In the early days of smartphone payments, many fintechs argued that the killer app for merchants would be their ability to detect and identify when specific shoppers walked by and push offers to their phones to lure them in. PayTile is taking the opposite approach to proximity payments — it's promising to let consumers limit their visibility to merchants.
"Whereas Venmo was built to pay people you know, we built PayTile to pay people you don't know such as farmers' market vendors or Facebook Marketplace sellers," said Anu Vora, CEO of the Cincinnati-based startup.
PayTile's P2P payment service operates in a similar fashion to Apple's AirDrop, which allows iPhone users to share files when they're nearby; a consumer-to-merchant version is in development and will operate under the same model. With PayTile, both parties need to have their phone's location turned on, the PayTile app open, and their PayTile profile visible to nearby users — the profile remains visible for a short period only, Vora said. PayTile users don't have to use their actual name or profile picture to identify themselves.
"PayTile is like an anti-social network in that users don't want to share their information, but they do want to give money to someone in a safe way," said Phil Goldfeder, senior vice president of global public affairs at Cross River Bank in Fort Lee, New Jersey. Cross River has invested in PayTile, provides its payments and know-your-customer capabilities and holds the funds in PayTile users' accounts.
There is still some need for users to identify themselves. "You can't use PayTile without a bank account," Goldfeder said; users must provide that info as well as their home address, email address, Social Security number and date of birth.
Cross River, which has $8.6 billion of assets, provides banking-as-a-service to 100 fintechs including Affirm, Coinbase, Revolut and Rocket Loans.
PayTile uses GPS location data to find nearby users, and plans to add Bluetooth connectivity. The service is live in Cincinnati and New York, and has a wait list of potential users across the U.S. The PayTile app is targeted at consumers such as millennials who don't carry cash, and is intended for low-value payments.
Vora founded PayTile because she couldn't find a P2P payments app that allowed users to send money or pay a vendor without disclosing personal information. With P2P offerings such as Venmo or Zelle, recipients and senders need to share contact information to identify one another within an app.
"This makes it problematic for these services to be used for casual transactions such as tipping valet parking attendants or making purchases at garage sales," said Thad Peterson, a strategic advisor at Aite-Novarica. "Also, when sharing contact information, the sender has to trust that recipients won't use the information provided for fraud or theft."
But Venmo and Zelle already have large P2P user bases, "so there needs to be a strong value proposition for consumers to download the PayTile app," Peterson said.
Besides anonymity, PayTile has an additional feature, Drop, a geolocation-based rewards service that merchants can offer to nearby customers.
Drop is reminiscent of
PayTile's approach keeps the shopper in control. PayTile integrates with Google Maps so users can be notified about offers available in their area and see the Drop location on the map. Users would receive a QR code in their PayTile app which the merchant would scan to redeem an offer, and the merchant would never receive the user's personal information.
As an example, a restaurant might need to drive foot traffic to their lower-volume venues, or they may want to incentivize traffic during off-peak hours.
"They can use Drop to offer free drinks with cash purchases at their restaurant at specific times," said Vora. "Another example would be a theater using Drop to sell off unsold tickets at a discount for that evening's show."
The anonymity may appeal to shoppers, but merchants may bristle at the lack of data PayTile shares with them.
"PayTile's challenge is to gain acceptance by businesses as a business incentive product," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. "Stores prefer having identity information for their incentive programs and want to track who accepted their offers and when they were redeemed in-store. They also prefer incentives that lock consumers to the store. This is best accomplished using in-store gift cards that can be digitized and sent by email to be entered into consumer wallets and store apps."
PayTile launched Drop in the Greater Cincinnati area and will announce its first live merchants in October. In early 2023, PayTile plans to launch a consumer-to-merchant payment business.
Vora has a track record as an entrepreneur and investor. She founded an education technology company called AdmitAlly, and sold it in 2020 to
Vora owns Candid Ventures, a venture studio and investment company based in Cincinnati with seven technology companies in its portfolio, including PayTile.
"I provided over 90% of the operational capital for PayTile," she said. "I'm both the CEO and the investor, which is a rare model."
