The web has solved a lot of problems when it comes to security. SSL encryption is almost impossible to hack. We have used all of the latest technology to improve our security infrastrucure.
We have a back-end system to prevent hacking that mirrors the strategy of the world’s biggest financial institutions. We are well aware that if we get one hack, we are dead!
Have you received any investment so far?
We have had £100,000 of angel funding and that has given us a runway from which to grow the team – the earlier costs were absorbed my Will and myself. We are on a Series A fundraising round at the moment for £10 million. It’s no small amount but the purpose is to take the service across the UK. The third part API will go ahead from March anyway which will deliver exciting opportunities.
What has the adoption been like?
We ran the beta testing in the centre of Birmingham. We’ve found that the major driver for users is being able to have a choice about the option they will use for payment, and chosing one that is different from the norm. We had 1,200 users during the beta with no marketing or promotion and 60 merchants. People were finding it through the subtle literature we had left with the merchants.
We did our first bit of PR last week and the user base doubled over night to 2,400. It’s interesting to see that return on investment. The average top up has also gone up from £11 to £18 and average transaction have gone up from around £3 each to over £10.
It’s all very reassuring.
See more at Dropletpay.com
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