Call me an old cynic

Jag tar kort

I was at the surprisingly busy Cartes & Identification show in Paris last week (www.cartes.com) looking at the latest and greatest happenings in the card industry. Biggest news alongside the absence of Visa for the first time in 20-odd years was the emergence of a huge number of plug-in devices for mobile phones and a proliferation of the ‘Square’ offer (reader plus acquiring). The basic idea is that easily available devices plus a tailored service small merchants means a much bigger acceptance base and so more people will use cards more often.

Being the jaded cynic that I am after 15 years or so in the industry and given that I’ve seen this all before (here), I started to deconstruct the idea and look for all the flaws that will stop this being ‘the future of payments’. Yes, I know this is a terrible way to look at innovation, but having already lived through 5 ‘year of the mobile’ s you have to poke around to see if this is really the breakthrough or just another side show. Anyway, back to the mobile plug-in story. First thing that struck me was the overall cost of the solution. As the bulk of these apps and plug-ins currently only work with high-end mobiles such as the iPhone, Samsung Galaxy SIII and other patent variations, the base cost in many markets is already in excess of 600 EUR. Given that one vendor at Cartes was advertising a fully certified, EMV mobile terminal for 249 EUR it seems that until the things work well with lower-end mobiles that there is a pricing issue.

And there of course is the next issue – EMV certification. MasterCard spotted this problem and started working with the vendors to extract the reality from a pile of marketing messages – their assessments are listed here and suggest that very few of these devices are currently certified. And of course there then comes the tricky issue of Cardholder Verification Method (CVM). In Europe EMV has been pretty much universally implemented along with PIN for all transactions – which means that to work in Europe any device accepting transactions should include a PCI PTS certified PIN pad – which is no cheap thing to do. Thankfully for the plug-in manufacturers though there is a built-in workaround as most EMV cards have fallback to signature included in the CVM list to ensure global interoperability and so EMV ‘Chip & Signature’ seems to be the most popular way of running these devices with most using the app to collect signature via the touch screen. MasterCard seem keen to promote this as a minimum CVM for transactions.

However, assuming that these plug-ins use Chip & Signature, AND have an EMV-certified reader, AND work on lower-end handsets to put them in right price bracket, still there is the small question of why the merchants didn’t use a traditional mobile POS in the first place yet seem happy to adopt this technology – and I think the answer is really to do with marketing. Acquirers have been making low-price deals available in most markets for years – in fact given that I can rent a mobile terminal for around 50 EUR per month here in Belgium it seems that the problem is not necessarily the cost. And herein lies the attraction of the plug-in offer – being able to plug it in when it’s needed and put it away when it’s not, no cumbersome specialist hardware, no dealing with traditional acquirers more tailored to major retailers, and if they are using a master merchant concept, fewer checks on what my line of business precisely entails. All in all this means that as a small merchant I get a lot more freedom and flexibility with this small solution rather than a scaled-down version of a big solution. I get to work with new and adaptive suppliers that have built their solution with me in mind.

But the final decider on whether these plug-in solutions are going to make 2013 ‘the year of mobile’ is really down to the consumer – once they are comfy putting their cards into these devices then they become attractive – and current research shows that today they are OK with a reader attached to a phone, unlike in the early days of WAY systems. That is unless we have a major data breach through the fault of one of these devices and all faith in the system is gone – I hope not and perhaps mobile POS plug-ins are the future because our expectations as consumers have changed and we now live in a touchscreen world!

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One Comment Add yours

  1. Ainsley Ward says:

    Comment from LinkedIn: Kevin Maher:
    Good article Ainsley. After 15 odd years in the industry, I agree with your sentiment, especially the “attraction factor”, given there have been mobile chip & pin devices available for ages. This may well be an option for the very small merchants if the acquiring offer was right, as you say. I imagine most merchants already have smart phones on a monthly package deal. The rental fee/acquiring package for the plug-in needs to be right. As for consumer confidence, for now I imagine most people would not refuse to use card if they had to sign. It is still fresh in their minds as acceptable CVM. Then there is the HANDPOINT PED option – bluetooth to phone with SDK for retailer phone apps.

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