Free mobile payments? That may sound too good to be true, but through its regulatory sidestepping and unique business strategy, its how Droplet plans to disrupt the mobile payments industry. How has the U.K. startup’s adoption been so far, and how do they make money while absorbing transactional costs? PYMNTS.com spoke with Steff Aquarone, CEO and co-founder of Droplet, to find out.
A familiar adage tells us that nothing in life is free.
Thanks to one U.K.-based startup, that wisdom may no longer ring true for mobile payments.
Introducing Droplet, a company that, according to CEO and Co-Founder Steff Aquarone, has a simple goal.
“Our aim is to transform the way the world does payments,” Aquarone said, “by making payments free and easy to send from anyone to anyone via our mobile app.”
PYMNTS.com spoke to Aquarone to discuss Droplet’s business model, it’s early adoption and how it’s able to make payments free in a heavily regulated environment.
According to Aquarone, Droplet has existed as a company for around 18 months, and just went live with its beta program in Birmingham, U.K. around six weeks ago. The company’s payments methodology: allowing P2P and P2B payments through an iOS app, is not unique.
That those payments are free, and how Droplet has managed to make them so, is another story.
“We’ve completely sidestepped the traditional banking and payments infrastructures, and there are loads of really exciting things you can do once you start to work outside of the existing system and restrictions,” Aquarone said.
Aquarone conceded that there were “a lot of barriers to entry” in Droplet’s approach, and noted that most of the company’s existence to this point has been spent on making their product secure.
“We’ve had to work with some serious cryptographic experts to make sure that our payments platform is as secure as any online global banking system is, so that’s taken a lot of effort,” he said. Droplet has also had to work hard to ensure that they meet all requirements in what Aquarone defined as the U.K.’s “heavily regulated space.”
That work has paid off, though. Aquarone said it’s Droplet’s ability to operate completely outside of the traditional banking sphere that enables it to make payments free, as their transaction costs are “so tiny, we can afford to absorb them in our general business costs.”
How does Droplet make money, then? Aquarone said some of his company’s future income will come from value added services that are still in the works, but for now, Droplet makes a little bit of money on the interest from funds stored on user accounts.
“What we’re seeing is people are topping up and leaving money in their Droplet accounts; they’re not just paying for things and having it taken straight out again,” Aquarone said. “When we have a Droplet account balance, we make a little bit of money on the interest.”
That gives Droplet a business model that many existing players would find untenable. Aquarone says that’s truly what makes Droplet so unique, and is why they’re able to use a strategy that makes plenty of sense, but that few others are perusing.
“Banks, and credit card companies that are effectively owned by banks, they’ve got something to protect, and that’s their existing business. And their existing business needs payments to be a big thing, and it needs payments to be an expensive thing,” Aquarone stated. “So I think the main answer to your question, ‘why hasn’t anyone done this yet’ is, everybody else has got too much to loose by making payments free.
What we see is the huge opportunity with what you can do when you make payments free, and what you can do when you have a payments platform that is truly online.”
To hear more Aquarone on Droplet’s early adoption, its business model and its regulatory challenges, listen to the full podcast below.
*If you have trouble with the audio player above, click here.
CEO and Co-Founder, Droplet
Steffan Aquarone is an entrepreneur, consultant and co-founder of Droplet. Droplet is a mobile money app that lets people load cash onto their mobile phones and send payments to anyone for free.
At just 20 years of age Steff was a founding director of a Top 50 UK corporate film production company. Since then he has worked as a consultant for global brands like RBS, Tesco and News Corp, helping them develop elements of their digital marketing strategies. Steff leads digital marketing courses for Econsultancy and writes regularly on the future of video on the web.
He is also a successful film producer, co-owning feature-film production company Immense Productions with best-selling comedy writer Guy Browning. Tortoise in Love came out in cinemas in the UK, Australia and New Zealand in summer 2012 and releases in the USA in 2013.
Steff is an unflappable operator who can make things happen against the highest odds and speaks regularly to audiences about the highs and lows of business, young entrepreneurship and the power of digital marketing. He graduated from the University of Warwick with a BA (Hons) in 2006 and became a fellow of the Royal Society of Arts in 2007.