A Memphis startup is providing a new way to pay.
SynapsePay officially launched its mobile payments network this month, a process that it’s selling as less costly for merchants and more secure for consumers.
Company founder Sankaet Pathak said SynapsePay is more secure than other mobile payment options because no financial information is exchanged during a transaction.
Users create a Synapse account to store their financial information on computers that are not connected to the Internet. The encrypted financial information is only shared with the banks and the Federal Reserve.
“There is a transformation going on with how people pay for things, and what we’re seeing in the mobile payment industry is that no existing or upcoming solutions are trying to improve the infrastructure of payment processing itself, which is how people’s financial information becomes exposed,” Pathak said.
SynapsePay is deeply rooted in the community: It’s backed by a local financial institution, financed by local investors and used by local merchants. The University of Memphis Crews Center for Entrepreneurship granted the business its workspace
Memphis-based
Independent Bank has partnered with the startup to facilitate the mobile payment transactions. Co-founder, co-chairman and president Susan Stephenson said Independent Bank is always looking for innovative ways to support its customers.
“We believe that SynapsePay is a unique payments platform that can help merchants and their customers,” she said. “We’re thrilled to have developed a partnership with SynapsePay.”
About 30 local merchants – primarily restaurants – already are signed up to accept payments on the new platform including Central BBQ, Aldo’s, Tamp and Tap, The Mad Earl, Ultimate Foods, The Cupboard, Oshi Burger Bar, Brother Juniper’s and Local. A complete list can be found on the company’s website.
Varsity Brands founder and CEO Jeff Webb is one of the company’s investors, along with Doug Marchant, CEO and general manager of United Health Services. Marchant founded EPN (which was acquired by WebMD) and co-founded Concord EFS, which was acquired by global payment processor First Data.
He said he was intrigued when he first met Pathak and other co-founders Bryan Keltner and Jereme Cavallo.
“The more I researched the payment process and got to know them, I was impressed with what they had created and thought there was a need for this application,” Marchant said. “They are using technology available today on smart devices to create a secure transaction that is easy to use and very inexpensive.”
The inexpensive piece is paramount to the company’s growth strategy.
“We’re only charging merchants 25 or 10 cents for every transaction,” Keltner said. “So essentially for a $100 transaction, we charge them 25 cents compared to $3-$5, which is a lot less costly than the existing payment networks like Visa and Mastercard.”
Because of the steep discount its offering, Keltner said SynapsePay merchants are offering significant incentives to customers who choose the mobile platform over a debit or credit card.
Customers need only an iPhone or Android device and a U.S. bank account to get set up using SynapsePay. Currently the company requires users to furnish banking account and routing numbers, but even that information requirement is on its way out.
The company is preparing to launch a significant network update that will allow users from Bank of America, First Tennessee, Regions Bank, Independent Bank, Chase, Wells Fargo, Citibank, US Bank, USAA, Schwab and Capital One 360 to connect their bank account to SynapsePay simply by using their online banking credentials.
The update is a significant milestone for the startup, Pathak said.
“We believe that building this infrastructure is a very essential piece of the puzzle,” he said. “We do not want to ask users for the information that they do not already remember. We want to make the process as seamless for the customers, but without compromising the security.
“It is a very delicate balance and we care about it deeply.”
By Jane A. Donahoe
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