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Payments Briefing: Behind Papaya’s bill payment technology

  • This week, we take a look at how Papaya uses AI to simplify bill payments for consumers and merchants.
  • We also explore PayPal’s entry into the stablecoin race, and how payments are increasingly becoming “invisible”.

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Payments Briefing: Behind Papaya’s bill payment technology

Papaya is an app that uses AI to simplify bill payments for consumers, and to help merchants and billers get paid faster. The Papaya app lets users take a photo of any bill – parking tickets, utilities, phone bills, medical invoices – and then pay it directly through the app. Users can choose from a number of common payment methods including bank accounts, debit cards and credit cards.

Papaya recently announced a $50 million Series B funding round led by Bessemer Venture Partners with participation from Sequoia Capital, Twitter's Dick Costolo, and others. The firm’s executive team hails from big names including GreenDot, Acorns, IdeaLab, and Blackhawk.

I recently had a chat with Papaya’s co-founder and CEO, Patrick Kann, to understand why he felt it was essential to create Papaya, what the app offers, and where he plans to take it from here.

Here’s my conversation with Kann.

What inspired you to create Papaya?

I founded Papaya in 2016 alongside computer vision scientist Jason Meltzer, who is also our CTO. Growing up in Brazil, a country with really high social inequality, made me sensitive about my good fortune to receive a quality education. I became passionate about giving back to the community and creating impactful businesses to help people.

When I moved to the US, I couldn’t believe how hard it was to send bill payments compared to Brazil’s Boleto system, where every bill comes with a barcode and you can pay through a single, centralized online system. Finances are the number one cause of stress for US families, and paying bills – especially paper bills – is a major component of that stress. Jason and I saw that this represented a huge opportunity for us to ease financial burdens by creating a way for Americans to easily track and pay their bills – and that’s why we created Papaya.

Papaya claims that only 2.4% of US consumer bills are currently paid and managed by mobile devices. Why do you think that’s the case? And why is it a problem?

For mobile bill payments to grow, there are three components of the experience that must be met: frictionless (pay bills with a few clicks), universal (pay any bill), and free for consumers. Combining these three components has been nearly impossible because the payments landscape in the US is completely fragmented, which leads to incredible friction in paying bills, whether that means setting up an online account for each service provider, calling by phone, or mailing a payment by check. To date, there has been no standardized template or process for bill payments unlike in Brazil, where every bill comes with a standardized barcode and can be paid through a single, centralized online system.

So, paying bills with your mobile device is not intuitive, or often even available, for most US consumers. This is problematic because it results in customers paying late and even at times going to collections just because current means for paying bills are simply inconvenient. And for businesses, it means they are missing out on critical payments.

Papaya says it allows users to take a photo of any bill and pay it in seconds, with a 97% accuracy rate. Can you elaborate on how that works?

We’ve built an AI-powered “bill understanding technology”, which can understand an invoice in the same way that humans do.

There are two main components to our technology. The first and most obvious one is reading the bill. We’ve built the world’s most sophisticated bill understanding system that extracts all of the relevant data from a picture of a bill to enable payment. We use computer vision and machine learning to turn pixels into text, evaluate image quality, extract relevant data, connect the data to systems that can pay bills, and crucially, evaluate the quality of the extraction and association to give fine-grained levels of confidence.

The second component is payment execution. Our users can pay literally any bill in the United States. There are millions of merchants out there, and the traditional way of sending a check would provide the same bad user experience as bank bill pay. Papaya has dozens of payment execution methods. We use AI to optimize quick and efficient delivery without resorting to mailing checks for the vast majority of payments.

How do you plan to acquire new users? And what are the customer acquisition targets/expectations for the coming years?

We’ve been fortunate enough to grow mostly organically. Because Papaya helps businesses and organizations across all industries to get paid faster and more often, many billers are proactively recommending us to their customers. This includes municipalities partnering with Papaya on parking tickets, healthcare organizations, and government organizations for taxes.

We have no marketing team and currently spend zero dollars on paid customer acquisition.

We’re looking to grow mobile bill payments adoption well beyond the single digits. We want to improve the entire bill payment experience for American families – and we aim to expand beyond our initial use case of payments for paper bills, which we expect will attract more users and partners.

How do you plan to utilize the recent $50 million funding? Will it allow you to pursue and implement plans that you hadn’t been able to thus far?

We will use the funding to expand our team to keep pace with the increasing demand, forge additional partnerships, and continue building industry-changing technology. Papaya currently has around 80 employees, and we plan to increase our headcount with this new fundraising, especially within product and engineering.

We’d like to partner with more businesses and organizations across all industries to create more frictionless payment experiences, and to help these billers get paid faster and more often.

PayPal poses a threat to banks in the race to develop stablecoins

PayPal is reportedly planning to issue its own stablecoin with a working name of PayPal Coin. The firm has not revealed much yet beyond confirming that it’s considering its own stablecoin and would work closely with “relevant regulators” if it does move forward.

Recent favorable tech and government initiatives have driven the value of the stablecoin market up to over $140 billion — seven times higher than two years ago.

PayPal has been getting deeper into the crypto game over the past year. In March 2021, it launched Checkout with Crypto, which allows PayPal merchants to accept crypto payments and settle in US dollars. And in April, Venmo also added a feature that allows users to buy, hold and sell crypto.

Banks have been less active than fintechs in supporting stablecoins and other forms of cryptocurrencies, and may fall behind in using crypto to build assets under management.

Global payment platforms like PayPal have advantages such as an account structure that enables the accumulation of value, and gateways that connect cryptocurrencies to the global payments infrastructure. Both Visa and Mastercard have expressed interest in supporting stablecoin payments. In December, Visa also launched a crypto advisory service as part of an effort to nudge banks and credit unions to build crypto products.

Quote of the week

“The future of payments is one where we never think about the need to make a payment, at all. The next great payments leap is not further into digital or connectedness, but into invisibility. Payment processes that were previously more visible, in the sense of requiring inconvenient manual inputting or interfaces between systems, are now trending towards faster and less visible alternatives.” – Shailesh Kotwal, vice chair of payment services at US Bank

Kotwal says we’re seeing a rapid adoption of digital payments capabilities by businesses across various industries, including retail, auto, healthcare, and transportation. These industries are actively looking to integrate payments and banking with their systems in order to maximize efficiency and growth. And although prices and records of what’s purchased should always be visible to both consumers and businesses, the process of paying for it need not be.

Kotwal predicts that we will eventually see payments fully disappear into simplified, holistic commerce platforms – and this will happen sooner than we think.

“Payments – the act of moving money from one person or place to another – will fade into the background. Soon, payments will become – and, in many ways, must become – invisible.”

What we’re reading

  • raises $1 billion round at $40 billion valuation (TechCrunch)
  • Tripment Health teams up with Walnut to drive BNPL for medical bills (PYMNTS)
  • Will an Amazon-Venmo deal shift ecommerce away from credit and debit? (PaymentsJournal)
  • US Bank ups card rewards for EV charging (PYMNTS)
  • British fintech Fly Now Pay Later secures $75 million for US expansion (Finextra)
  • With bank branches closing, ATMs are headed the way of the payphone (Payments Dive)
  • Revolut launches as a bank in 10 European countries (Finextra)
  • US Bank brings real-time payments to consumer bill pay (PYMNTS)

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