POWA down, Zapp and CurrentC next?

powa downSo we’ve started to see the power houses fall. We first had the multiple failures of Google Wallet using NFC. Then we had the telcos club together to create Softcard (formerly ISIS) and Weve, both using NFC and both struggling. Softcard was eventually sold to Google for $100m, god knows why, and O2 have taken complete control of Weve since their O2 wallet, also using NFC, crumbled. We’ve now started the demise of the less institutional mobile payments companies with POWA (QRCode based), which is all but dead and buried, it’s now time to start thinking who’s next? and guess what they’re not start-ups.

First we start with Zapp in the UK. Zapp was launched in Autumn 2014 looking to take advantage of both QRCode based technology and NFC. They re-branded a number of times, each time doing a shoddy job. Vocalink has invested more than £33m in to Zapp with further investment from institution and private investors, taking their overall investment up to £75m and yet they’ve produced nothing! As mentioned they were originally taking on retail alongside Paypal and co, but now they’ve changed their plans to allow customers to basically pay online using a button that connects directly to their bank account and thus bypassing the card schemes. And the success? None, all this money and they’ve basically got a payment gateway that no one uses. £75m, hundreds of employees and they’ve produced something a coder in his back bedroom could do in a couple of months between masturbation sessions. Really…

Now we have CurrentC in the US. Great name by the way guys! The major retailers in America were being bent over a barrel by Apple, Google and the card schemes, so  7-Eleven, Alon Brands, Best Buy, CVS Health, Darden Restaurants, HMSHost, Hy-Vee, Lowe’s, Michaels, Publix, Sears Holdings, Shell Oil Products US, Sunoco, Target Corporation and Walmart clubbed together. The initial retailers that are part of the new company account for about $1 trillion in annual sales, because of this ‘This will be the success story’ I hear you cry, WRONG! What happens when you get so many chiefs around the table with egos the size of the universe, bugger all, that’s what! They all want things their way that no decisions ever get made and everyone leaves the room in a huff. So much so Walmart has put two fingers up to the rest and created their own version with Walmart Pay. Other reports suggest, CurrentC (trading style of MCX) are in big trouble. They’ve had tens of millions invested, they’ve struggled to get a solution that works and they’ve delayed launches more than 3 times. They’re now trialling a scaled back version in a hand full of stores, but it’s not even receiving lukewarm success.

downloadFor me the only real innovation to come out of mobile payments is LoopPay. These guys created an incredible product allowing users to use their mobile device to pay at more than 10m merchants, or 90 percent of retail locations in the US. LoopPay’s technology uses a metal coil to emit a magnetic field that can communicate to most card terminals. This basically means that holding the phone up against the part of the terminal reader where you usually swipe your card, it transmits a frequency that means the terminal thinks the cards has been swiped and the transaction goes through. Now for me…That’s innovation! In early 2015 Samsung bought LoopPay and has integrated this in to their new devices. Samsung bought LoopPay for roughly $250m and what a bargain they got themselves.

I’d love to know the nitty gritty of why these companies, who raise such big amounts, can’t tell their arses from their elbows. The frustrating thing, because of who they are, the businesses they are associated with and their friends at VC’s, Private Equity and Private Investors they are absorbing all the cash out there that real innovators and start-ups need. Just with the companies I’ve mentioned above there’s more than $700m invested and they’ve all produced absolutely nothing that’s changed the payment world. It’s about time investors, whether VC, Private Equity or Individuals pulled their heads out their arses and look at whether a business has a product rather than what a company is associated to or what someone’s done in the past at big companies. Maybe then mobile payments will see some real innovation rather than the flat joke it is today.

POWA’s demise

Powa Technologies, the London technology company once valued at £1.8 billion ($2.7 billion), has collapsed into administration, putting over 311 jobs at risk.

Deloitte confirmed over the weekend that it has been appointed to take over the business, which has run out of cash and can’t pay its debts.

The company has raised $175 million (£122 million) to date, but had only $250,000 (£175,200) in the bank at the start of February and debts of $16.4 million (£11.5 million). That’s despite $50 million of investment in 2015 and a loan from its biggest investor, Boston-based Wellington Management, as recently as November.

Despite the huge sums invested in Powa, which has partnered with the likes of Adidas and L’Oreal, CEO and founder Dan Wagner told staff in a video that the company was “basically pre-revenue,” according to a video seen by the Financial Times.

Since this ‘Unicorns’ horn and wings have fallen off everyone is running for the hills making the technology the excuse for the demise. This is simply ludicrous! People have jumped on the bandwagon slating QRCode technology without a thought of what actually happened at the company.

I’ve personally been in mobile and cross border payments for the last 5 years and know some of the guys very well over at Powa and trust me it’s not the tech.

QRCodes aren’t the problem, if it was Starbucks, Zapper, YoYo, Levelup or AliPay wouldn’t be as successful as they are. In Q3 2015 Starbucks did more than 9m mobile only transactions. LevelUp has more than 14,000 merchants using on a daily basis. AliPay is the biggest and fastest growing part of Alibaba and it’s only QR based.

Rather than blaming the technology or adoption how about people focus on the management and the investors. I set up my first business at 17 selling advertising space in 2001 and grew this business rapidly employing people all over the UK, so know how to grow a business. There’s lots of people in the payment’s space who have had success in the 90’s and since then have struggled with the rate in which technology is moving. They all claim to be the fathers of the internet and all claim everyone is dying to work with them and yet they’re all complete failures! The real question is Dan Wagner joining that heap? The more popular mobile payments got the more con-men turned up to take advantage and ran companies in to the ground with promises they couldn’t keep.

Website Glassdoor lets current and former employees leave anonymous reviews of companies. Being anonymous it’s hard to sift out the people with an axe to grind or from someone giving genuine feedback. But, taken in aggregate, they give interesting insight. Business Insider reviewed the 133 public reviews of Powa on Glassdoor. The most common rating of the company is just 1 star, with 50 reviewers giving this rating.

Staff consistently complained of the following:

Uncontrolled spending
“Company spends outrageous amounts of money on travel and parties for potential customers and vendors, yet leaving hundreds of unpaid bills and invoices stack up leaving people to scramble just to keep the lights on and not get evicted.”

“That a start-up with no revenue needs offices in the most expensive buildings in each city is one example of poor management at this company.”
(N.B – It’s estimated Salesforce Tower (Heron Tower) cost £2m p/a in rent alone)

“This company spends money like the world is coming to an end.”

High turnover of staff
“Most people get fired (more than 60%).”

“REDUNDANCIES!!! This is kinda a company tradition. Just to warn you, it happens every quarter of the year.”

“Senior leadership instability (supervisor changed 5 times in 10 months).”

“People that have done an outstanding job have been basically fired. I have no idea why this keeps happening but it does.”

Bad management
“Management with no vision, lack of competence.”

“They do not appreciate your work, management use different excuses to destroy your years of work, re-design and ask you to rebuild it so that they can take over the control.”

“We all sit back and watch rolling our eyes as senior management changes direction.”

“Complete new management is needed. As long as they are there, nothing will go forward.”

High employee turnover, high spending, and poor management go some way to explaining the current turmoil at Powa, valued at $2.7 billion (£1.8 billion). We also need to look at the fact that the management team at Powa paid $75m in an all share buyout of MPayMe Ltd the creators of Znap, which had $120 in sales. Where did the insane price tag come from? I understand technology has a value, but $75m?

We also need to look at its biggest investor, Boston-based Wellington Management. What have these guys been doing whilst Powa has let it’s money go to it’s head. In November 2015 they were aware of Powa running out of money and gave them a loan of more than $16m, surely at this point it was time to come in and take control, consolidate, close offices, and get back to it’s roots and take one market at a time. Why did they not interview every employee to find the route of the issue or simply just read Glassdoor. No…. they just gave more money and buried their heads even further in to the sand.

With all this in mind and you still want to blame the technology? I think not.