In the rush to cash in on mobile payments, banks and merchants are often the intended targets of new services but they are often not in control of the experience. That’s an opportunity that start-up Paydiant is looking to exploit. The Wellesley, Mass.-based company is announcing $12 million in Series B funding led by Stage 1 Ventures, which will go toward the build out of Paydiant’s white-label payment and offers platform for banks and retailers. The investment, which included participation from existing investors North Bridge Ventures Partners and General Catalyst, brings Paydiant’s total funding to $19.6 million.
Paydiant’s software platform allows banks and merchants to add mobile payments and offers right into their existing banking and retail apps for iPhone (s aapl) and Android (s goog). The cloud service will work with near field communication (NFC) hardware but also offers support for barcodes, so retailers don’t have to buy new payment terminals to process tap-and-go NFC transactions. Paydiant-enabled apps will all work together as part of larger acceptance network, so users will be able to pay at a variety of stores. Paydiant is currently trialing with five of the top 15 banks and will work with financial institutions and merchant processors to help convince businesses to be part of the new as yet unnamed payment network.
The real payoff for Paydiant’s customers is not in providing payments but in helping them protect their own data. Mobile payment systems like Google Wallet require merchants to share their transaction data, which is a goldmine for targeting consumers with ads and offers. By helping retailers hold on to that information, Paydiant helps them own their customer relationship and ensure that a mobile payment provider doesn’t help a competitor target their customers with competing offers.
For larger retailers, there’s also the potential to make their branded payment cards the default choice for payments within the retail app. By steering the choice of payment to their own card, retailers can earn more on individual transactions. Paydiant also offers merchants of all sizes offers and loyalty programs, so retailers can engage and retain users by utilizing Paydiant’s assets.
Chris Gardner, co-founder of Paydiant, told me banks and merchants are also not in love with the slew of mobile payment options available. Some payment services ask retailers for too much data or try to extract high rental fees from the banks to place their cards inside their wallet apps. Both also face the prospect of having a payment provider come between them and their customers, weakening that relationship.
Paydiant, though, faces a lot of competition not just from big-name wallet services such as PayPal (s ebay), Google Wallet, Isis, Square and others. MFoundry, which some of the top banks use to build their banking apps, announced a plan with MasterCard (s ma) that lets banks create their own NFC wallets. Some of the biggest retailers including Walmart (s wmt) and Target (s tgt) are also reportedly exploring the idea of creating their own payment system.
But Gardner believes there’s plenty of retailers and banks to approach and many will hedge their bets, choosing to work with multiple wallet services as they figure mobile payments out. I think Paydiant’s white label approach does make sense. The banks and the retailers are eager to play a bigger role in mobile payments because they are the ones that deal with customers first hand. They’ll of course listen to payment providers, but there’s always going to be a desire by at least some of them to take more control of their mobile payment future.