Invisible Payments Are the Driving Force That Transforms and Connects Ecosystems

Consumers all over the world are conducting more of their routine activities using digital methods, whether that’s booking trips, buying food, gassing up the car, shopping for any number of retail purchases, or doing their banking. Senior Vice President of FinTech Daniel Marovitz; ClassWallet Co-Founder/President Neil Steinhardt; and Car IQ CEO Sterling Pratz told Karen Webster that during the eCommerce journey — whether it’s physical goods moving through supply chains or a corporate road warrior booking a reservation — according to  Marovitz, a big part of the story is: How does one manage payments in a digital space?

At first glance the three firms seem disparate, with no overlap., ClassWallet and Car IQ focus on a range of differing core customers, respectively, hotels, airlines and restaurants; teachers and school districts; and original equipment manufacturers (OEMs) and fuel operators.

But a number of common threads run through the businesses, the trio of executives pointed out.

“Platforms,” said Marovitz of his own and his peers, “make this movement from offline to online possible.” And as Steinhardt added, “traditional payment infrastructure doesn’t satisfy current needs.”

Steinhardt remarked that as platforms, with payments in the middle, start aggregating a range of standalone activities together, value is created.

Pratz chimed in that the trio of platforms are all sharing in, and shaping, the same evolution of that value: How stakeholders can move from an old school form of payment modality — using a half dozen credit or debit cards to pay for, well, everything — to a unified, digital channel to get things done. In the process, paper-based processes and payments are abstracted away.

Challenges abound in that pursuit. For there’s the complex task of collecting the payments, then distributing them across the financial supply chain. For the education sector, optimizing the back office of schools to position them to provide a more connected experience for their students and parents is the key pain point. And for the digital, on-road experience, there are a number of consumer use cases today that use several distinct apps to pair cars with gas pumps and complete a payment once the car is gassed up — but bringing them together often hits speed bumps.

The Connected Trip

To be sure, the platform models, overall, have been tried and true. Marovitz noted that’s original brand, Priceline (here in the states) is now a quarter of a century old, with a long history of transforming the ways we browse, buy and schedule the means of getting away from it all.

To Marovitz, “travel is a particularly tricky sector” when it comes to payments. It’s a vertical that has a few distinct attributes, among them the fact that all transactions are “future business.”

The trips might be far in the future, or they may be as soon as this afternoon. But so much depends on what might happen. Weather intervenes. People get sick or simply change their minds. Flights get canceled … and online platforms have to navigate an additional layer of complexity.

“We have to send people to places where their cards won’t work,” Marovitz said. Enabling payments within the platform means pairing payment methods to different currencies, in different languages and making sure that all regulatory and taxation mandates are satisfied.

Marovitz noted, “There are a lot of powerful things we can do both inside and outside of payments to build a connected trip in a better way. There are things that we can do on the supply side that each of those constituencies can’t do on their own, and that we’re able to do because of our scale and because of our reach.” is, in fact, in the midst of trying to solve one of the biggest challenges in online travel management: Unbuilding the trip — making the changes to cars or hotel reservations without having to chase through the email inbox and parse the terms of rebates, refunds and cancellations. On the consumer side, he said, the scurrying is enough to frustrate even the most experience traveler (and as Webster remarked, often entails the aid of a glass of wine).

Pulling it all together requires an intricate level of co-operation between aggregators and what he termed “organic native travel providers” including hotels and airlines.

“Unbuilding your trip is almost more complicated, and worse, than trying to build it in the first place,” he said. The value lies in using the platform to stitch together the components of a trip so that they are self-referential and self-aware — knowing, for example, that the flight is on Day 1, but the rental car isn’t needed till Day 2. The different legs of the trip may be in different currencies, paid for across different methods, and delivering an Amazon-like experience is an advanced technical challenge.

The Connected Classroom

Separately, ClassWallet, which operates a digital wallet for K-12 education and state government agencies, Steinhardt said, strives to modernize cumbersome paper-based process for requisitioning supplies and paying for them.

The key pain point solved: Getting these schools and agencies the goods and services they need, but still making sure that everyone transacts within defined rules. ClassWallet, he said, is in the business of selling efficiency to the business office of a local government or school district (with significant cost and manpower savings) — and particularly to helping serve the needs of teachers stocking and restocking their individual classrooms.

In an illustrative example, he said that a teacher can take a picture of a receipt of supplies bought at Walmart and submit it across the platform for reimbursement. In one school district of note, he said, the platform enabled 9,000 reimbursements in the first eight weeks to teachers, within 48 hours of submission. That process would’ve taken 340 school secretaries chasing 15,000 teachers for receipts, to collect them at the school building, send them to the corporate office and move them over to payroll, he said.

In terms of the platform itself, ClassWallet enables reimbursement, debit cards, closed loop bill pay, and closed loop eCommerce. “It’s kind of a commercial-grade Venmo,” Steinhardt said, “and this couldn’t be done if we didn’t do it digitally.”

The ClassWallet model also provides guardrails for how much teachers can spend on supplies for the classroom. Reimbursements can be preapproved, or spending can be set within the limits of a preapproved budget or individual transaction cap (which cuts down on fraud).

The Connected Car

As for Car IQ, Pratz said that the car has become the new payment vehicle and said the consumer shift to digital is influencing OEMs, fuel operators and fleet operators to consider shifting digital in a whole new way. Car IQ’s primary focus has been on fleets and OEMs, where operators have traditionally used a range of methods to pay for operating expenses.

Those operators, he said, “are looking for a way to simplify payment management, and to aggregate spend in one place,” as fleets reconcile the expenses incurred by drives. The platform approach, he said, also helps to eliminate fraud, chargebacks and disputes. The digital wallet approach enables a contactless payment scheme that lets connected vehicles to pay for goods and services on the road — gas, toll,  parking, EV charging, for example — without the need for a physical credit or debit card or additional hardware.

That approach, he said, creates value for the fleets for the drivers and for banks and service providers that connect to the vehicles.

It also eliminates the biggest challenge, he said — the providers didn’t trust the car as a means of transacting. But as an issuing bank, he added, Car IQ is tasked with PCI Level One compliance and assumes the risk of the transaction, while verifying the vehicle, the driver and the transaction itself.

“We spent a couple years inventing an identity and authorization capability that instead of using a KYC [know your customer] process … we created one called KYM: Know Your Machine,” Pratz said.

And so, via KYM, every time a vehicle enters a gas station or crosses a toll bridge or pays for EV charging it automatically uses that identity to sync with the bank and the merchant and get approval and then transact without the use of a card. The driver, literally, is just along for the ride, a secondary authentication factor. When the vehicle transacts, it is connected to both the bank and the merchant simultaneously, dropping information in real time into a digital ledger. Future use cases will involve real-time payments and loyalty and rewards programs — even warranties, he said.

“My thesis has been that cars are just driving around looking for things to pay,” he said, “and it’s a massive market.”

And with a nod to his fellow panelists, he envisioned a future where each of their platforms could be linked, as school buses could pay for fuel, travelers could rent cars on their trips and the cars could be “attached” to the cards used to pay for that car.

The benefits of the two-sided marketplace, no matter its focus, Steinhardt said, are readily apparent.

“It takes a lot of work to  take something so complex and make it so simple,” adding that “we’re bringing all these buyers and sellers together, and we’re doing it across a lot of different modalities. Efficiency drives the adoption, and that’s the power of these connected digital payments … as we help customers solve problems they may not have even realized they were having.”