Israeli startup Colu is closing its digital wallet app, less than a year after closing its blockchain operation. The company's notice to its subscribers states that the app will be withdrawn form use on December 31, and that money deposited in it by users will automatically be repaid to their credit card accounts.
This is another business pivot by the company. It will set up a subsidiary in the US and focus on the US market, after operating up to now in a few cities in Israel, Europe and the US. The company will still operate from Israel, but will cease its operations in the Israeli and European markets.
At its height, Colu raised $28 million in an only partially successful ICO, and employed 60 people in a building wholly occupied by it on Derekh Hashalom in Tel Aviv.
The company developed a technology platform for awarding incentives for local consumerism, enabling local authorities to encourage local purchases in particular parts of a city.
The Tel Aviv Municipality, for example, used Colu's system to provide incentives for people to buy at small businesses near the construction sites of the light rail network in Jaffa, where fewer pedestrians were passing by. The basic idea of the Colu model was to give bonus points in the form of "Tel Aviv Coin" to every user who paid at a local business using its digital wallet. The coins could be used for purchases at other businesses in the same area.
After the app ceases to operate, the "coins" accumulated in customers' accounts will not be repaid to their credit card accounts. Colu therefore recommends using them before the end of the year at local businesses. Colu reports that during the period in which it operated in Tel Aviv and Haifa, it distributed more than five million of these local coins, and that more than NIS 180 million was paid to local businesses via its app.
Colu will start to offer the platform it developed, without Colu branding, to any entity that wants to use it under its own name ("white label"). Colu co-founder and CEO Amos Meiri told "Globes" that this model was already in use in several cities in the US, such as Akron, Ohio, which advertises benefit to residents on their water bills. According to Colu, it is at an advanced stage of negotiations in Rancho Cordova, California and Youngstown, Ohio, and that it is on the point of signing agreements with additional cities in Arizona, Massachusetts, California, Michigan, and Illinois.
Meiri says that the business model is that $100,000-400,000 will be paid for the service and for maintenance of the app by the US subsidiary and a special team that will be set up in the cities themselves. The payment platform will be provided to the municipalities by Israel company Tipalti. In the future, Colu hopes to implement a model of joint income from advertising with the municipalities, Meiri says.
Colu is shutting down the digital wallet it operates in Israel and will offer this activity for sale to an Israeli financial institution. The closure of the wallet application, Meiri says, is for several reasons, one of them being the fact that Israel has still not introduced an open banking policy.
"This sounds minor, but it's more than that. We can no longer be a payments provider in Israel. The application as it works today cannot continue because it's very costly. Unfortunately, the Payment Services Law is structured in such a way that only the big players can continue to play here. You will see that that is what will happen - only the banks operating their payments companies, such as Bit, and Apple Pay and Google Pay will remain. At the regulatory level, in a market as small as Israel, it isn't worthwhile for us to do it."
It could be that Colu realized that the unavoidable competition with payment apps such as Google Pay and Apple Pay is altogether a lost battle. The announcement of the shift to the US and the closure of the digital wallet is the latest in a series of downsizing moves and adaptations to the changing marketplace that Colu has undergone in the past year.
Colu started out as one of the most prominent companies in Israel in blockchain and cryptocurrencies. Even after the blockchain hype died down, it continued to grow and to raise capital. It even issued a token called CLN, raising $28 million, but this was only half the amount that it sought to raise. In the end, the token's value collapsed, and Colu returned investors their money or gave them equity in the company to the value of their investment. Following this, the company shut down its blockchain operation, dismissed eleven development employees, and moved to smaller offices.
Published by Globes, Israel business news - en.globes.co.il - on November 16, 2020
© Copyright of Globes Publisher Itonut (1983) Ltd. 2020