Fran Duggan is pulling for small banks. After nearly 25 years in the banking industry, he’s seen the vital role that that community lenders and credit unions play in local towns and cities and the financial system as a whole.
But Duggan said he also sees a challenge: the evolution of mobile banking and payment technologies that are making it more difficult for small banks to meet emerging consumer demands.
Where Duggan, a former head of online banking for Webster Bank, sees a gap, however, he also sees an opportunity.
“Banks were created to facilitate payments, but many small banks, in particular, were behind the times technologically,” he said. “I wanted to help more banks get back into the payment business.”
So in 2011 Duggan co-founded Payveris, a Wethersfield firm that provides fully integrated, online and mobile e-payment technology that is more affordable for community banks, credit unions and pre-paid card users.
“Mobile payments are exploding,” Duggan said. “It seems everyone has a smart phone and people — especially younger generations — want to use their phone for everything including buying things.”
And consumer spending trends in the U.S. reflect that reality.
According to a 2010 study by Javelin Strategy and Research, which tracks consumer transactions for financial institutions and payment companies, alternative payments by American consumers — including mobile technologies — are expected to grow to more than $79 billion a year by 2016, up from just $22 billion in 2008.
Those figures are helping Payveris secure both client interest and funding. The company recently raised $5.2 million from a variety of sources, including Connecticut Innovations — the state’s quasi-public venture capital arm — and Ironwood Capital Connecticut, an Avon-based private equity firm. Payveris will use the funds to expand its sales and marketing efforts and support its growing distribution network.
Victor Budnick, managing director of Ironwood Capital, which invested $1 million in Payveris, said he sees high potential in the company.
“Payveris offers a solution for banks and their customers that is equal or better than that offered by much bigger banks,” he said.
Duggan said his company’s technology differentiates itself from competitors because it is both automated and cloud-based, allowing for faster, less expensive transactions with less risk for errors.
“We currently process more than $1 million in payments per day,” Duggan said. “And only .02 percent of transactions have any issues.”
That success rate has helped Payveris establish a growing client base in Connecticut and beyond. The company generates more than $5 million in sales and has 29 clients nationwide, including in Utah and California, with half actively using the company’s payment technology, and half in an implementation phase.
But Duggan has even more aggressive growth goals for the coming years. “There are more than 15,000 small banks and credit unions in our target market [institutions with $5 billion in assets or less],” Duggan notes. “We want to capture about 10 percent of that market in the next five years.”
Surveying the competitive landscape, Duggan thinks that’s a realistic goal. “There are only a few major players [currently] in the mobile payment business and our technology is more innovative and fully integrated with a [bank] clients’ online platform,” he said.
That translates to a seamless user experience, Duggan says, which is a must in a digital, mobile age. In fact, according to Google’s 2012 Our Mobile Planet study, one in six people surveyed say they have shopped for a new bank due to a poor mobile banking experience. Additionally, 46 percent of consumers start banking activity on one device and continue later on another.
“Our goal is to make transactions easier and more convenient for our clients’ customers,” Duggan says. And that objective is driving the company to offer new innovations that it expects to unveil in 2014.
“We are working on a technology platform that will enable people to move money across banks in real time,” Duggan said. For instance, he explained, if a person wanted to split the cost of lunch with a friend, he could simply use his phone to transfer money to the friend’s bank account. And, of course, the friend could transfer money to the merchant’s account using Payveris’ mobile payment to pay for lunch.
“That’s a real game changer which will dramatically advance mobile payments and put banks back in the center of transactions,” Duggan contends. “Having one platform for all banks to exchange money will dramatically lower costs and be more effective for merchants than accepting credit cards.”
And it’s not just banks and consumers who stand to win.
Duggan said he expects Payveris, over the next five years, to create nearly 50 new, high paying, high-skilled jobs in Connecticut — in addition to the company’s current 15 employees. They’ll be adding software developers, sales and marketing roles and client service specialists.
“We were approached by other states to open our business there,” Duggan said. “But it was nice to see the state [Connecticut Innovations funding] step up to support us.”
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