An Ann Arbor tech startup is poised to become the latest competitor in the single-card payment field, banking on a market for a device that will sync every card in a customer’s wallet into one card.
The Stratos Bluetooth Connected Card service launched Tuesday, allowing customers to sync all their cards — credit, debit, loyalty, apartment, gym or anything with a magnetic strip, into one card that can anticipate when you will need something. It’s all managed through a smartphone app.
With layer upon layer of security, including a card that doesn’t feature numbers like a typical credit card, the Stratos card is designed to keep personal data safe.
“The idea here is to make your wallet more secure than it’s ever been,” said co-founder and CEO Thiago Olson.
The field of single-card payment solutions is growing increasingly crowded, although some doubt whether the startups will be able to keep up with upcoming changes in credit card security. There are also concerns whether banks and credit card companies will accept their brands being consolidated into a third-party card. Finally, it remains to be seen how these smaller companies will fare when competing with the likes of Google and Apple.
Andrew Copeman, a payment services analyst with Aite Group, says he thinks this might be a “technology and product-development dead end.”
“It’s a numbers game. You really need deep pockets to be successful, said Copeman. “I think a lot of these companies are testing ideas in the hopes of being bought by deeper pockets.”
The best-known single-card payment device, Coin, had a successful crowdfunding campaign in 2013 but couldn’t deliver a product within the promised time frame. Even now, the company is still in the testing phase.
Since then, competitors have popped up, including Stratos, Wocket, Plastc and Swyp. All the devices operate on a similar principle with small differences, said Bryan Yeager, an analyst with the research firm eMarketer, covering emerging digital trends in commerce.
“They are just different takes on consolidating credit cards and other cards into fewer mechanisms,” said Yeager. “One school of thought is to do this via mobile devices because of the strong penetration of mobile devices.”
‘A lot of open questions’
Yeager says a lot of capital and interest has been generated by single-card payment solutions, but they remain mostly untested on the larger market.
“There are a lot of open questions with these card-based products, how much traction they will get,” he said. “It’s at a time where there is a lot of fragmentation in the market of mobile payments. But it is a worthwhile experiment to see if there is a market out there for this.”
Stratos might have an advantage in that it will be the first to launch to the public and deliver a product.
Olson, a native of Rochester Hills and 2007 graduate of Stoney Creek High School, partnered with Chris Bartenstein, who is Stratos’ COO and is a former Vanderbilt University classmate, and Henry Balanon, a developer who helped start Detroit Labs and is Stratos’ chief technology officer. After nearly three years of development and beta testing, they are ready to take customer orders. The first of the cards should ship in April.
“Stratos is the only connected card that has 100 percent merchant acceptance. That’s because we’ve developed a patented dual-stripe technology, which mimics the two tracks of information that run along the magnetic stripe on the back of a normal card,” he said. “Other connected-payment companies have created single-stripe technology, which works around 80 percent of the time.”
The Stratos kit comes with a card reader that allows the customer to input all cards into an app on a smartphone. Once there, they sync up with the Stratos card. The user can choose their top three most-used cards to feature, or in many cases, the card will figure it out itself. For example, using the location services on the smartphone, the card will actually know if you walk into a Starbucks or Macy’s and remind you to use gift cards or credit cards associated with those stores. A single tap of the card syncs it via Bluetooth to the user’s phone. A double tap brings up payment options on the phone, which can be translated to the card.
Stratos is not just a card, it’s a membership service, so users pay $95 per year for access to their cloud-based system, which keeps the card up-to-date on security additions and changes. Expect a new card every year, says Olson.
“We don’t want someone to have the same card two years from now and run into problems as retailers change the technology they are using,” he said.
This will become especially important as more and more retailers switch from magnetic strip technology to pin-and-chip technology for increased data security by October. Olson said the goal for Stratos is ultimately to create a card that is “tokenized,” meaning every time the card is used to pay, there is a different credit card number associated with it, making it impossible to duplicate.
Apple Pay and Google Wallet are also affecting the development of single-card wallet strategies. The tech giants use near-field communication devices to allow users to essentially touch their smartphone to a payment counsel to make a purchase. Even Samsung is making investments in the area, announcing a deal this week to buy mobile wallet software developer LoopPay.
While the technology going into the Stratos card is not new on it’s own, this is the first time all of it has been combined together into one device, said Olson.
“It’s not a competitor (to Apple Pay and Google Wallet), it’s more of a complement,” he said. “Just think, if you are in a bar or restaurant, you aren’t going to want to hand over your phone, you’re going to want a card.”
Single-card payment devices have drawn criticism and concerns over security.
Chester Wisniewski, a senior security adviser with Sophos, a developer and vendor of computer security software and hardware, said he doesn’t believe this type of technology would make a person’s security any stronger or weaker.
“The good thing is you’re not exposing your card number to any merchants,” he said. “It also means if someone is somehow able to steal your card, they have access to all your cards at once.”
A bigger concern is what these companies will do to protect the data they are collecting.
“The thing that makes people in my industry squeamish is you’re trusting these companies with your sensitive information,” he said. “These smaller guys may have the best intent, but its hard to get it right.”
Olson said the Stratos card is designed to be deactivated via the smartphone app if it is lost, stolen or left behind. He had previous experience working at the European Organization for Nuclear Research (known as CERN) and the U.S. Department of Defense before starting up the company.
The Stratos team says any data collected through the use of their card will not be able to be traced back to a single person. They have also invested in bank-level encryption services.
But with so much untested, it would seem best for Stratos and other startups to partner with the Google, Apple or Amazon, companies with deeper pockets, said Copeman. Even partnering with banks could be a good solution, Copeman said.
“The industry does need a periodic shakeup,” he said. “There are still opportunities for these bright entrepreneurial guys to get on board with them. but it’s all wishful thinking until we see concrete plans.”
Olson is determined that Stratos will be more than its competitors. And he’s excited to be doing it in his home state.
“There’s so much talent in this region and so many people are taking off and going to the West Coast for that Silicon Valley experience,” said Olson. “And we can finally provide that experience in Ann Arbor and Michigan.”