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PYMNTS Voice

B2B Payments Innovation: Back in the Spotlight?

Posted by Margaret Weichert on 31 October 2011 | 0 Comments

Tags: B2B, payments, small business, ROAM Data, Serve, American Express, Chase, U.S. Bank, Braintree, PaySimple, Intuit, GoPayment, Square

There was a time not that long ago, when B2B payments innovation was perceived by many to be “out of vogue.” Back in the late 90s and early 2000s, B2B payments innovation was synonymous with an exuberant group of innovative B2B payment exchanges, marketplaces and hubs that failed spectacularly. Moreover, even the secular trends in payments over the last decade have made little impact in the dominance of paper-based payments, which still account for more than 80% of all payment transactions and over 70% of total payments volume in the B2B space. It is perhaps understandable that many entrepreneurs and innovators looked elsewhere for innovation opportunities during the last decade. In fact, with the exception of Remote Deposit Capture solutions, very little B2B payments innovation gained traction in the 2000s.

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Analysis: Hip to be "Square?" Why Visa Thinks So

Posted by Karen Webster on 2 May 2011 | 12 Comments

Tags: Square, Visa, VeriFone, Intuit, mobile, payment, NFC, credit card

Last week’s announcement of Visa’s strategic investment in Square set off a wave of news reports and blog posts about its implications for Visa, Square and the rest of the ecosystem. Most of the discussion was focused on the how much Visa invested (they say it was in the “single millions of dollars”) and speculation as to Visa’s motivations for doing so (neat mobile technology). I think that perhaps the more interesting story is what this could mean to Square’s prospects in the long run, and more importantly, one of its major marketplace challengers (Intuit’s GoPayment) and small businesses more generally.

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An Open Letter to the Payments Industry: Square vs. VeriFone

Posted by Annmarie D. (Mimi) Hart on 27 March 2011 | 11 Comments

Tags: MagTek, Square, VeriFone, Mobile, Payments, iPhone, Security

Recently, Verifone’s Doug Bergeron called on Square, a start up company that provides a free credit card reader to small businesses and individuals, to recall its products because they are insecure and pose a great threat to the payment industry.

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Square vs. VeriFone: Mobile Payments 'Square' Off In Security Showdown

Posted by Jonathan Ramaci on 10 March 2011 | 5 Comments

Tags: mobile, square, jack dorsey, verifone, security

What a day at the ole' payments corral in the "square off" initiated by VeriFone's CEO, Mr. Doug Bergeron.

While people in our industry can be and should be very passionate about payments and security, there is a line where the message gets lost and all that's seen is something other than reason. I must admit that I was waiting to see an effigy of Mr. Dorsey being burnt at the conclusion of the now-infamous video or the camera being toppled by a flying drop kick.

Emotions aside, let's get to the real issues. The claim levied against Square is that it is not secure and a skimming device which needs to be immediately recalled. Can Square do things in a more secure, PCI Compliant manner? I do believe so. Does VeriFone live up to the standard of clean hands when it comes to security and do they see Square as a threat to their business model? I believe the answer is "yes".

The root of the security problems that both organizations are either contending with or claim to have solved really revolve around the antiquated magnetic stripe credit card itself. Let's face it , this form factor has changed little in the past thirty or so years and we probably won't see any changes to this form factor because of the millions of magnetic stripe point of sale systems which are in market and will be for some time to come. There is a lot of talk about payments moving to the phone tomorrow using the NFC protocol. There are a few large problems with this thinking - there are not the 13 million+ NFC equipped terminals in the marketplace to take these transactions and security should be a major concern. There is no incentive for the consumer to to "tap" versus "swipe". There is little incentive for merchants to pay to upgrade to NFC equipped terminals in order to take "card not present" payments via the phone which will end up costing merchants a higher transaction fee. This may happen, with many of the hurdles overcome, in the years ahead but that time vacuum also allows for yet-to-be-released technologies to challenge or surpass NFC.

What really needs to occur is to make the magnetic stripe card itself more secure. Anyone can freely buy a magnetic stripe reader online for $99, plug it in to a usb port and use TextEdit or Word to read the track data on a magnetic stripe. The introduction of Square into the market has not caused this; it's been there for years.

True security means tying the individual to the payment method (card) itself. In an unabashed plug, I invite readers to look at the iCache solution (www.icache.com). Our digital wallet, built to exceed CAST and PCI standards generates a card that is tied to the user, thereby assuring that the card that is presented for use (online and offline) is owned by that individual and that individual only. This occurs for brick and mortar and online transactions. The iCache solution also incorporates many other value added features to include issuance of dynamic CVV numbers. The iCache solution can be used anywhere in the world, without POS modification, delivering value to issuers, merchants and consumers - today.

Now that we are back from the iCache commercial, let's analyze the real issues with Square and VeriFone.

To understand Square is to realize that Square is more about the easy on-boarding of merchants and the processing of transactions than it is about the card reader itself. The Square "dongle" is a conduit to something much bigger which is the empowerment of every consumer to become a merchant without laying out a lot of money for expensive hardware, excessive processing fees and being locked into multi year contracts with hefty termination costs. Innovation and empowerment is a wonderful thing yet it does challenge established players. With every evolution there is the possibility of a counter-revolution when another's bottom line is threatened.

In all fairness, I do believe that Square can do more in the area of security and PCI compliance and I am hopefully sure that they will. There was not a great deal of information that I could find on the Square website which gave me complete confidence that all of the components of the PCI DSS standards were being followed. This could be intentional as the average consumer does not probably care to read all of the technical nuances of these standards. If the true debate is about security, it might be fair for each organization to release a table of all of the payment standards for all of their products and state their compliance for each. I do believe that today's event is not so much about security as it is about revenue lines and the simple fact that a less expensive, easier to implement solution is gaining a foothold in the payment acceptance space and payment acceptance hardware market.

If we look at some of the VeriFone devices, as advertised on the Company's website, the Side Swipe product line (which connects to a mobile phone for payment processing) does not appear to fully conform to PCI DSS standards for the same or similar reasons Mr. Bergeron calls for the removal of Square from the marketplace. The VeriFone Side Swipe works "with the simple swipe of a card, data is stored directly on application software resident in the smartphone". I am further confused by Mr. Bergeron's statement about Square that "the issue is not whether Square's application security is sound", yet a case was vehemently made that Square be emasculated for security reasons.

I do believe that more truth was revealed in the comments that "....what matters is they [Square] are freely distributing...." and that the "problem is growing hourly". What could the true problem be?

The Square hardware costs $0 while, from my research, VeriFone's PAYware Mobile hardware sells for roughly $139+. The issue appears to further extend into the area of other fees (source: www.vantagecard.com/solutions/wireless.html). Square's "card present" processing fee is 2.75%. Square's termination fee is $0. To sign up for a PAYware mobile for 24 months, there is a "Boarding Fee" of $49, a "Monthly Service Fee" of $11, a "Per Transaction Fee" of $0.11 and an "Early Termination Fee" of $199. This fee structure is highly reminiscent of my landline phone bill from 10 years ago!

It is also a bit concerning that at the conclusion of the educational website established by VeriFone to inform us about Square and educate consumers about payment security that in the bottom right is a nice big button where one can sign up for PAYware - not to mention the irony of a Twitter button in the upper left!

At the end of the day, evolution is healthy, innovation has brought us out of the dark ages and competition forces us all to do things better. In competing, let's compete hard while remembering the high road. In our industry, let's do our best to make sure that the payment system is secure and available for all who desire to transact. The movement of value across all modes of secure rails is of paramount importance to our free market system, our economy and all those in it.

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Will the Apple Fall Far From the (Contactless) Tree?

Posted by Karen Webster on 18 May 2010 | 5 Comments

Tags: Apple, contactless, Visa, Device Fidelity, mobile, iphones, payments, square

Apple started some tongues a’waggin’ about two weeks ago when reports of its contactless patent filing were released. Is Apple getting ready to enable its users to pay with their iPhones at the point-of-sale? Is this the first step in empowering their 110 million iTunes users to start paying for things not-Apple? Or, is it ho hum, companies file patents all the time and hardly anything happens with any of them so what’s the big deal?

Of course Apple isn’t the only one playing the iPhone contactless game. Visa just announced that it and Device Fidelity are going to collaborate and turn iPhone handsets into contactless payment devices.

These efforts come on top of Square: that’s the new iPhone-based system that allows merchants to take cards on their iPhones to sell physical goods. There aren’t any published reports yet, but extrapolating from the number of comments filed about the app and the downloads since its release on May 12, one might surmise that as many as 10k people have downloaded the Square application in less than a week’s time. This strikes me as a pretty good start though the real test is how many merchants sign up for the service and start taking charges.

We’re bound to see more efforts to turn the iPhone into a way for consumers to pay or for merchants to accept. And of course Android isn’t going to be far behind.

The big question is whether these new devices could do what the card networks and their issuers haven’t been able to: persuade merchants to spend the bucks on installing readers at the point-of-sale that take contactless. As our readers have heard from us over many years, the great hopes of contactless have thus far been dashed by the fact that merchants don’t see enough interest on the part of cardholders to make the investment and consumers don’t really see enough benefits from paying with contactless to care much about whether a merchant has contactless or not.

There are few factors now to consider in evaluating whether this could change.

First, most people don’t have a smart phone (75 percent don’t) and only a fraction of those have an iPhone. At the moment there probably aren’t enough people who might want to use these phones at the point-of-sale to get merchants interested.

But that could change quickly. iPhone, Android, and other smart phone sales are exploding. A few years from now it is easy to see that well over half of consumers could have a smart phone and many of these phones would be running the kinds of cool apps that were first developed for the iPhone. It is also important to keep in mind that these users may have an intense desire to use their clever apps to pay and contactless may be what they need to do that. Contactless cards didn’t catch on because consumers didn’t care about them (at least not enough). I’d expect smartphone users to be at lot more enthusiastic. It doesn’t take a large fraction of interested users to get merchants to pay attention to them—we think the magic number is around 5-10%.

If anything is going to get contactless ignited this could well be it.

Second, smart phones are so smart that they may not need contactless. This is a point that we’ve been making for a long time. Contactless seemed like the great technology hope many years ago. But life—and technology—has moved on. Square isn’t using contactless. It’s relying on the fact that the iPhone/iPad are wireless devices with interactive screens. We think this is big. Smartphones may well become the dominant way people pay (and in some form perhaps even the major device used by merchants to take payments) at the physical point of sale. But that doesn’t mean they have to be contactless. They may provide some other clever interface. Apple’s teaching us to tap, not wave.

And that’s my guess—businesses that are focused on putting contactless in mobile phones are, oh, so last decade. Entrepreneurs should be focused on what value can be delivered to consumers and merchants using the new technologies that have become available.

This brings us back to Apple. This company has the incentive and opportunity to drive mobile phone payments. In addition to the device itself Apple has two major assets. First, more than 110 million iTunes account holders all of whom have wallets populated with a credit card. That’s a base that vies with PayPal, but unlike PayPal Apple has a great offline delivery mechanism. Second, Apple has thousands of entrepreneurs who are trying to figure out creative ways to incorporate payment functionality and features into iPhones. It is simply unpredictable what they will do. But what is predictable is they will come up with lots of ideas no one at major payment players have thought about. The combination of these two assets - together with the iPhone customer base - can make Apple a significant player in the payments space.

And, Apple has strong incentives to do this. Think about it: if iPhones could become a highly useful tool for paying for things in the physical world that would vastly expand iPhone sales; then there are the sales of related devices like the iPad to merchants. If that’s not enough there’s also the possibility that Apple could control the wallet for these phones and extract a small fee for managing that wallet—as we know in payments small transaction fees times billions of transaction adds up.

Conclusion: if you are in payments you should watch Apple, but don’t think it is all about contactless.

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Square vs. VeriFone: Who Will Win?

Posted by Tyler Hannan | Platform Evangelist, IP Commerce on 8 March 2010 | 0 Comments

Tags: square, jack dorsey, twitter, verifone, payware, mobile, apple, iphone, application, m-commerce, payments, techcrunch, merchant

PYMNTS.com asked IP Commerce's Platform Evangelist, Tyler Hannan, to weigh in on the battle brewing between Verifone and up-start Square, and to look at its impact on the payments industry.

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The Marriage of Mobile and Payments Make the World a Better Place

Posted by David S. Evans on 3 January 2010 | 0 Comments

Tags: mobile, m-commerce, mobile banking, africa, kenya, smartphone, application, software, payments, International Telecommunications Union, Philippines, G-cash, Vodafone, Safaricom, M-PESA, MTN, mobile money, Obopay, YES Bank, square, apple, iphone

The Marriage of Mobile and Payments Make the World a Better Place

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/commentary

PYMNTS Voice

B2B Payments Innovation: Back in the Spotlight?

Analysis: Hip to be "Square?" Why Visa Thinks So

An Open Letter to the Payments Industry: Square vs. VeriFone

Square vs. VeriFone: Mobile Payments 'Square' Off In Security Showdown

Will the Apple Fall Far From the (Contactless) Tree?

Square vs. VeriFone: Who Will Win?

The Marriage of Mobile and Payments Make the World a Better Place

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