Kealan Lennon is sitting at a breakfast table in China with the then enterprise minister Richard Bruton and the head of corporate development with Tencent, the $920 billion multinational technology conglomerate. Bruton is leading the Chinese trade mission and is extolling the virtues of CleverCards, Lennon’s digital greeting cards platform.

However, Lennon’s mind is elsewhere. For the past three days, he had not seen anyone use a credit card or a debit card, never mind cash. Instead, everyone was using their phone to pay for all transactions.

His company had developed the platform that allowed customers to send greeting cards electronically using messaging applications like Facebook, WhatsApp and SMS. As he sat at the breakfast table, he began wondering if the platform could be reengineered from greeting cards to credit cards.

Within days, he had hired a team of payments experts to reposition his company. Four years on from his Chinese epiphany, his company has completely transformed and reborn.

The new iteration of CleverCards allows companies to send a digital credit card to the phone of the recipient via email or text message. Customers include insurers making pay-outs to claimants and gig economy providers paying workers.

It was a gutsy move, but one that has paid off, according to Lennon. The company’s revenues grew 10X last year, and is on track to grow 50X this year, much of which is coming from an imminent acquisition.

And the latter figure does not count the company’s new deal with MasterCard, whereby the credit card giant has formed a strategic partnership with CleverCards to expand the usage of digital cards across Europe. Lennon says the deal is “transformative” for CleverCards and will require his company to raise additional funds to scale up the business to cope with the increased demand that the MasterCard link-up will bring.

A small funding round is due to close in the coming two months from a mix of new and existing backers. However, Lennon anticipates going back to the market later this year for a “hefty chunk”. The company is still pre-profit, but Lennon says the decision to reposition the company has transformed its outlook.

“It was crystal clear what I had just witnessed in China,” he says. “Music had gone digital. Movies had gone digital. Even greeting cards had gone digital. Payments was next. It was already in China, but it had not gone to the west yet.

“I did not need to be Steve Jobs. I did not need to be a visionary. You could see what was happening. As soon as I got back I started to turn the greeting card platform into a payments platform. Just like Spotify and Netflix built digital platforms for music and movies, CleverCards built a digital platform for mobile payments. Essentially, we have a payments platform that enables anyone, anywhere, any time to be paid instantly.”

How do you do a deal with MasterCard?  

CleverCards has agreed a new deal with MasterCard

Even over a Zoom call, you hear the excitement in Lennon’s voice and see the energy in his face. Unlike many businesses, Covid-19 drove growth at CleverCards, with businesses looking for easier and safer ways to pay people during lockdown.

“I have never been involved with such a high-growth company,” he says. “Who would have thought that people would not want to touch plastic cards or touch paper. The B2B economy has exploded online. Everything has gone in the right direction for us. The stars rarely line up. But they have for us.”

But the real joy in his voice stems from the MasterCard deal. Announced ten days ago, Mastercard’s processing and services capabilities will be integrated into the CleverCard platform. The move allows MasterCard to offer digital credit cards to its customers, and provides a steady stream of businesses and recurring revenue for CleverCards.

The deal has been a long time in the works. Lennon had heard that MasterCard was looking for a digital payments platform and called them up on spec. Instead of pitching directly to them, he offered to bring them to a pitch with a large prospective client.

Lennon nabbed the client, and, in the process, convinced MasterCard to come on board. “To be honest, it could have gone tits up,” he says, “but Mastercard knew straight away that they wanted the payments platform.”

The deals fits within Mastercard’s stated strategy of increasing the number of European businesses and consumers accepting digital payments. A research note by Nasdaq sets out the synergies:

“The payments industry has been undergoing a massive shift from physical to digital mode and the COVID-19 pandemic has only accelerated the trend of contactless payments through both online means and in-store visits. Mastercard has been making investments to devise innovative solutions in order to bring more businesses under the ambit of digital economy.”

Commenting specifically on the CleverCards tie-up, the research note states:

“The CleverCard technology seems to be of great help to the gig economy, which does not need a bank account for managing their earnings. This seems to be in line with one of the endeavors of Mastercard, which has been striving to help gig and independent workers by offering an affordable and comprehensive set of personalized financial products and solutions for them.”

According to Lennon, the deal is transformational. Before the deal, he expected to increase headcount from 27 to 50 this year. However, with Mastercard routing business to CleverCards, he says it is likely the company will add hundreds of additional employees over the coning years.

“Our company is not yet profitable yet, but we have 75 per cent gross margins. We grew 10X last year. The pipeline that is there at the moment – pre-MasterCard – will see us grow another 10X this year. We are also in the closing stages of an acquisition which will have us at 50X year on year,” he says.

Raising funds

“I am talking to investors and it is a compelling offer.”

To deal with the expected growth, Lennon says his focus at the moment is getting the right amount of capital in place and putting the right corporate structures in place. For example, James Murphy, who sold health and beauty products group Lifes2good for €150 million, joined the board in 2018. Alan Coleman, founder and former chief executive of Brite:Bill, is also a board member. Brite:Bill was acquired by Amdocs in 2016 for almost €80 million.

To date, the company has raised in the region of €10 million. One of its backers is technology venture capital firm Delta Partners. In an interview with The Irish Times in 2014, Michael Smurfit said he was a backer of its parent company, Cleverbug.

However, Lennon is now plotting two new funding rounds. The first share issue is expected to close in the next four to six weeks. “It is a small enough raise that will allow us to get it done quickly and get us to the next place,” he says.

“We will do a much bigger raise at the end of this year. At that point, we will have closed the acquisition, hit our growth targets and become an e-money financial institution.”

Many existing investors are backing the plan, but Lennon is also bringing in some new backers. “I am talking to investors and it is a compelling offer,” he says.

“We have a very fragmented and archaic payments ecosystem. There is a lot of regulatory change coming in terms of Know Your Customers. We are in a good place.”

Lennon says CleverCards is not competing with the banks for the digital banks. Instead, he says it is “competing with cash and cheques”.

Evolution

Lennon now has firm targets and ambitions for the company. But the journey to this place has been filled with detours. The company was initially set up as an online greeting cards business, whereby you ordered online, and CleverCards printed out and delivered the card.

“Will we be the same coming in five or ten year’s time? No. IF we are, we will be in trouble.”

To make this work, Lennon developed an infrastructure of 75 printing facilities around the world, following the model championed by Jeff Bezos. However, when he offered customers the chance to send a digital card, he quickly realised the Bezos model was the wrong one for him. “95 per cent of our customers stopped sending printed cards in the post,” he says.  “Digital exploded. We were sending millions of digital cards.”

However, he believes payments will be the biggest play yet. “It is a different scale. I hate the word pivot. You are an entrepreneur. You focus on where the opportunity is. It’s evolution,” he says.

“Will we be the same company in five or ten year’s time? No. If we are, we will be in trouble.”