Long time no see, everyone! Today I wanted to give you more in-depth information about WePay, which we’ll be visiting soon. It is amazing to think about how our payment culture was like back in years– cash, bank transfers and checks, and how drastically the transfer of money has changed over the time. I had a pleasure to give you the brief overviews from co-founders who graduated from BC to the role of WePay’s in linking banking world and the tech industry.
WePay: Payments-as-a-Service for Platform
WePay is one of fastest growing startups in Silicon Valley, marking 1500% growth in the course of 2015-2016. Not to mention 4354.5% growth over the last three years–I mean, that’s 43 times of what it used to be in only three years! WePay provides an online platform designed to accept and process instant payments. It delivers payments-as-a-service APIs for simple activation of payments without having to modify user experience. In simple words, WePay targets the owner of the platform like GoFundMe, Caring.com, etc., not directly the buyers or sellers. Instead of all these crowdfunding sites coming up with their own solution, or program, to protect customers from frauds and frictions, WePay is selling their solution for other companies.
Original inspiration came from Rich Aberman, one of two co-founders, when he had to raise money with 14 other friends to pay for his brother’s bachelor party. After receiving checks, PayPal payments and cash from all over the U.S. he found this process cumbersome and that was how WePay was born. After studying for PayPal’s weakness, Bill Clerico and Rich Aberman, two young BC graduates and co-founders of WePay, founded WePay in 2008 asan alternative to PayPal. Ironically, two founders got the monetary support from many investors, one of them being an angel investor/co-founder of PayPal. When they were looking to raise money for their Series A funding, they did not go very far, turning to Bell and, through him, Highland Capital Partners, with whom they raised $7 million.
In 2012, when WePay raised $10 million as its Series B round of financing, WePay decided to roll out a white-label payments API and lowered its prices to court third-party developers and debuted an easy way to embed in-line payments. It has also been developing an algorithm that will prevent from fraud, which I will discuss in more details later.
In 2014, they are completely moved out from the group payment and focused on the payment API. Since then, WePay’s revenue has grown 150% after it pivoted. Also, it has grown from a small 13 employee company to the fastest growing startup with more than 200 employees now.
Boston College at WePay
- Bill Clerico’07: co-founder and CEO
- Rich Aberman’07: co-founder and CSO
- Alex Smith’15: product manager
Veda Social Risk Engine: the way WePay prevents fraudulent activities
Often fraudsters would try to steal millions of dollars by setting up an account to solicit other consumers. That’s why WePay added in-depth assessment to determine whether the customer isn’t trying to commit any fraudulent activities. Veda social risk engine uses data as a way to make sure they are actually verified sellers. Veda incorporated the data from social media like Facebook, Yelp and Twitter to distinguish real people from fraudsters – sort of like WePay credit score.
Veda also uses pattern recognition, integrated support data, and automatic cross-referencing to analyze risk. Veda needs five pieces of information to get started: (first name, last name, name of business, email address, and phone number.) Merchants get approved within a few minutes. WePay has way more suspensions for suspicious customers than PayPal, which means WePay is more meticulous and careful with letting people make payments. Because WePay has to undertake liabilities for any fraudulent activities as the intermediate between platforms and the users, they were able to save quite a lot by being extra careful!
As I mentioned in my presentation, payment API is all about the volume because it’s business model heavily lies on transaction fee, which is relatively low. Here are some basic information on rates and fees:
- 2.9%+$0.30 flat ratefor every credit card transaction
- 1% + $0.30 flat rate for every bank transaction
PayPal, Venmo, Square, Stripe…
It is interesting to see how WePay’s competitors changed as WePay gradually pivoted from one another. When WePay first launched, it was referred to as “anti-PayPal.” Just like the advantage of Lyft was “not being Uber,” WePay’s greatest advantage was that it wasn’t PayPal. Instead, WePay improved the shortcomings of PayPal and made the payment simpler. If you have bought anything from a website that uses PayPal, you know it asks you to go on PayPal’s site to sign in/login. However, WePay’s product, the payment API, is completely embedded in the user-interface of that website that you as a user don’t need to know that you’re using WePay in order to pay. It makes the user-interface more user-friendly and simple. PayPal may have advantages in that it started its business early and has a bigger body of consumers, yet WePay is quickly catching up with PayPal.
Interesting competitor would be Venmo, which has basically the same idea as what WePay used to. Venmo started their business a year later than WePay, and it functions just like what WePay had tried to achieve– making group payment easier. A lot of experts are suggesting reasons why Venmo is so successful: its social media component, its direct UI, the increase in the number mobile, etc. There hasn’t been a clear major reason that could explicate the comparatively huge success of Venmo, but I believe it is timing. WePay didn’t have the best timing for its initial idea with group payment, but because they had the right direction for their business(pivoting to Payment API), their business not only survived but also marked the notable success in a different way from Venmo.
Stripe and Square, two WePay-like payment API companies, are considered as two competitors of WePay. Bill Clerico at one of his interview mentioned that he doesn’t “view Square as direct competitor. Square also serves small businesses and helps them process payments, but really we’re enabling other software companies to build Square-like experiences.” Stripe is also somewhat different from WePay in that Stripe is for developers so they can manipulate the UI, whereas WePay is more integrated in each platform.
- In some way, WePay is pivoting from one independent startup to a child organization, how these changes are going to affect WePay’s culture?
- What were some difficulties as WePay, a growing tech company, was making a deal with one of the biggest bank in the world?
- Cryptocurrency is getting contradicting views. Is WePay going to accept it as a means of payment in the future?