The dream of the mobile wallet has become a technology buzzword.
The idea allows consumers to pay for drinks at a café, movie tickets, or pharmacy goods via their smartphones when buying. The natural place for installing this mobile-payments application is on public transport, enabling many consumers to make small payments every day.
The technology the industry is inclined to use for mobile payments is near field communications (NFC).
It already exists in many smartphones (excluding the iPhone), but it has to be adapted everywhere along the payments chain, from the smartphone to the payout counter, with the support by credit card companies and mobile carriers to clear the transaction. In Israel, this idea has not gained traction yet, except for a few attempts by credit card companies at a limited number of retail chains.
Israeli start-up HopOn has come up with a solution that allows payments by smartphones without NFC technology, making it quickly available for many more people.
HopOn, founded in 2012 by entrepreneurs Ofer Sinai, 30, and David Mezuman, 30, former accountants at KPMG Israel. PwC Israel is a Tel Aviv-based start-up with 12 employees.
Two weeks ago, HopOn and two other companies won the Globes and Bank Hapoalim Smartup2 competition, which provides a package of benefits and close support from the entrepreneurial incubator EISP 8200.
HopOn 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 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. The app is easy to use.
HopOn is the first company in the country to obtain Ministry of Transport permission to collect mobile payments in collaboration with Dan Public Transportation. 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 in Modiin, Rama Golan Public Transport, Metrodan in Beersheba, Superbus in Beit Shemesh, and the Jerusalem light rail CityPass.
“Today, it’s the simplest way 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, we first started with a concept. Ofer and I were accountants at big firms, traveling by bus to the office every day. We thought about the current experience of paying the driver, waiting for change – if you don’t have cash, you don’t get on the bus.
The experience is not good, and should not continue, at least not with current technology. We began thinking about how we’d market this.
“At first, we said a mobile payments and ticket system was needed, and assumed that NFC was the basic solution. But this solution requires people to stand in line next to some kind of machine. You’re basically taking a very expensive machine, to which a very expensive component must be added. Now instead of a smart card, the passenger will use his smartphone. We wanted to change the experience completely, so that no 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?
“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. The driver sees a sign that he recognizes on the smartphone screen which very clearly shows 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 drivers from having to deal with payments ... 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 they’re going to get from a system like ours. I make the bus accessible to passengers who might not use public transport because it’s inconvenient, but they will begin to use it in the future because the experience will be simpler and more convenient. You simply hop on the bus.”
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 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 long queues that can add 30 percent to the travel time. 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. With our technology, a 90-minute ride in the morning can easily be reduced to 75 minutes.”Do you intend to take your technology out of Israel?
“Israel is a good place to start. 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 brings. 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 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 this 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.”
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 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.
“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. 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.”