The Week In Payments: N26 Ups Debit Rewards, Wag Sags And Bill Ready Goes To Google

There was no lack of action in the wild world of payments and commerce this week. In the running toward things column, there was German challenger bank N26’s big push into the U.S. with a new take on the locally nearly defunct world of debit card rewards and perks.

The flashier entry in that column, however, was the announcement that former PayPal Chief Operating Officer Bill Ready will be starting as Google’s president of commerce come January 2020 — signaling that Google is getting very, very serious about its next big run at payments and commerce.

But not everyone was running toward things this week, SoftBank, was taking a giant leap backward — selling back its 50 percent investment stake in Wag to Wag, triggering a round of layoffs and a host of questions about what the future holds for a service that everyone called “The Uber of Dog Walking.”

So what does it all mean? Karen Webster was joined this week by Payrix President Bob Butler to offer a post mortem on the big events on the week — and what they mean for What’s Next in Payments and Commerce.

When The Debit Rewards Come Marching In

When the effects of the Durbin Amendment to Dodd-Frank went into effect in 2011 — and the interchange fees on debit transactions plummeted — issuing banks lost some $14 billion in revenue annually according to estimates in a 2014 Federal Reserve paper. Banks, unsurprisingly, who also need to make profits, put the kibosh on debit rewards.

But it seems that debit rewards 2.0 might be on the verge of making a comeback — as German Challenger Bank N26, currently expanding into the U.S., announced that it is expanding its cashback Perk program via some new partners. New opportunities, some of which are time-limited, include Booking.com (up to 15 percent cash back); Lime (50 percent off on rides); Headspace (up to 8 percent cash back on a monthly subscription); Babbel (up to 8 percent off a monthly subscription); Curology (5 percent discount on a customized skincare monthly subscription); Headout (up to 10 percent off three Broadway show tickets); and YOOX (discounts on three purchases).

It’s a very clever move, Butler told Webster, especially considering the state of the U.S. card-toting consumer enamored with rewards.

“I think folks are open to using debit, but in the U.S., we’ve gotten to a point where everyone is addicted to rewards points. And so this looks like an alternative way to drive some customer loyalty and using a partner method to do so is a brilliant idea,” Butler said.

It is also, he noted, a very complicated idea, and one that will rise and fall on its ability to build solidly desirable offer partners to actually attract consumers, a process that will entail no small amount of “heavy lifting.”

And challenger banks, Webster noted, aren’t just looking to acquire customers — but to become a customer’s primary financial services relationship, not only the card they use when they are trying to do some rewards hacking, but also their bill paying and everyday purchase making. That is no easy task because that top of wallet relationship is something that everyone in the industry is after, they agreed. However, meaningful rewards that drive that big customer acquisition spike, Butler noted, could be the right first step — provided that they keep those perks and rewards coming.

And speaking of steps, while N26 is pushing forward this week, SoftBank was doubling back, and leaving Wag wondering what it’s next steps will be

Wag’s “Ruff” Week

SoftBank is done with the dog-walking business, announcing this week that they are amicably parting ways with Wag — a dog-walking startup that Softbank’s vision fund invested  $300 million in two years ago.

SoftBank had owned a 50 percent stake in Wag — which Wag has officially bought back.  SoftBank will no longer have a spot on the firm’s board and Wag looks to be getting smaller.

According to recently named CEO Garrett Smallwood, Wag has begun layoffs of dozens of employees and plans to sharply downsize its remain workforce.

So what went so wrong for the “Uber of dog walking”?

Simply, Butler said, not every cool idea makes for a good, stable marketplace that can be expanded at scale. And that, he told Webster, is his considered opinion as a Wag user and fan.

“You have a lot of floating valuations on things that seem cool without as much concern about how do you scale that cool and still keep it under control and push it toward profitability. I love a $14 dog walk — but I don’t know how they pay the dog walker and still find a way to scale that over the long term.”

There are solutions here that Wag could employ, he noted, and he can even see it being more successful as a smaller, more regionally focused service.  There is a lot about Wag, he said, that is unique and genuinely convenient, particularly not having to be at home to pay his dog walker.

But the big lesson to learn from Wag this week, he said, is likely that building the “Uber of X” isn’t nearly as easy as entrepreneurs thought it would be — because no matter how clever the model, if it doesn’t scale and make money? It’s going to have a hard time surviving.

“Because you can put up a great app and make payment easy, doesn’t mean an easy path to  success.”

And speaking of long roads to success — Google is gearing up for another big run at payments and commerce. And this time, with a payments and commerce heavy-hitter at the wheel.

The Big Bill Ready Move To Google

The world got an answer to a question that it’s been asking since Bill Ready announced earlier this year he was leaving his role as PayPal’s chief operating officer at year’s end. It was a question that was not simply borne out of idle curiosity. Ready, Butler noted, is such a tremendously respected figure in the payments ecosystem for his work at Braintree, Venmo and on PayPal OneTouch, that the entire ecosystem was pretty curious to know what was coming next.

We know now the answer to that question. In January, Ready will move to Google as president of commerce at Google. That, notably, is a bit different than his role at PayPal — one that will no doubt involve a rethink about how Google uses payments to monetize search in new and different ways — and build out a commerce ecosystem to rival Amazon.

“I think this shows that Google is very serious about commerce. There are so many innovations in the ecosystem with Bill Ready’s fingerprints on them, this puts Google right on the map with trying to make their digital commerce happen,” Butler said.

It is undeniable, he noted, that Google has struggled in these areas before, but with Ready onboard, it really could be the start of a game-changer for the search giant. It’s a big loss for PayPal, he noted, and a big win for Google.

“If I were Amazon right now, I might be a little bit nervous,” Butler noted.

But, of course, to see how nervous exactly Amazon should be, or how big a different Bill Ready can make at Google will require staying tuned for a while since the show won’t officially start until after the ball drops and the new decade begins.

We wouldn’t worry too much about being bored, however. We imagine there is plenty of big news still left to sneak into the ending of 2019.

See you next week.