After Deal with Ciright One, What’s Next for Stratos?

According to a press release sent out Tuesday, Pennsylvania’s Ciright One signed an agreement with Ann Arbor-based mobile payment startup Stratos this week to take over the management of Stratos’ customer service and fulfillment operations, a deal that was reported by TechCrunch as a last-ditch effort to save Stratos from “collapse.” Ciright’s Julie Taylor was clearly a little miffed about the report when we spoke to her this morning about it.

“We’re focused 100 percent on transitioning the Stratos customer base over to Ciright’s network,” she said, clarifying that though Stratos customers may have noticed a recent lapse in customer service, which the Ciright deal seeks to mitigate, the Stratos cards remain completely operational.

Stratos began its journey in 2012 as Protean Payments, founded by Thiago Olson and Chris Bartenstein. After a name change, several iterations, and a few rounds of funding, Stratos finally launched its mobile payment card in March. The Stratos card is capable of mimicking a user’s debit, credit, and loyalty cards, which are synced via mobile app. Users tap the card on a hard surface twice, press one of the card’s hidden buttons to indicate which card they wish to use, and pay just like a credit card. The appeal of the Stratos card is that it can store your other cards’ information electronically, thereby eliminating the need to carry all of them around in your wallet.

Ciright is building its own smart card with capabilities similar to the one Stratos has already released. What differentiates the two cards is mobile functionality and geolocation, Taylor explained. When Ciright’s card is released in April,  its customers will be able to take advantage of advertiser offers based on where they’re shopping. For instance, say you’re at a car dealership. Your credit union or bank would be able to see that and send you a push notification with a targeted offer on automobile financing, Taylor said. The credit union or bank would also have access to real-time analytics on response rates, which means it could tweak offers on the fly to “laser target” a specific audience.

“Think of the possibilities once we have mass-market appeal,” she said. Customers would be able to turn off push notifications from advertisers if they so choose.

Taylor praised the technology behind the Stratos card despite TechCrunch’s criticism that social awkwardness resulted when users tapped the card and little lights flashed, or when waiters mistook it for a business card.

“Change is difficult for people to adopt in general,” Taylor said. “People are used to swiping. The Stratos card technology is valid and awesome—the product speaks for itself. We have no issue with their technology.”

The issue, Taylor confirmed, was money. Stratos was having a hard time getting more financing—TechCrunch reports that a planned funding round for Stratos recently fell through, and credits Bartenstein as the source of that information—which in turn led to “an interruption” in Stratos’ customer service operation. “That is an issue they were facing,” she added. “They were evaluating their options, and the rest is history.”

Taylor said her company’s CEO was friendly with Olson and Bartenstein through time spent together in the past at industry events. “They really connected and had a shared vision, so they stayed in contact,” she said.

As for whether this is Ciright’s first step in a full-on acquisition of Stratos, Taylor said, “It’s Christmas week, for crying out loud. There just isn’t a bigger story right now. We’ll continue to have regular conversations with our board and other stakeholders.”

Taylor said it’s also not known yet how Ciright will fold Stratos’ existing staff and Michigan office into its Pennsylvania operations. According to TechCrunch, the building that currently houses Stratos will be for sale starting in early 2016.

We were able to briefly exchange e-mails with Olson this morning, and he verified that Stratos had been considering a number of options for moving forward before it signed the agreement with Ciright. The deal, the terms of which are undisclosed, “wasn’t a last-second arrangement and we are excited to be partnering with Ciright moving forward,” he said. He declined to get into specifics about what “moving forward” might look like exactly, saying he couldn’t comment yet.

Sarah Schmid Stevenson is the editor of Xconomy Detroit/Ann Arbor. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET_AA

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