Welcome to the latest edition of PYMNTS.com’s VC Voices: a weekly column where we bring you commentary from the best of the best around the world of payments investment. Want to know what the biggest backers of our industry’s innovators and disrupters think? We give our VCs 500 words of unedited space to do with as they please, so you’ve come to the right place.
This week, we’re joined by Matthew Witheiler, principal at Flybridge Capital Partners, who gives us his take on two different approaches to verticalizing payments.
By Matthew Witheiler, Principal, Flybridge Capital Partners
Verticalizing Payments
OpenTable’s announcement three weeks ago that they would begin testing payments got me thinking about the evolving world of mobile payments. The company’s foray into the payment world is not the first attempt at cracking the space and it almost certainly won’t be the last. The question is, will it be successful? I think part of the answer lies in how OpenTable is taking the payment technology to consumers.
There are two ways players in the mobile commerce world have attempted to go to market: broad or narrow. The broad approach is the one taken by players like LevelUp, PayPal, Isis and CloudZync. Here, technology providers extend a mobile payment tool to consumers with the intention of being ubiquitous. Whether the solution leverages existing technologies or creates new ones, the idea is to let consumers use the payment mechanism in as many places and applications as possible.
The narrow approach is exactly the opposite: it focuses on facilitating payments in a single application or vertical. Companies like Cover, Uber, and even iTunes have taken this approach to market. Instead of offering ubiquity, the narrow go-to-market playbook attempts to solve the payments chicken-and-egg with a single application where the payment technology can provide a meaningfully better consumer experience.
In general the broad vs. narrow plan of attack in the payments world has been a tale of two cities. On one hand, companies taking the broad approach have spent significant capital and struggled to get consumer traction. On the other, the narrow-approach companies have seen more positive momentum. It seems that being killer at solving a single payment pain point is more powerful than solving mobile payments in general.
There are, of course, exceptions to this. Square, one could argue, has taken a more broad approach (although I would counter that the company initially went vertical in the crafts market before expanding horizontally). In general, however, the rule seems to hold true. So could OpenTable be successful where so many others have fallen flat by solving the dining payment experience? I think they have a shot.