Thursday, July 5, 2012
Many of us have several credit cards that offer rewards like airline and hotel points when we use them for purchases. Yet with so many choices and frequently changing rewards, it can be confusing to figure out which card to swipe. Matthew Goldman wants to make this easier.
Goldman is the founder and CEO of Wallaby Financial, a payments startup that, for a fee, can connect all your credit cards to one plastic slab. The company is betting that improving the existing credit-card system is going to be easier and more appealing for people than newly emerging payment technologies, including ones reliant on near-field communications chips in phones.
Essentially, you give Wallaby information about your credit cards, and the company then sends you a new piece of plastic that you carry instead of the other ones. When you swipe the Wallaby card to pay for, say, a dress or movie tickets, the service uses algorithms to decide which of your underlying cards to use to complete the purchase. In doing this, it considers several factors, including which cards you have in your portfolio, your personal preferences, and which card will earn you the most rewards for that transaction.
After a six-month free period, the service costs $50 a year. Goldman says it's well worth it to slim down your wallet and beef up your rewards. "We think we're going to save people several times that," he says.
Goldman, who spent several years working as a product manager at the prepaid debit-card company Green Dot, says the idea for Wallaby has been percolating for years. Before his Green Dot days, he worked as a consultant and spent lots of time on the road racking up credit-card rewards points. While getting gas one day, he saw an ad on the pump's display informing him that if he had used another card to pay—one he actually kept in his wallet, but hadn't thought to swipe—he would have gotten 5 percent cash back.
Goldman was annoyed, but also inspired. Why, he reasoned, should the consumer even have to think about which card is best to use for any given transaction? In January, he started working on the idea full-time, receiving funding from Los Angeles-based startup accelerator MuckerLab.
The Wallaby card is issued by a bank that the company is partnering with, but it isn't a new line of credit, and users will still have to pay the annual fees and bills for their myriad cards. The service will work with any major credit card, but during the beta period, scheduled to run until early next year, it won't work with private-label store cards.
Goldman has lots of competition on the wallet-lightening front, including from PayPal, which lets consumers make in-store payments with their cell-phone number and a PIN, and Google, whose Google Wallet uses near-field communication, or NFC, to let customers tap certain smart phones on special readers to pay. There's also a digital payments effort called Isis, which also uses NFC, from the three largest wireless carriers.
Wallaby isn't the first experiment with a multifunction card. Why haven't others caught on widely? Karen Webster, CEO of the consulting firm Market Platform Dynamics and an advisor to a Wallaby competitor called iCache—which offers a rewriteable credit card—contends that though it sounds inefficient, carrying multiple cards helps consumers control their spending. That's because the act of physically choosing a card makes us more aware of what we're doing. It's a big leap for consumers to trust that one card is going to be smart enough to do it for them, she says.
Goldman argues that Wallaby's intelligent software will be up to that task, and that the card will catch on sooner than new payment technologies. Wallaby's card works with existing readers, so merchants don't have to do anything special to begin accepting it. "Right now, plastic works," he says. "People know how to swipe their credit cards."