First there was Coin, then there was Plastc: two companies promising the smart credit card of the future–one card that could store all of your cards. The companies announced their products with gusto. They took customer cash and preorders, Kickstarter-style. Then, Coin began apologizing for delay after delay, and it still hasn’t officially launched. Plastc never technically delayed, but it only teased an eventual release in summer of 2015. In the meantime, a slew of competitors have popped up asking the crowd to pay their bills before they even debut anything. Call it Kickstarter Syndrome. Lots of product videos. Not so many actual products.
The smart credit card built by the Michigan-based startup Stratos and designed by Herbst Produkt, announced this week, will be available within 30 days. CEO Thiago Olson has positioned Stratos to be competitive among peers, and that all came down to patience. Whereas other startups rush to be the first “disruptor” to announce a product, Stratos adopted a classic design and development process. The company raised $7 million in venture capital, hired 50 people, polled another 1,200 people, honed its technologies, polished the user experience, and worked with manufacturers to ensure everything could be produced reliably at scale. (Though whether or not there’s a market for smart credit cards is still in question.)
“I won’t lie, it’s been hard to stay quiet, especially when Coin got out really early on,” Olson says. “We kind of looked at what we were building, the electronics and complexity–and especially the manufacturing–and realized it’s difficult to be reliable at [a large] volume. We wanted to avoid giving consumers [a bad] experience.
A Boy Genius Grows Up
Olson, 25, speaks with the articulate polish of any startup CEO, but by background, he is more of a scientist than an entrepreneur. He was a wunderkind who built a nuclear fusion reactor in his basement at age 17. He studied electrical engineering and plasma physics at Vanderbilt and Princeton, worked in multiple U.S. national laboratories and a particle accelerator in Switzerland, and joined the Department of Defense where he shifted from R&D to become, as he describes it, a “mini VC” or venture capitalist, giving out research grants. Somewhere along the line, he had a planet named after him, and he caught the entrepreneurial bug, founding Stratos in 2012 in his home state of Michigan.
Olson’s background may seem like overkill in the payments sector, but his engineering mind isn’t wasted at Stratos. The card–like all of its competitors–is a remarkably complex piece of hardware. Inside a body that’s as thin as a stock credit card, it squeezes in two magnets that dynamically program its magnetic strip to mimic any card you possess (a redundancy its competitors lack, which Stratos believes makes its card swipe more reliable in the field), a battery (which lasts up to two years), an accelerometer (that enables users to tap their card a few times to pull up information about it on their phone), a Bluetooth transmitter (to talk to the phone), three hard buttons (to quickly select credit cards when your phone isn’t around), and LED lights (to show which card you’ve selected).
Designing And Developing The Old-Fashioned Way
“We can’t just buy a chip off the shelf to make this thing work,” Olson says. “We work with things at the wafer level. We get the silicon from the manufacture, grind it down in a clean room.” Sourcing the right manufacturing team to do this work was a major endeavor–one that plagues Kickstarter-style hardware frequently. In a traditional design process, a company usually has a lot of back-and-forth with factory production engineers before ever taking a product to market, since good ideas on paper or in prototype don’t always translate to mass manufacturing. (Consider, for instance, why Apple poeticizes the process of milling aluminum in its product videos.) Kickstarter projects, designed by two-person teams without experience in factory production, are often naive to such compromises, and so they can sell renders rather than realities–grand ideas like coffee makers that can roast your coffee, too–that cannot come to fruition (even though Kickstarter itself has tried to crack down on that trend.)
With usable hardware, Stratos began stress-testing–bending the card thousands of times, testing whether it was waterproof, and ensuring it worked on all sorts of swipeable terminals. Olson’s team also spent years considering use-case scenarios. Will it work at ATMs? Yes. What happens when the card’s battery runs out? There’s an early warning, and a new card is automatically shipped your way when the old one is low. What happens if you pay at a restaurant and your waiter hits a button, changing the card? The system is designed so the waiter would actually have to intentionally double tap it, and you’d receive a text notification if the card changed. This level of thought is normal for big products made by major companies, but the little pain points add up for churned out Kickstarter products, like the Ouya, which had a slew of problems including an horrible controller, unreliable backend, and lousy interface, even after it raised record amounts of money.
A Subscription-Based Business Model
Users subscribe to Stratos for $95 a year. With Coin and Plastc, you buy the card outright. Olson believes his approach will reconcile nervousness with early adoption, because whenever the company releases a new, better card, users will receive it as a replacement. Stratos is working on its second-generation product, which will add the micro radio transmitter needed for full support of the European-popular Chip and PIN credit cards, as well as an onboard thumbprint ID lock to keep your card more secure. There’s a logic at play here: Stratos doesn’t need to maintain legacy hardware if everyone is on the company’s latest card. “The payments landscape is changing rapidly, Olson says. “We don’t necessarily want you on our last-gen card three years from now.”
Granted, just how large the market is for people who will pay for the privilege to pay for things is still uncertain. About 70% of Americans use credit cards, but their usage at a all-time low. Stratos has to compete with a new era of smartphone, and even smartwatch-based payments on the horizon. And now matter how painstaking the development, it’s impossible to know if Stratos cards really work until they’re in the hands of customers, using them across the real world.