British mobile wallet startup Yoyo has closed a $US10 million Series A funding round and is now eyeing the US as part of its “global ambitions,” co-founder Alain Falys told Business Insider.
Launched at the start of 2014, Yoyo is one of an increasingly crowded field of mobile apps that lets users pay for goods with their smartphones. It distinguishes itself with its narrow focus — university campuses — and its ability to offer deals to its customers and marketing data to retailers.
Over the last year or so, Yoyo has seen strong growth and currently processes 150,000 monthly transactions. This makes it the second-largest mobile wallet in Britain, the co-founders say — second only to Starbucks’ own app.
Like Starbucks’ app, it processes payments using QR codes: The user preloads money onto the wallet, and then at the point of sale, a unique QR code is generated for each transaction. The retailer then scans the code to receive the payment. This doesn’t require proprietary technology, just a 2D barcode-scanner — already found in around 50% of retailers.
First launched at Imperial College London, Yoyo has now spread to 15 other British universities as part of its focus on “closed environments” and is the process of expanding further. It is growing 25% month-on-month.
At universities where the app has rolled out, it can account for between 25 and 50% of all transactions on campus. For reference, contactless payments hover far lower, around 5 to 8%. And Yoyo’s customers are sticking around: The founders claim a “stickiness” rate of around 80%, and they say Yoyo users spend more than non-users per transaction on average.
The benefit of using Yoyo (besides the nominal convenience) is rewards — again, like Starbucks’ app, users can accrue points from retailers, which can then be redeemed for offers or shared. And on the retailer side, there’s access to a swathe of purchasing data, letting them track and target customers more effectively.
A $US1.2 million seed round in 2013 was led by Imperial College-affiliated Imperial Innovations — and the organisation returns again to lead the $US10 million Series A. Other investors include a number of figures from London’s FinTech Innovation Lab scene, including Taavet Hinrikus, cofounder of money transfer platform TransferWise, the founders of Money20/20, Philip Riese, former President of American Express Consumer Cards, and former TeleCity Group CEO Michael Tobin.
Hinrikus in particular has also been a recent beneficiary of VC money, with a $US58 million funding round earlier this year led by Andreessen Horowitz valuing TransferWise at a rumoured $US1 billion. It’s part of a wave of Silicon Valley investor cash pouring into London, targeting FinTech startups at the expense of the established banks.
With a fresh $US10 million in the bank, Yoyo cofounders Michael Rolph and Alain Falys say they are doubling down
on their engineering and product, expanding the company’s 25-strong workforce. They are also planning international expansion, hoping to launch in five US colleges (they won’t yet say where) before the end of the year. The funds provide a 24-month runway to consolidate Yoyo’s position and make these “global ambitions” a reality, Falys says.
As a university-based payment app with a focus on rewards, comparisons with the infamous Clinkle are perhaps inevitable. After massive hype and a record-breaking $US25 million seed round, the app succumbed to a quagmire of developmental difficulties and has become a cautionary tale of over promising and under delivering.
Rolph says the lessons are clear: “Don’t raise too much without a clear vision.” He points to the Yoyo team’s background in FinTech as evidence they have what it takes. (Rolph has previously worked with money transfer service Azimo and Seedcamp, and Falys has been a Visa exec. Other employees’ backgrounds include PayPal and Mastercard.)
A more serious threat to Yoyo is the ambitions of Apple and Google. Both mobile giants are working on their own mobile wallets — Apple Pay and Google Wallet respectively. Visa recently announced plans to introduce “tokenisation” technology in Europe, one of the last hurdles to the roll-out of Apple Pay on the continent.
Yoyo hopes its rewards, combined with the valuable consumer data it can provide to retailers, will help to set it apart from Google and Apple’s offerings. Whether the consumers themselves will think it’s worth it remains to be seen.