In those rare cases when consumers did go to the trouble of all that thumb typing , they would have to hope that , when they hit the Submit button , the 3g network didn ’ t drop their connection — because if it did , they would have to start the whole transaction over , without knowing whether or not the first one had gone through .
With all those deterrents to mobile shopping , the e-commerce industry didn ’ t believe smartphones were worth the investment of their attention or , more importantly , their money .
Ready thought otherwise . “ I started looking at our traffic logs , and I ’ d see a half percent , one percent , one and a half percent of our traffic was coming from mobile .” He started thinking about Moore ’ s Law , the famous principle that computing power doubles every two years , and he realized : in just a few more years , phones were going to become the main way people did their
Online shopping has become so commonplace that people don ’ t think about how complicated it is . You hit the “ Buy Now ” button and it works . Magic . But there are a remarkable number of complicated steps that go into making that magic , and the steps are collectively known as a “ payment gateway .”
First , anyone who wants to receive credit card information on the internet has to follow guidelines spelled out by Visa , Mastercard and the other members of the payment card industry ; their technology has to be what is called “ PCI compliant .”
PCI compliance requires the use of bank-level data security : established cryptographic protocols for encoding sensitive information ; safeguards for protecting that information where it is stored ; and maintenance and testing to make sure those systems are , and stay , secure .
Bank-level security isn ’ t easy and it isn ’ t cheap . The expense is a justifiable investment for big online retailers , but for small businesses — or for individuals who want to pass money between each other — it is completely out of reach .
And PCI compliance is only one part
PAYMENT GATEWAYS
shopping . He knew he could have Braintree build out the tools to make this possible — but to justify the company ’ s expense , he also needed customers who would be willing to buy those tools . And convincing them wasn ’ t easy . “ I would say , ‘ Someday , people are going to buy TVs and clothing — everything you buy on e-commerce , you will buy on your phone .’ And I ’ d get laughed out of the room .”
True Believing
Ready also didn ’ t have any data to prove his point . He was seeing into a future that hadn ’ t happened yet . “ When we did our first native mobile payment APIs , we literally had tick marks on the wall for each transaction . We would literally count them , because there was nobody trying to do that .”
It was a vicious cycle : as long as the consumer ’ s experience was bad , people
of the process . Once the credit card data is sent securely across the network , the receiving end has to translate those 16 numbers into an actual payment . Is this string of data attached to a Visa , a Mastercard , a Discover , an American Express ? Before the merchant can check to see if the credit card number is real , verify that it belongs to the person who submitted the order and confirm there is money available in the account , the merchant must first figure out which credit card company to ask . The software that does this , a “ payment switch ,” interprets the data and handles the connection with the issuing bank .
Then that credit card company — the issuing bank — goes through its own verification process . Debit card transactions get routed through the account holders ’ banks . Security checks run to protect against fraud .
The average credit card transaction goes through roughly a dozen individual steps before it can be approved — and these steps all happen in the two or three seconds between pushing the “ Buy Now ” button and seeing the confirmation screen . Like magic . wouldn ’ t shop on their phones . But until people started shopping on their phones , merchants didn ’ t see any need to improve the mobile experience . Bill knew he was going to have to find a way to break the cycle . He was going to have to improve the customer experience on his own .
Braintree was one of the main go-to companies for any small business that wanted e-commerce , on a mobile phone or not , and the company already had relationships with most of the early mobile winners — Uber , Airbnb , Dropbox and Angry Birds . All of them told Ready the same thing : their biggest falloff in the customer acquisition funnel — the place where they were most likely to lose prospective customers — was the point where the person had to type in credit card information . As long as they could get customers to enter their card info that first time , then the apps could save the information , so users would never need to enter it again and would be able to make future purchases with the push of a button .
But customers really didn ’ t want to enter all that information , even that first time . Ready knew something that these customers didn ’ t : the credit card information that they thought was being saved by Uber or Airbnb ( founded in 2009 and 2008 , respectively ) or Dropbox or Angry Birds was actually being saved by Braintree . “ We had the payment credentials . So , imagine a user that would sign up for Uber , sign up for Airbnb , sign up for Dropbox , go play Angry Birds . They would be asked to reenter their payment information for each app . And that would be this huge pain point in every single one of those apps . But we already had the payment information for that user . We knew who that user was . We had the technical ability to make it such that , when you went from one of those apps to the next app , we could just pop your payment information there if we wanted to — at a technical level .”
But Ready knew he couldn ’ t do that . “ The user would have completely freaked out .” Braintree had been so successful at making itself transparent to customers , at hiding its brand and its whole existence from the shopper , no one knew that half the e-commerce sites on the internet were running on the platform and capable of sharing payment information across different brands .
16 FINANCIAL HISTORY | Fall 2020 | www . MoAF . org