How Button Is Connecting The World of Mobile Commerce

Mike Townsend: This week on the show we interviewed and brought on Mike Dudas who is the co-founder and Chief Revenue Officer of Button, a payment start up out of New York. Before this Mike worked at Google Wallet, he worked at Venmo, Braintree, PayPal. A lot of really great payment experience and we talked to him about all this. We hear his stories from working inside these companies, his take on the future, we learn all about Button. A truly fantastic conversation. If you have any comments or suggestions, ways we can improve, as always, please do get a hold of us, we really enjoy hearing those. We hope you enjoy. Thanks.

All right. Hello everyone. This is another week on Around The Coin. We have Mike Dudas on the show as well as Brian, myself, and Faisal. Really excited to have Mike on, seasoned payment expert, really all around great guy. Thanks Mike for joining us today and look forward to our conversation.

Mike Dudas: Thank you guys. Appreciate it.

Mike Townsend: I know the pre-show context. Brian and Mike had known each other for awhile, gone out. Brian, what’s the lingering thing? What conversation would you want to start with?

Brian Roemmele: Gosh. Mike has got to be one of the best minds in payments and I thought for a long one of the more under utilized minds in payments. Now I think he’s marshaling his energies into this great company called Button. I tell you, it’s really the history and what he’s doing today. I think what he’s doing today is probably a lot more exciting than in history, but how did you start, Mike? What brought you into this whole thing we call payments?

Mike Dudas: Absolutely. I was working at Google. It was 2010. Up to that point, the first eight to ten years of my career had worked primarily in advertising and media. Google’s a pretty phenomenal company in the sense that it’s one of the few places where the company is in so many different lines of business and is really open to letting folks who have exhibited skill in one area explore another area and really develop themselves there and try building businesses.

I switched from working on Google’s music business, which I did for the first 15 months there, to a new project called Google Wallet, which was an exceptionally ambitious project and a product that is still gaining momentum and has taken a few different forms over the years and I think is really finding it’s footing. Primarily as a mobile on device payments product.

Jumped into the payments world in 2010 and really haven’t looked back since. After spending two and a half years working on Google Wallet, which we can talk more about, I jumped to Braintree/Venmo, which was and still is one of the most exciting companies in mobile payments from both merchant perspective and a consumer facing perspective. PayPal acquired Braintree/Venmo last year. Post acquisition I co-founded a company called Button that is also in the mobile commerce space broadly defined. Not specifically mobile payments but definitely has a payments element which we can talk about.

It’s been quite a ride. It’s been about five years and five of the most exciting years in the payments industry, although I’m sure folks say that every five years.

Brian Roemmele: Actually it is. Mike you really were at the precipice of the big changes. Let’s talk about the early days of Google Wallet. What was it like? You guys were kind of throwing all these different- I’ve heard from insiders- you’re throwing a whole lot of different ideas up. Talk about the early team and the dynamics. Maybe reference that to how Apple Pay came out. The early innovation you guys were reaching for actually wound up manifesting later on, right?

Mike Dudas: Yeah. Absolutely. I think the long term vision for Google Wallet is one that’s fundamentally a very strong vision. Basically an operating system based or OS level mobile payment system that works across any environment that a consumer would want to pay whether that be in store, whether that be contactless, whether that be a remote payment from a mobile device.

I think those things are starting to merge and will continue to over the coming decade. I think it became pretty clear that the Go-To-Market approach, an NFC based secure element provisioning credentials from a TSM without owning the entire hardware and software stack was challenging. Trying to bite off a tremendous amount. In order for that to succeed right off the bat you need a lot of cooperation from a lot of folks. From issuers to card networks, to mobile networks, to merchants to consumers to many others. We learned just a tremendous amount that I think is really valuable to Google today.

Brian Roemmele: Did you feel early on that the carriers would be what they wound up being to Google Wallet? Almost impinging upon its early success?

Mike Dudas: I think it’s clear that it was a market that was evolving very quickly. It wasn’t readily apparent in 2010 who was going to compete directly, who was going to collaborate. I think candidly Google moved the market forward by moving very, very fast, rapidly. Getting a product in the market in a time frame that is unfathomable. Whether that turned out to be accretive in the very near term for Google, I’m not sure, but for the ecosystem as a whole I think it really got folks moving towards, again, a vision that is very similar to what you see developing in the market today.

Brian Roemmele: It’s interesting. Getting large retailers like Macy’s and Jamba Juice and a few of these other companies on board with Google Wallet early was a monumental task. Obviously Apple is taking advantage of that infrastructure that Google actually helped build.

Mike Dudas: Absolutely. I love using Apple Pay at my local Duane Reade, which is a deal that we did back in 2011. It’s proven to be a value add for Walgreen’s and Duane Reade, laying the infrastructure that Apple Pay is able to take advantage of and that Google Wallet today is able to take advantage of.

It’s kind of funny to see, Google came out of the gate, did a tremendous amount of PR marketing in a much earlier phase, 2011. I think you see that happening three and a half year to four years later with Apple. The market is more ready. Look, it’s easier. They’re using issuer and network standards and have a lot of cooperation there, versus the Google Wallet structure which is I think still a proxy transaction.

Mike Townsend: I wonder how much the consumer side plays into it. Assuming all else was set up, is there, because I’m thinking now versus 2010 and the differences in behavioral psychology of people where you could explain it’s much easier to explain to your friend next to you if you say, it’s kind of like Venmo, but you pay the merchant. There’s more analogies to make for people that they’re more comfortable exchanging money through the phone by holding it up to something else whereas four years ago, I wonder if that would’ve been the same scenario. Even if assuming Google had all the other pieces lined up.

Mike Dudas: I think that’s right, but I also don’t want to talk about Google Wallet as if it doesn’t exist. It’s getting more usage to my understanding than it did in 2011. When you hear stats like two thirds of mobile payments in market are happening by Apple Pay, I have to imagine, I don’t know this for sure, but I’d have to imagine a large percentage of the other third is Google Wallet.

I think the numbers overall are still not huge. Where Apple has been successful is clearly on the marketing front, clearly on the really seamless consumer experience front and frankly it solves a real problem. It’s fairly straightforward in that it’s only payments today.

I tap to authenticate and it’s pretty easy and simple and it just helps you pay. I walk out of the store. The story is very clear, concise and straightforward for the consumer.

Brian Roemmele: You obviously were trial blazing back then. Were there any other standards for looking at QR codes, other types of transport mechanisms to get merchants paid?

Mike Dudas: Yeah. The way that these products are incubated at Google is that- new products- it’s typically, or almost always, an engineering initiative, right?

Brian Roemmele: Sure.

Mike Dudas: I actually didn’t join the team until the technology was ready to be commercialized. When I joined in 2010, the lead engineers and the guys who were the founders of the project and the product, Rob von Behren, Jon Wall, were well along the path. I know they did a tremendous amount of research and to what technology to use, considered all alternatives for sure, but NFC certainly made the most sense. I think there’s been sort of an up and a down in the popularity of NFC. I’ll admit to myself that basically I thought in 2013, I was questioning whether it was a dead technology. Certainly if Apple wasn’t going to support it, it was. Right?

Brian Roemmele: Yeah.

Mike Dudas: It became clear that Apple has the customers who are going to be the early adopters for any type of technology like this. They’re shopping at the places where it’s going to be available, they have the tendency and the predilection to try and be engaged and interested in new technology. As soon as they embraced NFC, that was the kick start that the ecosystem needed.

Faisal Khan: Mike. I had a question on the Google Wallet. Since Google has got its foot in so many markets, how come they didn’t extend the Wallet to those markets immediately?

Mike Dudas: It’s a whole set of different issuer relationships, carrier relationships, merchant relationships. We were looking at other countries. Look, it was a Herculean task to launch in a couple of cities. Even today the physical landscape is not wired for in store payments. There are very few NFC terminals. To make this the type- to make a mobile payment system work, you really do need merchant marketing or issuer market in this case. The banks are the ones doing most of the marketing on Apple Pay right now.

Without that it’s pretty hard to launch even in a pilot, five cities in the same country with all those ecosystem players I mentioned never mind a whole new set in another country.

Faisal Khan: The Google brand is so powerful. You go to let’s say for an example South Africa or New Zealand- not New Zealand, South Africa. You say I want to go deploy Google Wallet, which companies would like to work with me? I’m sure you’ll find plenty of takers.

Mike Dudas: Yeah. It was certainly contemplated. I think it was pretty clear that we said “let’s try to make this work in the US first”, that’s Google’s home territory, and go from there. I wouldn’t be surprised if something more experimental happens where let’s say Google- I have no inside knowledge, but I wouldn’t be surprised today to see Google do something like what you’re talking about where there’s an area where payment technologies are not set in stone like they are in the US and perhaps there’s an opportunity to leap frog. That wasn’t contemplated at the time.

Mike Townsend: Yeah. It kind of reminds me, Faisal, of we had Joaquin Ayuso, the CEO of Kuapay. He sold a company, it was basically the Facebook of Spain, for a few hundred million dollars and then he came over to Santa Monica, started this mobile payments company, essentially doing a similar thing to LevelUp with in store payments and they would put in their little device. They hit a lot of friction here so they launched down in Chile. Apparently Chile had a huge adoption for it and they were real excited to be working with a fancy California start up.

Faisal Khan: They’re doing pretty good over there.

Mike Townsend: Yeah. They really are. They do have that DNA, the whole company’s Spanish and they have that Latin root, so probably a bit of advantage. If you and I were to try to do that.

Mike Dudas: Have they had any success going on beyond Chile?

Brian Roemmele: Yeah. Fuel dealers was their primary focus and I think they have 80 percent of all the fuel dealers in the country. Is that correct Mike?

Mike Townsend: Yeah. I know they have a ton of fuel dealers. That was probably six months ago so I’d imagine more now as well as a lot of Walmart terminals.

Brian Roemmele: It was great focus. That brings us back to merchant adoption. My thesis has always been with any wallet or payment start up is that if you try to own every element in an ecosystem, and not work with but work against every element, you’re doomed for failure because there’s too many moving parts. The success of Apple Pay is that banks, ISOs, merchants, processors, equipment providers, everybody is energized and promoting this ecosystem whereas if you look- and Google was close to that.

If you look at some of these other initiatives, it was like, I want to own the merchant account, I want to own the equipment, I want to own the customer, I want to own the data. Thankfully we’re not in that world. Nobody wants to live in that world where it’s only one company owning every aspect, at least even in some merchant segments.

I think Google started with that but I think they failed to connect to different elements of the ecosystem to really energize them, to get down to, what is it? 750,000 merchant account sales reps that are out in the field. These people literally see merchants face to face. They would literally plug in an NFC reader if it was available. Those areas were never utilized and Apple’s utilizing them today. That’s one of the elements of success in my view.

Mike Dudas: Yeah. I think the biggest gap right now is still the merchant one. I think anybody would probably say that. You’ve seen CVS, you’ve seen I believe Rite Aid and some other folks say hey we’re turning off our terminals and we’re not going to accept NFC payments.

Brian Roemmele: That’s a political move. That’s a political move, right Mike?

Mike Dudas: I think, it’s clear that there are- there’s a long history of merchants not being super stoked about the form of payment, the way folks are paying in their stores. Can they control that? No that’s been made readily apparent. Can they attempt to influence it in a pretty strong way and make things take longer to happen? Absolutely. I think, look, there’s some real issues here of course. Certainly in the cost of payment side and on the data and information side. There’s obviously not an ability for a store brand card to work, which for a lot of retailers in specific segments like department stores, that can be 30 to 50 percent of your payment volume. Loyalty cards aren’t supported.

Brian Roemmele: That’ll be part of Apple Pay in the future.

Mike Dudas: Yeah. The retailers are struggling though; Radio Shack went out of business right? They were a partner of Google Wallet a few years ago. The time horizon to say that Apple Pay is going to have something available in three years is not something that is super reassuring in a cut throat and brutal retail environment.

I think there are still gaps that others could potentially take advantage of or you’re seeing merchants themselves go with- sorry.

Brian Roemmele: What about the optics though? Right? If you’re sitting back and Mike you’ve seen a lot go down in this industry, what are the optics on a consumer level when you have a merchant denying using a technology that costs exactly as much as if they handed them over a physical card.

Mike Dudas: Yeah. They’re not good.

Brian Roemmele: The optics there is not good.

Mike Dudas: No. Not at all. I think that a lot of merchants, if you said “hey we’ll come in and we’ll pay for all your terminal upgrades and all your system upgrades and we’ll support all your data needs”, I think they would do it. Forget cost of payment. I really thing it’s a complex infrastructure and complex data situation and system situation. In certain merchant segments that’s more important.

In the segments that you’re seeing, Whole Foods doesn’t have a loyalty program today. Folks like McDonald’s care deeply about speed and convenience, Subway, speed and convenience versus cost of payment. “Hey can I get you in and out happily?”

I think you can look at the merchant segments and see where there’s the really strong value proposition today and where, to your point Brian, Apple Pay might have a stronger one than others in a couple, I think, a couple years. Do you really sincerely believe that there’s going to be a solution for store brand cards and deep loyalty and data analytics in the next six months?

Brian Roemmele: World wide developer conference, we’ll see the beginnings of the loyalty. Loyalty is an opportunity for brilliant start ups to intercede. If we’re looking at the Apple Pay, and I’ve already seen five start ups that are working on this, one I’m going to meet next week that are flying out. It’s blowing my mind. One VC called me up and said, listen you got to meet these guys.

Basically, if you assume that the network, the internet of payments is NFC, then let’s take that as an acceptance point, then what can we build around it as entrepreneurs and creative thinkers to make loyalty, those different layers of loyalty and reward systems and the data analytics that merchants want.

Apple’s not against that. They just don’t want it to ride on the back of the credit card transaction. We have things like iBeacon, we have other in apps scenarios, things we’ll talk about that Button can do. There’s so many opportunities that build up on the infrastructure, but there’s too many people that I think are brilliant that have their arms folded and they’re talking a view of, wow, Apple already shut down the entire opportunity chain here. I don’t know what to do. I wanted to make a wallet and I can’t do it now. To me that’s the wrong thinking.

Mike Dudas: Do you have any insight into what type of a loyalty framework Apple will make available to developers? That’s the key question. Are they going to have a stored value system, a point system, an intelligent points optimizer, a campaign management system?

Brian Roemmele: All of the above. All of the above. Basically what Apple’s going to do … We’ll separate the two different elements. Element number one is store credit cards. Absolutely going to be done. That was one of the major things that’s holding Starbucks back from adoption, obviously, they live on that. Apple’s not-

Mike Dudas: Is it a new form? Will I have to have a new stored value format and a new issuing bank and all that to work with Apple or will they support my existing schema?

Brian Roemmele: That’s where it becomes complex from a programmable API standpoint. Now you can ride on the existing infrastructure that NFC created and on the other end, either your processor or whoever’s doing your back end can interpret that encrypted token as your store credit card. Now, that’s not a difficult thing. It’s all technology. It’s technology from 2000. Larger stores will have no problem getting into that element.

On a smaller level, on regional stores and things of that level, you could probably create a side line store value card that communicates through BLE and things of that level, but not properly within the secured element and the tokenization schema that Apple’s created for Touch ID and what we’re calling Apple Pay. That’s definitely coming.

The APIs are going to be tangentially connected to Apple Pay. They’re not going to say, okay you can just plug into Apple Pay through an API and go at it. They’re going to be notifications that will take place inter-app or in the deep levels of OS which will communicate to iBeacon and BLE so that there is recognition on a micro-location level that something just took place.

I really believe that the loyalty aspect in physical retail, the main signaling of that, is going to be BLE and iBeacons and on some merchants it’ll be through the NFC tokenization schema.

Mike Dudas: I get the tech, the thing that I think is important though is the program design. I’m just wondering is this API that you’re talking about and the schema and basically the capabilities of Apple’s loyalty framework going to be able to support a highly customized loyalty program? The type of data exchange and segmentation. I haven’t seen, certainly or heard any- I’ve heard rumors of an Apple loyalty program, but I haven’t heard or seen anything much beyond that. I’m excited to see it.

Brian Roemmele: I just have a chicken foot and a crystal ball and that’s all.

Mike Dudas: They nailed payments, I’d say they nailed the payments design so I would definitely have a bias towards agreeing with you that they’ll nail loyalty design if anybody can. I think it’s harder to platform loyalty than it is payments.

Brian Roemmele: Oh yeah. That difficulty to me creates an amazing opportunity for many, many start ups. If you look at the Apple micro-location scenario when you walk into the Apple store right now. You have lock screen notification in a lower left hand corner of your screen. That is going to become a much more richer communication mechanism. Your micro-location, as you get in through the door of the business, there’s going to be a lot of stuff that you- there’s a lot of stuff you’re already telling a merchant just carrying a recent iPhone, it’s an iBeacon already. A merchant can already start taking some forms of information from that and harvesting it.

Identifying that iBeacon to a particular transaction, that’s where the API is and everything else can be built around it. All we need to do is identify that person, with permission of course, Apple’s not going to do this without a great deal of sign off from the consumer saying, okay I’ll let this merchant under this circumstance know that I perform this transaction to this API. That will enrich an app layer, which I think is going to become very robust, and very rich for the merchant and the consumer.

You can get down to locations within a store. As I say, the Whole Foods settings, you’ll know if you went to the prepared food section or if you went over to check out or if you went over to the wine bar. You’ll have that sort of pinpoint a locality. If you see what Apple’s doing with micro-location, I think it makes a lot of sense. It is also part of their anti-Google campaign if you will. The idea is to try to shunt people via the OS right to the merchant and emancipate a payment right there. I think that’s the beginning of it.

Again those pieces have to be built, the developers have to have access to it. I think we’ll see the beginning of it in June at the Worldwide Developer Conference, but Apple’s going to go very slowly and to your point about waiting two or three years, I don’t think it’s going to be that long but it’s not going to be as quickly as I would like or as the rest of the world.

Mike Townsend: Brian, do you think Apple could build a moat in any sense to where there is no possible entry for other players in the space? I remember we were talking about in the iBeacon show, I think it was the NFL 49ers stadium or one of the stadiums were launching specifically the Apple Beacon technology in there.

Brian Roemmele: Yeah.

Mike Townsend: I can’t imagine that a stadium’s going to go through the same process twice with implementing some of the hardware. Is there hardware they could put in, not in the merchant side, but in other facilities, like stadiums or completely different areas where it blocks everyone else out? Is there always going to be that ubiquitous … the potential for other players to get in the space.

Mike Dudas: If we’re talking about being consumer friendly, I certainly hope that that’s not the case.

Mike Townsend: Yeah. Yeah.

Brian Roemmele: Beacon technology is an open standard as NFC is. We have to really look at Apple’s thinking on what they’re doing. By choosing NFC, they knew that they were going to rise the waters in the Harbor for everybody who adopted NFC, including Google, including Softcard Isis to some extent. It’s actually a good idea, if you really study game theory, it’s a good idea to have multiple players within any ecosystem you’re creating. It is a bad idea to try to take winner take all type of mentality.

Mike Townsend: Yeah. Then you get lazy.

Brian Roemmele: Never works. Not only that, people won’t adopt it.

Mike Townsend: Mike, I want to ask. Venmo has always been a favorite of mine. It really hit me as one of the few apps where I could explain it to someone who does not care at all about technology or apps on their phone. They probably just got the iPhone as a present from their parents over Christmas. You tell them about Venmo, and there’s always a little skepticism about how you can pay people with your phone. They’re not comfortable with. Then I always come back a week, two weeks later and people are actively using it. It’s one of the few apps I’ve seen that really, really took off. What was the story? When you got involved, how did they come from the ground up?

The idea wasn’t obvious. I never felt like six years ago that there was a huge vacancy in my life with the ability to pay people peer to peer. They come off and they absolutely explode with a fantastic product. What was the origin there?

Mike Dudas: Yeah. To caveat, I will readily admit. I came onto the scene of Venmo well after the founding, in fact years after. The company was part of Braintree by the time I joined. Kortina and Iqram and the team just did an amazing job of nailing a consumer experience. Seeing a need almost before the technology was ready for it. I think the original idea, and I think Kortina has written an essay on this, was tied to text messaging.

Brian Roemmele: Yeah. Great, great essay.

Mike Dudas: Obviously the killer app was turning payments and P2P payments into an app based experience that was just dead simple and just turning it into a verb and literally making it so beautiful, so simple and really fun. I think people make light of the social aspect of Venmo and say, “hey who would want to write a note or have a payment be public or social?” Whereas, Kortina rightfully pointed out, paying is typically one of the most social things you do. You’re paying a friend back, you’re sharing a meal, you’re sharing a cab.

The problem they identified was particularly amongst a younger set, folks who were doing lots of group activities and there was constant needs, multiple times per week, to split bills and money moving in this really interesting social network and just started by solving a very simple intimate problem which is paying a friend in a very, very clear concise way with a ultimately what turned out to be a really differentiated twist which was this social element.

Look, you see every single messaging platform today now trying to move in the other direction. Saying hey we have a social environment, let’s add payments.

Brian Roemmele: Facebook, right?

Mike Dudas: Yeah. All the Asia messaging platforms.

Brian Roemmele: Yeah.

Mike Dudas: I think that it’s definitely something where it’s clear now that there’s a number of payments use cases that are high frequency that are social. Now, is P2P payments in and of itself a huge stand alone business and was it ever contemplated in that manner? I don’t believe so. It’s about finding payments use cases that enable you to develop a relationship with the consumer and then spread that brand out that people love into other use cases that do have a strong business case.

Mike Townsend: Let me ask this Mike. I have the Venmo app open now. I’m curious, you make a good point. You say Venmo made it into a verb. You Venmo people, you don’t pay them on your phone using Venmo. That’s brilliant, absolutely brilliant to get people to remember to use it. As I’m sifting through the publicly displayed comments and things, it really appears- I’ll read a couple.

One is a payment for not candy, one is for an emoji of a dinosaur, one is an emoji of a shower, one’s like a fart symbol, there’s Uber, something in different language. It almost appears that it’s a game aspect as opposed to a useful part of the payment exchange. Was it kind of something that got people to be comfortable using the app? I feel like there’s got to be a subtle difference that really sticks to comments. I use them, they’re fun to use, you throw anything in there and often times it’s just not serious. I wonder if that was their game plan from the beginning, to get people to think about payments differently.

Mike Dudas: Kortina and Iqram are two very, very unique individuals with really great view point on payments and the world. What they did is they created a platform that people use in different ways. I write very literal, that’s just is the way my brain works. I write very literal payments messages, I believe if you look into my feed. Other people don’t but again it’s just part of the fact most of the payments that are happening that are P2P are social and giving folks the ability to put that expression there.

Again, the original premise was this was going to be part of a text message so there should be some context there. I think the app based paradigm and the stream is a little different than the very, very initial imagination.

Brian Roemmele: Let’s bridge this. You’re in Google and obviously while it had taken off, what made you reach out to Braintree, I guess was your next move? What was the excitement there? Was it Venmo? Was it the Braintree idea?

Mike Dudas: It was a couple things. One is Braintree was a company that was in the segment of mobile payments that I still think today gets far less attention relative to the importance which is the on device mobile payments segment. In other words, verticals where you’re actually paying on the device for a good or service that’s fulfilled in the real world.

Brian Roemmele: Like Uber.

Mike Dudas: Yeah. Uber, HotelTonight, Seamless, Instacart, or just your normal shopping. Amazon does a huge mobile business, Walmart does. Walmart’s said fascinating things. In Q4 over the holidays 10 percent of their mobile on device sales came from inside their own stores. People buying stuff they couldn’t buy in store.

Brian Roemmele: That’s crazy.

Mike Dudas: It’s nuts.

Brian Roemmele: I couldn’t believe that.

Mike Dudas: Stunning right? That segment, it was clear to me when I was looking to potentially leave Google and go to an earlier stage company, a high growth company. I loved working on high growth business at Google, but wanted to really focus and that’s why I was looking at companies like Braintree. They were in the sector that Google was moving towards, on device payments with Google Wallet Instant Buy and seeing a lot of success. Braintree works with the best merchants in the world. They process payments for Airbnb, for Uber, for Dropbox, for Eventbrite, for Slack.

Brian Roemmele: It’s amazing.

Mike Dudas: They’re just a phenomenal company. A great team.

Brian Roemmele: That’s an aggressive sector, right? They’re competing right up against Stripe, right? We got Stripe which is a brilliant company. Patrick and John are incredible leaders. You were in a belly of the beast at the time.

Mike Dudas: Merchants are lucky. If you’re creating a mobile commerce business today, you have fantastic options. The infrastructure is in place and it’s up to you. You can collect payments, you can pay out, you can do anything from that front. Both Braintree and Stripe plug easily into a number of other service providers that provide other business functions. There has never been a better time to start a mobile commerce business. It’s never been easier. You don’t have to take a month to get a merchant account.

Brian Roemmele: I’m going to put you on the spot here. You’re inside of Braintree. It is exploding. You’ve got Venmo, everything’s going on. Tell us what happened, I guess maybe Bill Ready came down, when you heard that you were going to be merging with PayPal. You’re merging with PayPal. What happened? Tell me that story if you can, the experience.

Mike Dudas: I can just say that, look, it was an exciting time and is an exciting time to be at Braintree. PayPal has tremendous resources. If you look at I think, what, 150 million consumer accounts. The piece of the business that Briantree has, they’re just such complimentary business, PayPal and Braintree.

Brian Roemmele: Mike, you were there right? You were there inside this dynamic company. How did you feel when you first heard it? How did you hear about it if you can share? Was it somebody send a text message, holy cow where PayPal is going to acquire us, or, Square’s trying to acquire us but PayPal’s going to win? How did that all- I won’t go too far into that, but how did it all play out?

Mike Dudas: Bill is very transparent about the process.

Brian Roemmele: Cool.

Mike Dudas: Look, he explained the rationale. Like I said, it makes a tremendous amount of sense. I think we see that today with this company. Braintree continues to win fantastic merchant accounts, both new developers as well as large businesses. They now have the resources of PayPal to add incremental value to a merchant so they can say, hey look we’ll process your payments and we can add PayPal Touch so you can do one touch payments to improve your conversion and you can accept PayPal all with one integration.

The SDK that Braintree released I think about a quarter ago, that tells you how much sense this made for both parties. That’s the way that Bill explained it and I think he’s spot on.

Brian Roemmele: You had high horse power developers inside of Braintree and Venmo. What was it like being around those guys? They seem like they really know their stuff. They were really ahead of the curve on a lot of this.

Mike Dudas: Oh yeah. I think when Braintree was founded, it was founded as a very traditional, trying to make merchant processing a little bit easier back in 2007. This is really pre- mobile payments. It was an e-commerce company.

Brian Roemmele: It was a stone age. dominated it. It was a different time.

Mike Dudas: Yeah. It was a remarkable engineering team. Again, I came in well, well along in the Braintree story, but I think it’s pretty obvious that those folks were great, what a high leverage team. I was like the 100th employee five years on.

Brian Roemmele: Wow.

Mike Dudas: A hundred people just a really focused team created a tremendous amount of value. You see that happening, like you said, with Stripe and other companies. It’s remarkable the engineering talent and how much value a very focused group of exceptional engineers and designers and product folks focused on a big need can create. We’re trying to do the same thing at Button in terms of connecting these apps together now.

Brian Roemmele: Let’s focus on that. You left Braintree/PayPal and you went and you formed Button with some brilliant individuals. Let’s talk about Button. Who is Button? What is your mission? The whole thing. Explain it like we don’t even know what payments are and what app layers are or anything.

Mike Dudas: Yeah. Absolutely. On one of the recent, I think it was the Q3 earning call, Mark Zuckerberg basically said advertising is just a payments business. At the end of the day these things are super intertwined.

For the past five years everything I’ve done in payments has been really thinking about the full stack and “closing the loop” between consumer intent and demand. This is what Google’s obviously their business model is — taking consumer intent and matching it and fulfilling it right? I’m looking for something, I’m searching for something and increasingly I’m doing other things. Watching a video, I’m on my calendar, I’m on my maps and getting the information. Sometimes organic, sometimes paid, to get me to purchase or fulfill my need. Everything I’ve done in payments and all the projects I’ve worked on have had an advertising component either immediately or via the merchants that we enabled and worked with.

Post acquisition by PayPal, I was looking at, “hey what other problems are there that need to be solved in the mobile commerce ecosystem”. At the high end of the funnel there’s huge mobile advertising platforms. The app stores themselves, Google, Facebook and a host of others, ad networks. At the bottom of funnel, we’ve talked about all the great mobile payments companies and the platforms that exist for folks to get their businesses started. It was kind of this middle of the funnel, “I’ve acquired a customer, how do I make their experience more valuable and how do I foster customer loyalty and just a great experience?” And I felt like that was a really ripe opportunity for a new company. It gets to what we were talking about with loyalty and Apple and it’s really hard to platform that stuff.

We created Button towards the beginning of 2014 with a phenomenal team. Our CEO, Mike Jaconi comes from Rakuten. He sold a company to Rakuten, the large Japanese company and ran Rakuten Loyalty here in the US. He has a loyalty background. Our head of Ops, Tanner Hackett, worked at Rocket Internet and led their Lazada business in Malaysia. We have the lead iOS engineer from Venmo, Chris Maddern and one of the original Google Wallet engineers, Mike Wakerly. Just a phenomenal team. Focused.

Again, with all this payments and loyalty and operations experience, and e-commerce experience, focused on this middle layer. “I’ve acquired a customer, how do I create a great experience?” What we saw as a massive opportunity was breaking down single app silos and really extending individual app experiences into complimentary apps or other apps. “I’ve booked a reservation with Resy to eat out tonight, I’m going to call an Uber. I have to take a car to get there, why don’t I just link those two experiences?”

We created a product called the DeepLink Commerce Product, and we actually do an installation of the app that we’re sending traffic to. In this case you book a table, call an Uber. If I want to install Uber, we can actually bring that experience into Resy, the originating app, to cut out some steps. We tie those apps together and we create just a great experience for the consumer. We link two apps together and you can have a whole evening out. We think this is going to be applicable across a broad, broad range of commerce segments. We want to be the company that helps apps, particularly in a commerce space, work together.

Brian Roemmele: Mike, I just think this idea is absolutely brilliant. To me it’s almost one of those things where when you first hear it, you’re like why didn’t anybody else think of this or do it? Do you see a lot of people coming into this space? What are the challenges that you’re facing to make this all work?

Mike Dudas: Yeah. Absolutely. I think the notion and the focus on commerce is unique to Button. I think that there’s no question that other companies like Google themselves and Facebook and start ups have recognized, “hey, we need to link together apps and build connections and bridges like what exists on the web.” Where we’ve tried to focus though is really on the problem that Google and really we think everybody is trying to solve, again, the problem I said at the beginning — advertising is a payments business and everything ends in a transaction, so how do we help people get to that end point sooner?

That’s kind of our insight is really focusing deeply there and then actually bringing some payment technology to bear. We have a technology called Cart Adjust which means — I’m Uber, I want to incentivize an OpenTable user or somebody in another app to use my service — I can actually provide them with some sort of an offer. Today it’s a dollar value offer, in the future it could theoretically be loyalty points, it could be a coupon. Button actually does the cart adjustment automatically so the consumer doesn’t have to enter in coupon codes and other things like that.

Brian Roemmele: Let’s freeze there for a second. This is, I think, one of the most important elements where, I talk to a lot of people about what you do in the payments world. Again, whenever you’re doing something so creative and so new, it’s hard to explain. I think that is, to me, the crystallization of what Button is about is its ability to incentivize all of the elements of that particular ecosystem. The consumer, the two merchants that are involved. Everybody is winning in that environment, there’s no losers.

Mike Dudas: We believe so. Yeah. If we do this correctly with our partners, everyone wins. You have to have that technology DNA to build seamless technology and have it work at scale in a system that allows apps to work together seamlessly and change campaign parameters and things of that nature. You have to have a good business team to really credibly explain the value ad to both sides of this exchange.

Then you have to have a really strong design ethos, which Button does. The connections that we design, we believe are as high quality as the apps that they are residing with them. That’s essential. It’s not easy these days to convince a large established company that it’s growing fast to embed an additional SDK or to outsource a function like customer acquisition or re-engagement. You have to be tremendously credible across every piece of your business to get the thumbs up from folks to partner with them. We’ve been fortunate enough to have Uber and a number of other folks.

Brian Roemmele: Mike, does it look like an affiliate program to some of the merchants involved?

Mike Dudas: Yes.

Brian Roemmele: Now, if I’m an app developer and I’ve just created this really great app that discovers taco restaurants. I want to be able to get the Uber API through this. What’s the process? Is it a difficult process to integrate? I’m putting API, Uber’s already opened their API to allow this to flow into my app, is that correct? You’ve already partnered with them?

Mike Dudas: Yeah. We’re complimentary to Uber in the sense that they have a fantastic API that a developer can absolutely build to. The value out of working with Button is we make that just- we’ll package it up and get it done in literally like hours versus potentially days. Once we’ve built this connection for a developer, we are maintaining this and really giving it great attention, ensuring it’s optimized and we have other connections to point to to see if it’s working or not working. We have a great design team.

The other piece is that we connect on both sides of the network to multiple APIs. Let’s say you’re an app, like one of the NBA team apps for example.

Brian Roemmele: Sure.

Mike Dudas: I’m the New York Knicks app. There’s a few things I want to do. I want to sell tickets to people so I might want to partner with Ticketmaster, StubHub, or SeatGeek. Hey people might want to grab dinner before they come see the game so I might want to partner with OpenTable. People want to take an Uber to get where they’re going so I might want to partner with Uber. The NBA, the benefit to them is they can basically do one partnership with Button and theoretically get connections to companies in all of those verticals and again, with the tender loving care that Button can give where we pay deep attention to how these things are working and we optimize them so that these app connections don’t, six or 12 months down the road, become a forgotten feature which sometimes happens as companies are growing and building fast.

Brian Roemmele: Right. Right. Right. This is phenomenal. Can we talk about revenue to Button? How does Button profit in this arrangement?

Mike Dudas: It would be your, as you suspect, an affiliate model where I’m receiving an incremental ride, an incremental ticket sale, an incremental seating dinner reservation, I’m willing to pay some percentage of sales or some bounty amount for that transaction. That gets paid to Button who then shares that with our partners.

Brian Roemmele: Have you found resistance?

Mike Dudas: We’ve found people have embraced this.

Brian Roemmele: I love it. I love it. I’m hoping to hear that.

Mike Dudas: The key here is saying, look this is how much you’re spending right now to acquire and reengage new customers on Facebook, on Google, on Twitter, or you tell us. We’ve seen all the studies but let’s talk about your individual spend. Then let’s just pencil out what this looks like in terms of affiliate fee with no risk up front and basically a no risk placement in a really complimentary way. We’re doing high quality work, I’m not bashful about saying that, so people are liking it.

Brian Roemmele: That’s awesome.

Mike Townsend: Mike, I’m curious. What does this look like in the future? If you fast forward the tape, do they open the Button app in the future and have an interaction where they can see all the different paths they can take for the night? For instance, you could take an Uber to a five star restaurant in Mission and you sign up for that route, could you commit to multiple merchants at a time with the consumer in exchange for some discount? Are there other ideas that you guys think are really interesting to think about and potentially one day would become a reality that aren’t true today?

Mike Dudas: Yeah. Look, the scenario you laid out is one that’s really exciting to us. Scott Belsky wrote just a phenomenal blog post on the interface layer between the consumer and the apps that can fulfill the needs that they have. We certainly have the ambition to be that interface layer and really help — whether that takes the form of a consumer facing brand or not, I think really just depends on consumer behavior that we’re going to watch.

Today we’re really just an enabler. We don’t provide any direct fulfillment services. There’s great companies out there in any vertical that you can think of and our idea and our premise is to connect folks in one app where they have expressed intent to another app that can fulfill that.

Mike Townsend: We have to draw Faisal in because Faisal’s our international expert whether he likes to admit it or not. Faisal, what’s your takeaway in terms of how does this work in your part of the world.

Faisal Khan: We don’t have this in my part of the world. I had a question of Mike. Do you think this would eventually become something like mainstream technology, just like the API is, that you have apps talking to each other and the whole experience like you are trying to bundle it for maybe somewhere down the years would just be a normal thing. What’s your take on this thing?

Mike Dudas: I hope so. I think that Apple will allow apps to become more and more open and communicate with one another. They’ve started to do that with extensions. I think eventually they’ll make it easier to do the things that we’re talking about.

Faisal Khan: When I first saw your website, I really couldn’t get it what you were trying to do and then it just hit me. When it hits you, I’m thinking my God these guys are on the edge of something really super. Really like what Brian said, why didn’t we think of this earlier? It was a fantastic product. Good luck on that. I think there’s a lot of potential in what you guys are doing.

Mike Dudas: Yeah. I appreciate it. I think that counter to your point, I think this is something that goes international. In fact, we’re already talking with multiple folks about international implementations of exactly what we just discussed. There aren’t the regulatory and the ecosystem challenges that you have in pure payments. We’re again, we’re really connecting two apps together. The partners that we work with, yes some of them are global, and so we have ambitions to be this year in a number of different countries facilitating connections.

Brian Roemmele: Mike, how far do you see these tendrils, these branches going out? I can start extrapolating that one single app can actually reach out to individual products. Like, hey I want to have wine in the Uber on my way to the air so I can stop by here. How far out are you guys extrapolating on this? Is there a limit or does it get wacky and impractical as it goes too far out?

Mike Dudas: No. I think you can get to that level. Some of that will have to be fulfilled within a service itself as you get to really, really niche cases. Today you’re seeing some really exciting app connections that are very deep, very deep already.

I’ll give you the one example recently, but Yummly and Instacart which was direct integration that those two apps did. Yummly is a food and recipe app and it’s a phenomenal one. They integrated with Instacart’s API so that I can select a recipe that I’ve been looking at that I’m excited about that I want to basically cook tonight. With a touch of a button, I basically can tap, if I have Instacart installed great, it basically populates my order with all those ingredients directly over to the Instacart app. If I don’t, it will do an installation for me and still port over that information.

The intelligence is in both apps. There’s that recipe and language translation service that Yummly has, there’s the API that Instacart has to recognize that and then fulfill it. It’s like stuff that is seemingly magical but accessible today and now it’s just a matter of extending that into more environments. I think every app should have that functionality.

Brian Roemmele: Mike, as a marketer I’m freaking out over here because you have brand specification that could take place. If I’m baking a cake, I can literally specify the brand of sugar, the brand of vanilla, and the opportunity to work with packaging companies. There’s tremendous layers that can be built into this. Are you examining that aspect?

Mike Dudas: Yeah. We’re examining it, but today we’re really focused on building what I would call the pipes or the highway and then you’re going to have a lot of ways that people can get to different destinations that will be built on top of that. APIs, there really wasn’t, if you go back to even just 10 months ago or 12 months ago when Button was formed, there weren’t these — Uber only released their API in 2014. Postmates did the same, has a great API. You’re starting to see right, it’s what these apps make accessible is really the limit of what you can do today.

The barriers are being broken down and the functionality is being exposed. It’s really exciting to see companies that have been formed only in the last handful of years do more, let’s say, than companies that have been in the same space for decades, right?

Brian Roemmele: You see this as a mechanism to empower this whole app economy, this on demand economy.

Mike Dudas: Yeah. Not only on demand. Starting with on demand but getting to a whole range of segments. The reason we started here — on demand is a really exciting one because of the high growth, the frequency of usage, it’s a great place to start. I think the idea of app connections is going to touch every segment of apps, and particularly in commerce, and given the power of a mobile device and that just kind of goes beyond, goes to sensors and other elements and things in the real world that we’ve talked about like Beacons, is going to make the mobile computing experience and commerce experience just so much more powerful than anything we’ve ever experienced in e-commerce.

Mike Townsend: Mike, I’m curious. Say I’m a app developer and I’m considering what apps to give discounts to. Should I give the Uber — should I show up with — what type of apps should pop up for my users? Is there differentiation between the users that are using the app to the promo code or discount code that they see?

Mike Dudas: Yeah. Absolutely.

Mike Townsend: Then behind the scenes, does it exist yet where there’s a whole Google Analytics version of where traffic is coming from, where credits are using, where they’re going afterwards? Is that built yet or are you guys planning on building it?

Mike Dudas: Yeah. Yes. I’d love to say it’s as beautiful as Google Analytics today, but it’s somewhat custom and customer specific. It’s that powerful, both on the analytics side and on then on the campaign — we’ll call it campaign management, but look, this is a commerce network.

Mike Townsend: Yeah. This is a huge, huge thing because this is essentially for every app developer. You shouldn’t not do this.

Brian Roemmele: There’s no downside.

Mike Townsend: There’s really no downside.

Faisal Khan: It almost makes me feel that this would eventually become something like an API framework, independent, that everyone would start using maybe a couple of years down the road.

Mike Dudas: Yeah. There’s been talk. Absolutely.

Mike Townsend: Kind of like what Zapier does to connect apps, could you do that here?

Mike Dudas: Yeah. People have likened it to IFTTT. That’s where we try to differentiate and I think we do on some of the technology around cart adjustment, around design today, around crafting beautiful thoughtful placements and experiences as well as building great technology that’s highly functional. Then again, to the point you raise earlier, having that analytics on the back end, having the campaign management tracking on the front end and then all the things that I saw make Braintree successful. Really great customer support and account management. I can’t understate how important that is to making an ecosystem like this work.

APIs are fantastic, but APIs without support and management, education, documentation, yeah good luck.

Brian Roemmele: Worthless. Mike I got two big questions here. Do you actually calculate cost to acquire customer? Are we getting down to that level? Can you say that this customer costs you X versus Y?

Mike Dudas: Yes. Furthermore because you’re not committing to, this isn’t like advertising where you have to pre-commit to $100,000 buy before doing it, you can tune this as you go. We can make really good estimates based on previous integrations with other partners on a broad basis, and then tune and refine as we see real data. That’s the beauty of the kind of “affiliate model” of these app connections.

Brian Roemmele: How does a developer start? Did it come to you as sort of like a marketplace and say, what should I connect- the guidance of what the connections would be from my app? Who’s helping me with that? Is this automated in some way?

Mike Dudas: Today it’s operational and then over time we automate. I think people overestimate what you can make automated at the outset of a business. We’re pretty focused on making suggestions and introductions today. Again, you could automate this, but it’s a new concept. We’re out there still, we’re telling a story. Folks are excited about this.

Faisal Khan: If I had to explain it to someone, I would say, this is something like an app router. Taking information from one app and just bringing it to the other in the most logical sense.

Brian Roemmele: Yeah. Exactly. Like I said, once it hits you, you really understand the power of what Mike’s doing.

Mike Townsend: You’re the Chief Revenue Officer, so you’re the guy who brings in the dollars.

Mike Dudas: Yeah. Chris and Mikey and team build and I sell their great products that they build.

Mike Townsend: Awesome Mike. Hey man, we were so excited to have you on, so excited for what you’re doing there.

Brian Roemmele: This is amazing.

Mike Townsend: Would love to set up another one in the future.

Faisal Khan: Thank you for coming. Really appreciate it.

Mike Dudas: Thank you guys; I really appreciate it as well.

Brian Roemmele: Honor to have you.