After announcing we’d be working with Google Pay to power key components of their rewards platform, award-winning financial journalist, author and editor James Ledbetter published an excellent breakdown of the story in the December edition of his monthly newsletter - FIN. He kindly agreed for us to share the story with you.                                                                          

Powering Google Pay’s Next Steps

December 23rd 2020

The word “pivot” is overused by tech founders who’ve hit a dead-end, to the point of parody. But it really is true that founders who start their spotless business thinking that they are trying to solve Problem A end up, once their knees are deep in the muck, with Solution B.

Dev Subrata, founder and CEO of the UK-based Fidel, places himself firmly in that camp. When he launched Fidel in 2013, he and his team were trying to collect the data generated—location, amount, time of day, method of purchase—when a customer makes a purchase. “We were using QR codes and Bluetooth beacons and we thought those would change the world,” he told FIN in an interview today. “They didn’t.”

Fidel had single-mindedly invested a lot of money and engineering effort to create a product that couldn’t actually do the thing that it intended to do. “We nearly bankrupted the company,” Subrata admits.

The problem was that there was a level of protected data that Fidel couldn’t access, and without that, nothing that they could create around customer behavior mattered much. What else to do? At the time, many in the payment space—including Google—were focused on creating digital wallets, but Subrata knew “there was a graveyard of wallets” he didn’t want to join.

So Fidel decided to penetrate the walls of the big credit cards—American Express, Mastercard, and VISA—and offer them something they couldn’t produce themselves: a secure, “tokenized,” API that would layer on top of their data network, and could be used by developers to quickly create all sorts of services the cards could not create on their own. These services include loyalty programs, discounts, and cashback rewards.

It was no easy sell—not because it was a bad or unappealing idea, but because the credit card companies are almost by definition severely risk-averse. Still, Fidel persevered—”by baby steps, all based on increasing trust,” he recalls—and eventually secured deals with the Big Three. This was a huge achievement, and when Fidel launched its API to the world in early 2018, customers who recognized the power of this secure, real-time data came knocking on Fidel’s door.

Including, as it happens, Google. “I wish I could tell you I had a years-long tactical plan [to win Google as a client],” Subrata told FIN, “but they came to us.”

And how. As FIN documented last month, Google is in the process of massively upgrading its presence in the payments world:

The range of financial services that Plex promises is quite far-reaching: peer-to-peer payments; automatic payments to restaurants and parking meters; free-to-open savings and checking accounts, with Google-branded ATM cards; expenses management; and more. Google will partner with established banks—including Citi—to offer banking services, and of course there will also be all kinds of offers and cashback rewards and discounts that will power the whole system. And it’s not as if Plex is starting from scratch; the company claims that 150 million customers in 30 countries already use Google Pay. Even healthy fintech companies like Venmo have to be worried about Plex.

As pedestrian as things like cashback rewards might sound, anyone who pays attention to customer payment behavior will tell you that these features are critical to both acquiring users and keeping them. Just to take an example: If you are a Target shopper, and you’ve registered your card with Google Pay/Plex (and therefore with Fidel) you could get real-time discounts with Target even if you don’t use that registered card to pay. If you save money, you are likely to go back!

Yes, where Google is concerned, there are well-deserved privacy reservations about turning over financial information. But Subrata stresses that with tokenization, literally no one—not Fidel, not Google—knows what the data means, or keeps it in any usable way. If at a carnival fairgrounds you happen to pick up a torn ADMIT ONE ticket, you can’t use it, and neither do you know who originally bought it—that’s what tokenization achieves.

Fidel is not profitable—”we’ve not optimized for that,” the sincere Subrata told FIN—but its future growth seems reasonably assured. Look for the company to expand the types of APIs in offers; a system allowing customers to accept payments to a given card or wallet is already in beta. Beyond that, it’s anyone’s guess, although Subrata’s current mantra is “Embedded finance is real.”

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