Uber is launching a credit card

Uber is going to get to know its customers a little better thanks to its new partnership with Barclaycard U.S., which will issue new, Uber-branded credit cards.

“The seamlessness is predicated on how easy it is to get out of an Uber and pay,” said Judy Zhu, Uber’s U.S. fintech and loyalty partnerships lead. “No matter where you are in the world in the 600 cities we’re in, Uber pretty much feels the same. We’ve now started to focus on the reward aspect of how to link Uber to your outside world, to the things you’re doing before and after an Uber ride.”

For most Uber customers that includes spending at restaurants and bars, travel and shopping. So Uber’s annual fee-free credit card incentivizes them to do more of those things and as a result, use Uber more to get them to those experiences. It offers four percent cash back on dining purchases, which includes UberEATS; three percent on hotel and airfare; two percent on online purchases, including Uber rides; and one percent on everything else — that is, purchases made with the physical card.

It’s a perfect reminder of how a major brand that customers like interacting with can use custoemrs’ transactional data to curate experiences that steal their attention away from bank brands, moving the financial services aspect of the interaction to the background. Barclays’ U.S. business has always been a partner-first bank, said Denny Nealon, Barclays head of U.S. partnerships.

“It’s never been about our brand, but our partners’ brands,” he said.

What’s really new, however, is that the experience is built natively into the Uber app and points are posted and available for redemption in the Uber app — immediately.

“You’re going to be in the Uber app and never [have to] leave the Uber app,” said Kirsten Osland, Barclays’ director of U.S. partnerships, adding that Barclays has been “pushed to focus on customer experience, simplicity and timeliness. You’re going to be able to do this from start to finish to the point where you’ll be charging on your card in an Uber.”

It’s one step closer to what has been perhaps the holy grail of fintech: is to transform financial services so customers never need to know they’re interacting with their finances, suggested Arman Zand, head of portfolio engagement at Quona Capital.

Along with name and Uber ratings, Uber users and cardholders will soon also see their points balance.

The onboarding process happens in Uber too. When users open the app they’ll be prompted at the bottom of the screen to learn more and apply for the card. Any basic information Uber already has on the customer appears in pre-populated fields leaving the customer to enter only what’s absolutely necessary, like a Social Security number. A decision should be ready within just a couple of minutes.

“Nobody is in Uber hanging out doing things playing around, you’re pulling it up because you’re trying to get home. So between the time you turn on your app and get a ride and get to your destination you should be finished with your process for applying for a card,” Zhu said.

Zhu maintained that Uber is still a transportation company, not a payments company. Launching a card grew out of a desire to add value to the ride sharing experience, not the need to think about a payments strategy.

“We never said we were an expert in payments, our focus was on revolutionizing transportation. A big aspect of that is the magical moment when you step out of your Uber, so we naturally started seeing role payments play,” she said.

How people choose to pay for Uber was a big part of the thought behind how to reward them. There are lots of card products in the market today, Zhu said, but for Uber to play within those confines wouldn’t have allowed it to add value to its customer relationships by learning what else they do when they’re not in an Uber.

As part of the perks attached to the card, Uber will push exclusive events and experiences to customers in certain cities — like secret concerts, secret shows, private dining experiences with top chefs. The company already knows where its customers are and will be able to serve events to them, rather than put the onus on them to go to some event or ticketing site to see what’s going on at a given time. The transactional data will inevitably help them tailor what experiences they push.

Customers also receive a $50 credit in subscription services after spending a certain amount in a year and mobile phone insurance up to $600.

Innovative as Uber has been, by making payments invisible and now by speeding up the on boarding and points redemption process, it’s also underlining the fact that most payments today still happen through cards. Peer-to-peer payments brands Square Cash, Apple Pay and Venmo all have mobile interfaces, but the payments themselves are still card payments (and they’ve all introduced plastic prepaid cards this year to bridge the adoption gap between physical and mobile payments).

Barclays wants to eventually provision the card directly into other digital wallets, Nealon said.

“Uber is all about on-demand experiences,” Zhu said. “What we want to realize is the on-demand aspect of getting that card. You’ll still have to wait seven to 10 days to get the physical card but we can instantly provision the card so you get immediate use of the card added to your Uber riders’ app and use in Eats. To the extent that you’re calling the car and applying for the card, by the time you get home you should be able to get your four percent cash back on the dinner order you just made on Uber Eats.

How new payment technology is helping Gett compete with Uber globally

gett taxi and zooz partnership

Payment solutions aren’t always thought of as strategic but in Gett’s case, getting payments right means being able to compete globally versus aggressive ride-hauling app competitors like Uber. The taxi on-demand company already operates in 57 cities worldwide, including New York, London, Moscow, and Tel Aviv. As one of the largest on-demand transportation apps, it’s essential to have the right combination of risk management and seamless user experience when it comes to customers paying for their rides in every country it does business.

As Gett grows increasingly global in its scope, it requires the same from its ability to process payments. Apps like Gett have simplified the user component of payments by making them almost invisible — once you’ve set up your account and ordered a ride, a user never really has to touch payments again. The challenge, though, on the back end for global companies is managing the complexities of foreign acquirer banks and cross border payments.

“As we continue to scale we realize that the payment process and user experience through our E-wallet is a key factor for our users. The challenge for us is to make the payment process smooth and slick to our authentic and loyal users, while blocking fraudulent activities ,” said Tal Brener, CFO Gett.

Working with only a handful of acquirers means a merchant can’t fully optimize for risk and profits. Fees and user experience can suffer. That’s where Gett’s new relationship with payment technology player, Zooz comes in. Zooz is a 5 year old startup that sits on top of the traditional payment processing relationships merchants have with Braintree or Stripe, for example. It’s also agnostic to acquirers. Working with Gett, the company’s smart-routing technology enables the transportation firm to smartly route payments to the appropriate payment processor and acquirer.

“The Zooz platform makes payments painless by reducing card declines and fees, and easily integrates additional local payment providers and methods for the benefit of our customers” Gett’s Brener explained.

For example, Gett may pick up a Chinese citizen traveling on business in London. Zooz gives the firm the ability to route this payment through a local acquirer in China, applying local risk management rules to improve decline rates and avoiding cross-border fees. “With Zooz, Gett can now route transactions based on the firm’s own KPIs, not just based on relationships they have with acquiring banks,” said Oren Levy, Zooz’s CEO.

Built extensively to service global retailers, Zooz is a technology platform and charges its clients a fee based on usage. It counts DIY website builder Wix, daily deals site, Groupon, and iconic British brand, Burberry, as clients. The firm also provides an analytics package so that its customers can grow internationally with added transparency on their payments systems. “Using Zooz, Gett now can tell where the issues are, figure out how they can solve them, where issues came from, and why cards were declined,” Levy remarked. “Before Zooz, merchants had to go to a bank directly to resolve any problems. Now, they can see more data and optimize their processes and revenues.”

With all the talk about Uber’s success, it’s easy to forget that there are other companies competing for the future of transportation. Gett is one of those companies enjoying early success. Unlike Uber which turns anyone with an app and a car into a potential driver, Gett works with existing taxis or black car services. According to Crain’s, the company was rumored to be raising upwards of $400 million on a valuation as high as $2 billion after having raised over $200 million to date. Competitor Lyft recently closed a $1 billion round at a $5.5 billion valuation.

Paypal recently touted the fact that every time a customer pays Uber, the firm sees revenue via its Braintree division.  And who knows, maybe the competition for global on-demand transportation will be decided by payments?

An ex-Uber marketing pro weighs in on the Uberization of money debate

online lending

[dropcap size=big]W[/dropcap]hile the stock market opened 2016 with a loud plop, the hottest companies continue to be technology startups. Atop this pile sits Uber. Uber has become synonymous in tech circles for how easy buying things really can be and how enjoyable the experience can be, as well. If the taxi industry can be Uber-ized, the thinking goes, so can many large industries that have similarly been slow to change.

This conversation hit finance circles when the WSJ ran a story about how slow the finance industry has traditionally been in adopting best practices that have influenced the buying cycle in other industries. According to the article’s author, Zachary Karabell, head of global strategy at Envestnet, finance is indeed now undergoing its own Uber process. Not overnight or over weeks and months, but over the next few years, major parts of finance will undergo technology-driven disruption. And this change is being driven by fintech startups, like Wealthfront, EquityZen, Loyal3, and ZestFinance.

Whatever the risks, however, the Uberization of finance is no fad or stunt. Many of today’s startups may implode, as most do, but the spread and democratization of capital—and the proliferation and analysis of data—are irresistible trends. They will offer new opportunities to millions of people, entrepreneurs and investors alike. They also will unlock a vast amount of money, energy and talent, and to that we simply should say, bring it on.

Not everyone buys this line of thinking. Cornerstone Advisors’ Ron Shevlin explains that there isn’t really a parallel to the financial industry because this whole discussion is based on a misunderstanding of what Uber has really done. Uber pursued a consolidation strategy in a highly fragmented industry. The WSJ cites marketplace lending and crowdfunding as examples of uberization but rather than consolidate, these new forms of finance add to the fragmentation of the finance industry.

An Uber exec weighs in

Upstart, an online lender targeting millennial borrowers, is typically used as an example of the disruptive change that’s happening in finance. In order to lend to young adults, Upstart had to turn traditional lending models on their heads, as many of these FICO-like credit scores rely on historical data. As young people find their places in the gig economy, it’s not easy for them to get loans. Upstart’s forward-looking models are trying to change that. Young borrowers don’t have very much credit history, so Upstart uses other inputs to determine creditworthiness for its customers.

Mike Osborn joined the startup finance company recently as the company’s first CMO. Hailing from the marketing team at Uber, Mike joins a firm that’s generated $240M in originations in 18 months since it launched, averaging 25% month to month growth since inception (you can listen to Tradestreaming’s interview with Upstart founder and ex-Googler David Girouard below).

Osborn has a quick 3 point questionnaire when testing for Uberization:

  1. Is this an industry ripe for disruption?
  2. Who’s the disruptor?
  3. How will it be disrupted?

Finance fits this model, and to Osborn, much of the change is going to happen from the bottom up — with changes in consumer usage patterns brought about by top UI/UX in new finance apps and platforms. “When you think of what drives user experiences, in Upstart’s case, it’s about having better holistic models, better rates, different options — all with the view that we’re helping our users out of a jam,” Osborn explained.

In this vein, next generation finance tools should resonate with users and generate the same reactions as other apps residing on their smart phones. Why shouldn’t users have the same visceral responses to their banking apps that they do to their transportation apps?

“When your target audience are millennials, they live and breathe online and they do it in a community-driven way. Financial service providers need to find ways to get their users financially fit and package it into a shareable experience and celebrated event — the same way getting physically fit is. When someone loses a lot of weight and gets in shape, they take a before-and-after picture and post it socially. I can imagine the same thing happening before and after a difficult credit card situation.”

Growth hacking new accounts online and offline

Perhaps ironically, many of today’s online financial services startups rely on offline methods to acquire new customers. It’s especially acute when it comes to landing new borrowers, as two of the largest online consumer lenders, Lending Club and Prosper, each send tens of millions of offers via snail mail every month. Upstart’s Osborn embraces both online and offline acquisition marketing.

“When we think about where we’re going to find our next customers, we’re definitely looking at the offline opportunity. We’ve been positively surprised in volume and profitability with offline channels. When you get an email offer to refinance your debt, it’s pretty easy to ignore it. But when you get your credit card statement in the mail and a couple of days later, receive an offer to help pay it off, the offer has relevance and timeliness when it comes via direct mail.”

Same goes for social media marketing. Osborn claims that a Facebook response is either immediate or it disappears into the ether. That’s not to say Facebook isn’t fertile ground to message new prospects — it just needs to work quickly. Same goes for Google and search engine marketing. “The economics on Google work but we’ve been most positively surprised with direct mail,” Osborn reasoned.

If finance is being Uberized, where’s the pressure coming from?

It’s debatable whether the disruptive change everyone’s talking about is supply-side or demand-side driven. Osborn thinks it’s actually a confluence of factors that’s enabling the next generation of financial services, technologies, and apps racing to get a foothold with today’s customers.

  1. Consumer-led: The changes happening in the industry right now are implicitly lead by the consumer. People are demanding change. When every experience looks like an Uber experience, you get what you want and begin to expect more. You don’t want to have to go through all the hoops and paperwork associated with traditional financial services.
  2. Technology-driven: A lot of the change that’s happening in online lending is coming from changes in capabilities. Now, at Upstart, the firm has the power to make credit decisions using so many different signals — like what grades a prospective borrower got in college. These borrowers were previously shut out of the market if they were judged solely on historical credit models.

Osborn believes it takes a new type of company and leadership to be able to compete today — both require an understanding of big data and large systems. “When I first met with Dave and the rest of the leadership team, founded by Googlers, I saw they understood the power of taking in all that data and making wise and powerful decisions, like extending credit, with it. There’s a reason we have such good ratings on CreditKarma and high NPS scores with our customers.”

Whether financial services are actually being Uber-ized misses what’s really going on. Led by technology advances and driven by customer demand, startups and incumbent institutions are changing the way users interact with money.

Photo credit: FamZoo via Visual Hunt / CC BY-SA