Few South African companies have entered the local technology market with the amount of muscle displayed by Thumbzup Innovations. The Centurion-based company, which unveiled its Payments Pebble device in April, has forged a close partnership with the Absa banking group and secured venture capital funding estimated at R120 million.
Absa is pushing the Pebble as a key part of its mobile payments strategy aimed at entrepreneurs and small businesses. The Pebble, a card-reader that connects to a smartphone's audio plug, enables traders to easily process card transactions instead of handling cash. Absa has exclusive rights to the Pebble in South Africa for 12 months and is aggressively promoting the Pebble through a variety of media campaigns.
"We held discussions with several banks during 2012 but Absa soon emerged as the right partner," says Thumbzup CTO Willem B"uchner. "They've put a lot of support behind the product." Absa worked closely with Thumbzup to refine the Pebble to meet its technical and business requirements, adds B"uchner. The product was piloted among a handful of Absa merchants in November last year and further tested with more than 200 vendors in January.
Reduce risk
Absa is pitching the Pebble at merchants that currently conduct most of their transactions in cash. It's charging an initiation fee of R160 and thereafter a monthly rental of R50. Absa clients pay transaction fees of 3.2% of the value of purchases processed using the Pebble. Other merchants pay 3.75%. The Pebble accepts MasterCard and Visa credit cards and debit cards and can accommodate both chip and magnetic stripe technologies.
"We want to reduce the risks faced by small businesses by allowing them to move away from handling large amounts of cash and giving them the security of knowing that they will be paid for the transactions they perform," says B"uchner.
Thumbzup planned to unveil the Pebble last year but delays in obtaining security certification for the local product deferred the launch. The company has secured approval from MasterCard and Visa for the Pebble's security features and the product is being rolled out by Absa with their endorsement. The Pebble incorporates a variety of security and encryption features, including a scroll-wheel function that ensures that the card holder's PIN code is not retained in the merchant's smartphone.
We discontinued the company twice and re-established the engineering team numerous times during the past four years.
Stafford Masie, Thumbzup
Founded in 2010 by entrepreneur Stafford Masie, Thumbzup began developing the Pebble two years ago, after abandoning three earlier prototype payment devices. "We discontinued the company twice and re-established the engineering team numerous times during the past four years," says Masie.
Expansion
B"uchner, former COO at Tradebridge's POCiT payments business, joined Thumbzup in 2012 to head the company's development team. Thumbzup currently employs nearly 30 people, most of whom are software developers or hardware engineers. The Pebble is manufactured by a Randburg electronics firm.
Soon after it began developing the Pebble, Thumbzup secured international venture capital backing estimated at R120 million. Thumbzup management is reluctant to disclose details of its backers or the extent of their shareholding. The appointment of Avi Eyal, head of Entr'ee Capital, to the Thumbzup board in 2012 indicates that Entr'ee is among its investors. The UK venture capital firm holds stakes in several mobile transaction businesses, including Norwegian company mCASH, Israeli company Riskified and Zappit in the UK.
Thumbzup is looking to expand its business in South Africa and abroad. Other local banks may adopt the Pebble once Absa's exclusivity ends next year, says B"uchner. "We're looking for deep partnerships, not companies that will just move the product," he says. Some of Absa's rivals are already touting other mobile payment products. Standard Bank is marketing the SnapScan system, Nedbank is promoting the PocketPOS device and First National Bank has entered into partnership with UK mobile payments firm mPowa.
"There are only around 100 000 card accepters in South Africa serving a population of around 60 million. The local market potential is substantial. We believe we can change the way many people do business in this country," says B"uchner. Thumbzup is in talks with prospective partners to launch the Pebble in southern Asia and South America, says Masie. Entry into these international markets would pit the local firm against prominent competitors such as US firm Square.
B"uchner adds that Thumbzup is continuing to invest heavily in product development. Enhancements to the Pebble are expected soon and the company intends launching further mobile payment devices. "We don't intend to be a one-product company. We have a broad portfolio of innovations we're preparing to launch," he says.
Thumbzup has already caused a ripple in the local mobile payments market with the Pebble. Whether it can cause a splash at home and abroad will depend on the success of the product during the next 12 months.
First published in the August 2014 issue of ITWeb Brainstorm magazine.
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