Fintech seeks to build a small-biz niche on Visa tech

A Toronto fintech is seeking share for distinct niche — and it thinks a three-year-old technology decision by Visa may be the ticket to its success.

Wave on Thursday launched an instant payouts feature that uses Worldpay and Visa Direct, the card brand’s real-time push payment system.

Wave focuses on knowledge workers, field workers and creatives. That includes consultants, web designers, photographers and skilled repair people. There's overlap with microbusinesses served by the likes of Square and Stripe, though there are subtle differences that Wave hopes can be a differentiator.

MICHAEL TENAGLIA

“These are businesses that tend to use laptops or mobile devices as part of their business primarily, so they send invoices more than other businesses may,” said Les Whiting, Wave's chief financial officer.

Wave aims to reduce the amount of time required for these businesses to receive their funds from up to two banking days to near real-time. It's part of what the company hopes will be a suite of services, helped by Visa's 2016 decision to open its payment technology to external developers.

Wave reports it has 3.7 million registered customers in more than 200 countries, tracking $330 billion through its accounting, invoicing, payroll and recurring billing services. Visa Direct has become popular with micro-merchants and contractors for payroll, B2B and P2P purposes. Visa Direct has also bolstered its real-time business disbursement capability through collaborations with fintechs such as Ingo Money.

Wave customers often form their own businesses, which is slightly different than the freelancers or drivers who dominate the gig economy. They’re also not operating pop up stores, which takes them out of the traditional mPOS hardware market.

Like gig economy workers, these businesses get paid irregularly, and often under circumstances when they are not prepared to collect, such as shortly after a music lesson or a consulting session or after photographing a wedding.

These companies and their clients are under pressure to provide faster payments in an environment that often lacks scale. Writing for PaymentsSource, Derdre Ives, managing director of Wirecard North America, argued immediate access to capital and income is necessary to give these entrepreneurs the flexibility to sustain and expand their businesses.

“For these businesses cash flow is difficult, they may not have a daily cash flow,” Whiting said. “A consultant may get a large payment, or sums paid out over a long period of time so having access to immediate funds is important.”

Like Square and Stripe, Wave is making a future diversification play, which will use Visa’s open APIs to help build products, such as advances, credit products and other integrated financial services that use the instant payouts as a base.

That will rely on Visa's open development posture, in which the card brand reversed more than 60 years of history by making its tools open to fintechs, entrepreneurs and other outside parties. The goal for Visa is to spot innovation early, which the card brand believes is one of the best ways to take cash out of the system in favor of digital transactions.

APIs, software development kits and similar tools are driving everything from blockchain to open banking to merchant acquiring. For small business payments, APIs are attracting investment from the likes of American Express.

The model allows payment companies to quickly respond to changes in how small business receive funds, from whom, and in what channel.

“You’re only starting to see the broader adoption of this,” Whiting said. “There’s been a lot of focus in the peer-to-peer space with this [open development].”