Before CEO Toffer Grant founded PEX, he worked in the world of prepaid cards (gift cards in particular), where Christmas was the biggest challenge of every year. Gift card use would faithfully and intensely spike around Christmas, only to settle back to a more typical baseline six to eight weeks after the “event.”
That was, of course, predictable — people would get gift cards in lieu of a physical gift, and recipients redeemed those cards in the first few weeks after their receipt. Predictable means that those spikes could be planned, and the technology that powered those payment products were built to accommodate the big spikes that happened once a year, before falling off to average levels.
At PEX, Grant is still working with prepaid cards, but their spikes are almost the exact opposite.
PEX issues Visa-branded debit cards, paired with a spend management app, to small businesses (SMBs) that need a solution for the part of workforce spend that is anything but predictable — related to specific tasks and, by its very nature, usually ad hoc. For example, the movie producer who is filming on location and needs a temporary workforce to support the production on-site; the plumbing contractor whose service technician needs to run to the distributor to pick up a part; the teacher who needs supplies for a class science project. These products give those workers an easy way to pay for those ad hoc purchases without putting any of their own funds on the line, and they give corporate financial managers the ability to fund those cards as needed and set business rules for how, where and when those funds can be spent.
In this context, he noted, the tech that powers the PEX cards used by SMB clients — and by the growing legions of gig workers in need of spend management solutions — wasn’t built for a few geyser-like spikes that happen over the course of a year. Instead, they support constant high usage, with the fraud controls to enable a secure and seamless worker experience.
The Prepaid Renaissance
Lately, Grant noted, prepaid has seen a bit of resurgence in the U.S. and globally, and the gig workforce deserves a lot of the credit. The prepaid card is a very useful tool for the ever-increasing number of gig workers who might incur costs — food and transportation, typically — in the course of doing their “gig.” These solutions eliminate the need for those workers to spend any of their own funds along the way, as well as track receipts and trigger manual reconciliation processes back at corporate.
“That has been a really big innovation: that none of these firms are looking for workers to spend their own funds in support of those gigs,” Grant explained, noting that the one possible exception to that might be locations where cash-only purchases need to be made. Other than that, out-of-pocket payments for workers are mostly a dying breed.
However, Grant added, these days, that innovation needs a lot of scaling up. The innovation necessary is for every firm in the space to be able to onboard and manage an onslaught of gig economy workers, and to get mass quantities of cards produced and delivered in a timely fashion.
On a small scale, at the consumer level, that’s not a big deal. If a customer loses their card, an issuer can get them a new one in a day to two. However, when firms are talking about providing thousands — and even hundreds of thousands — of cards to gig workers spread all over the world, this becomes a much more challenging logistical puzzle. The matter becomes even further complicated by the fact that security is constantly under siege on these platforms, and they, more or less, have to be up and running all the time.
“The payments industry has upstream mechanisms to fall back on,” Grant said, “so if you want to pay for a meal with a card on a Sunday night or make a purchase early Monday morning when maintenance is happening, you as a consumer don’t feel that because a stand-in is running during that time. But in this market, particularly because of the constant battle against fraud, stand-ins become a tool that can’t be used very often.”
Given the volume of these workers entering the systems, the challenge lies around building a system that doesn’t have spikes to be managed so much as a constant fire-hose level of output. Moreover, he said, the system needs to be customizable enough so that firms can have access to application program interface (API) tools that allow them to blend prepaid tools with their own internal spend management mechanisms. Different firms, different jobs and different use cases, he noted, have very different needs and call for solutions that they can mold to those specific requirements.
Mobile Moving In
The changing world of helping firms provision cards to workers means, in some sense, having a front-row seat to seeing the power — and remaining problems — with integrating mobile payments as a useful tool, Grant noted. Virtual cards aren’t new, but in the era of the contactless digital wallet, they’ve taken on a capacity with in-store payments that they’ve always sorely lacked. In theory, that should be a huge boon because it means businesses can push virtual cards and remove one big problem with physical cards: having to wait for them to arrive.
The trouble, he said, is acceptance — and how it’s just not there.
“We are seeing this as still very patchy, and there needs to be a better critical mass of acceptance to make it really effective. Right now, clients still need to be keeping track of what is cards-only, what is card-and-wallet and what is cash-only,” Grant explained.
That is more than they want to track, which means wallets aren’t moving the needle much.
“I believe that is changing,” he continued. “I think we are seeing the acceptance opening up more and more. CVS just signed on with Apple Pay, and they were a long-time holdout. But we are really going to have to see where the rollout is — if it’s consumer goods or mom-and-pops, or restaurants, or QSRs — and I think that will tell you a lot about the direction that this will take moving forward.”
Move forward it will — of that, Grant said he is very confident, mostly because it has to go forward. Necessity has a way of being the mother of innovation. There are many gig workers coming into the marketplace, but there will be even more demand for mobile payments than there will be workers in a lot of areas. This is something, he told Webster, one can see even today, as soon as once steps into a ridesharing vehicle.
“Your Uber driver is also a Lyft driver, and a Juno driver,” he said, “and sometimes you can feel like you are riding in an Apple store because your driver has three different tablets going up front to keep track of which service they are driving for at that moment.”
Gig workers are coming — in droves, he noted — and they have their choice of where they want to work. Attracting them is going to be a critical capacity going forward. Wages are a big, and often-focused, part of that. However, workers also don’t want to have to pay money to earn it, nor do they want to spend a lot of time organizing their invoices for reimbursement.
“When we look at the future, a lot of attracting that high-level ability to the platform is going to be what is the easiest, most frictionless platform to work for because, in gig work, time is literally money,” Grant said. “And expense management — and making it transparent and easy on both the worker and the employers — is a place where we can innovate away a lot of lost time.”