The dream of the mobile wallet has become a frequently heard technology buzzword. The idea is to allow consumers to pay via their smartphones when buying drinks at a café, paying for movie tickets, or purchasing goods at a pharmacy. The natural place for installing this mobile payments mechanism is on public transport, used by many consumers making a small payment every day.
The technology that the industry is going for to make mobile payments is near field communications (NFC), which already exists in many smartphones (except for the iPhone), but it has to be adapted all along the payments chain, from the smartphone to the payout counter, with the support of credit card companies and mobile carriers to clear the transaction. In Israel, this idea has not yet gained traction, except for various attempts by credit card companies at a limited number of retail chains. Israeli start-up HopOn Ltd. has come up with a solution that allows payments by smartphones without NFC technology, making it quickly available for many more people.
HopOn was founded in 2012 by entrepreneurs Ofer Sinai (30) and David Mezuman (30), former accountants at KPMG Israel and PwC Israel. The Tel Aviv-based start-up currently has 12 employees. Two weeks ago, HopOn and two other companies won the “Globes” and Bank Hapoalim (TASE: POLI) Smartup2 competition, winning a package of benefits and close support from the entrepreneurial incubator EISP 8200.
HopOn has developed high-frequency sound wave technology that allows rapid payment by smartphones on buses. Transmitters are installed on the bus door which identify the passenger’s mobile device and uses the app to make the payment. The app is easy to use. The registration process is carried out by uploading the passenger’s telephone number, at which point an SMS is sent with the user authorization code that must be uploaded back into the app.
HopOn is the first company in Israel to obtain Ministry of Transport permission to collect mobile payments in collaboration with Dan Public Transportation Ltd.. It is now possible to pay for trips on Dan routes with HopOn. At the same time, HopOn is running a pilot with five public transport operators nationwide Kavim Public Transportation Ltd. in Modiin, Rama Golan Public Transport, Metrodan Public Transport in Beersheva, Superbus in Beit Shemesh, and the Jerusalem light rail CityPass.
“Today, it’s the simplest thing to pay for the bus by smartphone,” says Mezuman. “Now, when someone gets on the bus, he has to go to the ticket machine, place his smartcard on it, or pay in cash. We want our system to eliminate the queue so the bus is not delayed at every stop. You get on, open the app, and everything happens automatically. Within a second, you have your ticket and you sit down. You don’t have to wait, you don’t have to talk with the driver, or work with him. You simply get on, open the app, and sit down.”
”Globes”: Why did you decide to ignore NFC and work with a different technology?
Mezuman: “When we began the process, we first started with the concept. Ofer and I were accountants at big firms, travelling by bus to the office every day. We thought about the current experience of paying the driver, waiting for change, and if you don’t have cash, you don’t get on the bus. The experience is not good, and it should not continue, at least not with the current technology. So we began thinking about how we’d market this.
“At first, we said that a mobile payments and ticket system was needed, and concluded that the NFC was the basic solution. But this is a solution that requires people to stand in line next to some kind of machine. You’re basically taking a very expensive machine, adding a very expensive component to it, and instead of a smartcard, the passenger uses his smartphone. We wanted to completely change the experience, so that it did not matter how many people were getting on the bus at the stop, they would not have to wait in line, they only have to open the app.”
How does the driver see that the passenger has paid with the app?
“In Israel, in most places, the driver is the guard of the bus’s threshold, he is the conductor. When a passenger buys the ticket through HopOn, he gets a ticket that he presents to the driver and goes to sit down. The driver sees the sign that he recognizes on the smartphone screen, which very clearly shows that the passenger has paid for the ride and he lets him enter the bus.”
What’s your business model?
“Because of the value we give the public transportation companies by saving the driver from having to deal with payments from the passenger and the reduction in waiting time at bus stop, we take a percentage of the ticket price.”
Don’t the bus companies now lose a percentage of their income?
“No. they see the added value we create, they see the future, they see the immediate operational savings that they’re going to get from a system like ours. I make the bus accessible to passenger who might not use public transport because it’s inconvenient, but will in future begin to use it because the experience will be simpler and more convenient. You simply hop on the bus, you don’t have to go to the central bus station to buy a ticket; you simply see the bus and get on.”
HopOn’s pilot with a public transportation company only allows payment for a single ride, but the company plans to offer solutions for monthly passes and other services in future. “Our system is suitable for all kinds of public transportation tickets. We’ll offer these solutions on the basis of permits from the Ministry of Transport. We’ll also support solutions for student, elderly, and youth discounts,” says Mezuman.
Mezuman says that HopOn’s solution saves public transportation a lot of time, reducing congestion because buses at bus stops block the road. “During rush hour, a bus can wait five minutes at a stop to take on passengers,” he says. “It doesn’t matter if the passenger is paying by cash or a multi-ride card, he still has to wait in line at the ticket machine and pass his ticket. This creates very long queues that can add 30% to the travel time. With our technology, a 90-minute ride in the morning can easily be reduced to 75 minutes. Since our system is smart, it eliminates the queue. The moment the bus stops at the bus stop, within 90 seconds all the passengers have gotten on and have sat down. No one has to wait, get change, or get a ticket. It’s a very smooth operation.”
Do you intend to take your technology out of Israel?
“Israel is a good place to start it. It’s our incubator. The target, of course, is the world. We’ve all been in contacts for months with companies in other countries, we’ve attended international conferences, people are very enthusiastic about the innovation our system offers, and just a few weeks ago, we closed our first agreement to launch operations with a bus company in Monaco. In the coming months, we’re going to install the system on the buses there.”
You come from the world of accounting. How do you see the start-up scene?
“The world is amazing, really interesting, and very dynamic. Everyone takes the accounting experience a bit differently, it was interesting, it gave me a broad perspective of the business world. I learned about companies, the market structure, but these become repetitious. In the start-up world, everything changes in an instant. We started at A, and reached Y. To be self-employed is very different from being a salaried employee. You invest a lot more. The pressure, the processes; ultimately it’s the satisfaction and that brings you to new places.
Second financing round
HopOn has raised $700,000 to date, and it is now undergoing a large financing round in terms of its size. “The initial capital came from Ofer and me. We made the investment, because we didn’t want to wait,” says Mezuman. “We saw that the costs were not too high to develop an initial product and to close agreements with companies, so the initial investment was our own. We subsequently recruited a company that invested several hundred thousand dollars. We’re in advanced talks with several investors, and we hope we’ll soon close this financing round and make the leap forward. We’ll hire more employees and expand our activity to more markets.”
HopOn is being helped at the Smartup2 competition by EISP 8200, which was founded in 2010. The program is run by veterans of IDF unit 8200, and includes Ernst & Young Israel, the law firms Naschitz Brandes and Pearl Cohen Zedek Latzer Baratz, Bank Hapoalim, BRM Capital, AOL Israel Ltd., Nextage Ltd., and Tel Aviv University.
“Our program is basically this first accelerator in Israel that deals with very early-stage start-ups,” says EISP 8200 director Yanon Glasner. “It’s an NPO, we don’t take equity, we don’t invest in start-ups; everything is very Zionist. The program is not just for Unit 8200 veterans. In fact, most of our graduates are not Unit 8200 veterans. We decided, with very clear intent, not to hide in this ivory tower, not to classify ourselves as elitist, but to open our doors and give other people, every entrepreneur the benefits of what we know how to give, and what our network of graduates know how to give.”
Glasner says that he will advise HopOn for 3-4 months. “The program does not provide traditional support; it’s structured and organized. We’ll provide them with assistance on the basis of what they want, such as management,” he says.
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2014
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