Paydiant’s Early Success as a White Label Mobile Payment Provider

Navigator Edition: October 2013
By: Jeff Crawford and Stephen Kiene

Over the past year, Paydiant, Inc., a small New England start-up, has achieved early success providing a white-label mobile payment platform to merchants, processors, and financial institutions (FIs). In 2012, while near field communication (NFC) mobile wallets from major technology companies were dominating headlines, Paydiant was quietly making inroads providing partner-branded mobile wallets based on cloud-based QR codes. Throughout 2013, the company has made several announcements indicating early, but meaningful adoption of its white label platform to power everything from physical point-of-sale (POS) payments to card-less ATM withdrawals.

Paydiant works with existing POS hardware to display a 2D barcode containing transaction information on a terminal screen or on a printed receipt. Customers use their smartphone camera to scan the code, and a secure token is used to access payment credentials stored in the cloud. The transaction is completed without storing payment credentials on the phone or passing the credentials to the merchant terminal (Figure 1).

Figure 1: Paydiant Mobile Payment System Set-Up
Source: Fist Annapolis Consulting research and analysis.

The basic Paydiant wallet application (Figure 2) can be customized, but typically contains functionality to incorporate multiple payment types (including credit, debit, private label, prepaid, and gift cards), to vary the amount paid (i.e., leave a tip), and to redeem offers during the transaction. This set-up requires merchants to deploy software at the point of sale terminal to generate the barcode. Card issuers also must directly integrate with Paydiant (or have their issuer processor partner integrate) to ensure that the payment credential can be accessed and stored via Paydiant’s cloud-based servers.

Figure 2: Paydiant User Interface
Source: Paydiant.

Paydiant’s most notable partnership is with FIS, which began using the cloud-based solution to power its version of a mobile wallet in January 2012. In March of this year, FIS built upon the Paydiant relationship by rolling out a new ATM feature called Cardless Cash Access that utilizes smartphone applications to “pre-order” a cash withdrawal from a participating ATM (Figure 3). Following initial trials for the wallet and ATM solution this spring, FIS began promoting this feature to FI clients nationwide while working with merchants to enable the solution.

Figure 3: Process Flow for FIS Cardless Cash Access
Source: FIS.

Other partnerships have also been instrumental in Paydiant’s development. The company gained attention last year when several prominent FIs (including Bank of America) began local trials using the firm’s cloud-based payments technology, although these trials did not result in widespread deployment. The company subsequently announced additional partnerships, including Vantiv (October 2012), Menusoft (January 2013), Diebold (July 2013), PULSE (August 2013), Future POS (October 2013) CU Wallet (October 2013) allowing a wider range of merchants and FIs to introduce mobile payments. In early October, the company announced two prominent retail partnership when its platform was selected to power Harris Teeter and Subway Restaurant’s mobile payment application for in-store purchases.

Paydiant’s solution offers the benefit of a relatively easy set-up for both merchants and issuers. It generally does not require new hardware at the point of sale (rather a software push), and issuers are able to customize the wallet experience. Card customers are required to download an application similar to ones already on smartphone devices and then choose which card accounts they want to link to the wallet. However, the transaction is considered card-not-present and therefore carries a different (and higher) set of economics for the merchant. Finally, and perhaps most significant, it still requires a behavioral shift for consumers accustomed to pulling a card out of their wallet. Customers may consider taking out their phone, entering a PIN to unlock, launching an application, logging into that application and then completing the transaction an onerous process. The inclusion of offers and loyalty integration may help encourage such behavior, but this notion remains as of yet unproven.

In September, Paydiant closed its third round of venture funding, raising its total to approximately $40 million since it was founded three years ago. While the wallet is unique in its approach to branding and integration, the firm has not released any transaction volume statistics. Paydiant faces stiff competition from other technology providers in the mobile payments market (Google, PayPal, Isis), but as banks and merchants continue to seek new ways to advance mobile capabilities and appeal to tech-savvy consumers, Paydiant’s white label approach makes it an important player to watch.

For more information, please contact Jeff Crawford, Senior Consultant,; or Stephen Kiene, Consultant, Both specialize in Mobile/ Alternative Payments.

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