Can IP Commerce Create the Apps Store for Payments?

There’s no Steve Jobs strutting on the stage, massive consumer buzz, or slick television ads about how there’s an app just for you. But there are some things you’ve probably heard about and a soon-to-be known Denver based company, IPCommerce, is the invisible engine that’s powering them.

You might have seen the television advertisements for American Express OPEN. They’ve launched AcceptPay which they tout as “an online invoicing and payment solution that can help business owners improve cash flow at a time when customers are taking a longer time to pay.” Amex’s solution is based on a software application developed by PaySimple and a small-business service built around this application. A small business can easily accept multiple tender types online and offline after installing this application and signing up for the service. For the reasons I talked about in Why the Payments Industry Needs a Catalyst to Drive Payments Innovation, developing an application like this is incredibly complicated because it needs to work with multiple payments rails and comply with lots of security rules.

If PaySimple had to do all of that work itself, on top of developing easy-to-use software for small businesses with a greater user interface, it would still be a powerpoint deck gathering dust in a VCs office. Fortunately, PaySimple was able to use APIs, which linked into IP Commerce’s software platform, that provided all of the code and connections needed by link into the payments plumbing. Through the miracle of the division of labor, PaySimple got to focus on what it could do best—develop an innovative solution for small business—and offload a lot of dirty work to a specialist. As a result, American Express got access to a technology that would have taken it a long time and a ton of money to develop on its own—so much so that the AcceptPay innovation probably never would have launched without something like IP Commerce.

The APIs that IP Commerce makes available are enabling many entrepreneurs to develop payments-related applications far more quickly and cheaply than they could have done on their own or through other solutions. Square —the new smart-phone enabled payments system for small merchants and their consumers—is powered in part by the IP Commerce invisible engine. So is BrainTree Payment Solutions, a gateway and value add provider of online payment solutions. A new e-commerce application that relies on IP Commerce’s APIs, getta! , that just launched on MySpace. getta! (disclaimer: I’m an investor and on the Board) uses the power of social networks to encourage group buying—the buyers get volume discounts and the merchants get sales.

IPCommerce has made these applications—and more like them—possible by spending years doing the dirty work of creating code that links into the multitude of discrete and non-interoperable software programs that ultimately run the payment systems. This tedious work is what many successful software platforms do. There’s nothing glamorous about Windows 7 or Snow Leopard. These software platform—that we don’t really think much about, except when they crash—are based on millions of lines of code that do all the nasty business of computing—from telling the chip to move 1s and 0s around, to working the pixels on your screen, to connecting to your home wireless system. IP Commerce has spent the last 4 years and many millions of dollars writing the code that’s needed to get a lot of the mundane but complicated tasks that need to be done to work with each of the several tender types that are used in the US.

IP Commerce’s work isn’t done. While it covers much of the payments business through which most of the dollars flow it doesn’t have 100% coverage yet. And it is going to need to keep up with ever changing software systems. Moreover, like all software platforms, its value will ultimately come from spawning numerous applications that rely on it. But it has done a lot of the tedious but important work of developing a cloud based platform that sits on top of the payments system and it has a rapidly growing stable of applications that have shown its power.

IP Commerce has the prospect of creating the same sort of powerful network effects that Windows has (which isn’t to say they are necessarily the next Microsoft—that franchise is tough to beat!). These come in two ways. First, IP Commerce’s platform will become more valuable to the participants in the payments ecosystem (such as processors and device makers) the more applications there are there are that drive volume through these points. Likewise it will become more valuable to developers of payments applications as even more of the payments system standardizes on this platform. Second, some of the applications that are being built on IPCommerce—like some of those built on Windows—have their own APIs and are creating their own ecosystems. These applications can work more easily together as a result of relying on the same platform.

Don’t look, of course, for tens of thousands of applications coming out of garages over the next year. Creating “applications” in payments is a lot harder than it sounds. The success of the iPhone has made us think about applications as software programs that do cool things like help you find friends nearby or learn Mandarin. In payments, the software application is usually just one piece of a business model. Developing successful business models in payments—no matter how good the software application is—is extremely difficult. There’s everything from glacial inertia to chicken and egg problems to solve.

Despite these challenges it is likely that cloud based platforms such as that provided by IP Commerce will become the one of the main drivers of innovation in payments in the coming years. These platforms drastically lower the cost of creating businesses that need to connect to the payments plumbing to create value. They are likely to therefore unleash a vast amount of entrepreneurial energy devoted to discovering ways to provide value to businesses, consumers, and governments that transact with each other. PaySimple, Square, Getta, BrainTree Payment Solutions, TIO Networks, SoftTouch, and over 100 other applications, are early indications of what’s to come.


David S. Evans is an economist and a business advisor to payment companies around the world. His recent work has focused on helping companies create, ignite and profit from payments innovation. He is the originator of the Innovation Ignition Framework® , a tool provides a systematic way for companies to evaluate and implement innovative ideas and achieve critical mass.


Invisible Engines Series


I. The Invisible Engines that Drive Innovation and Transform Industries

II. How the iPhone Invisible Engine Provided a Catalyst for the Mobile Phone Industry

III. The New Age of Invisible Engines: How Software Platforms Will Drive Growth in the Next Decade

IV. What’s in the Cloud for Payments?

V. Why the Payments Industry Needs a Catalyst to Drive Payments Innovation

VII. PayPal X’s Global Payments Development Platform