Digital Media Buzz > Mobile Credit Card Payments: Fad or Future?

Mobile Credit Card Payments: Fad or Future?

By Sheila Shayon

According to Ross Howe, sales and product development director for mStation/Mophie, “Mobile credit card transactions are the first big innovation since PayPal, and the biggest innovation in the credit card industry in 50 years. Plastic is old news.”

Mophie, a leader in creating iPhone accessories, is releasing a new product called the Mophie Marketplace. It’s a magnetic Strip Reader for iPhone 3G and 3GS. It enables the phone as a mobile payment solution that is fast, secure, completely transportable, light-weight and form-fitting. It’s an intelligent case solution for any merchant looking to drive sales at point-of-purchase, with assurance to customers that their card data is encrypted as it is swiped.

Encryption is ensured at the iPhone entry point by a tiny circuit board that bypasses the HH device completely. The iPhone never actually sees the credit card information - but sends it to a server in cyberspace where it is decrypted. Mophie is working on the next level of security, another layer at the swipe-head level, and the company is passionate about the issue.

The particular expertise at Mophie comes from its experience on the consumer side, rather than the payment side. Howe refers reverently to “making accessories for Apple customers that are beautiful, sexy products. The biggest challenge in developing Mophie Marketplace was to keep it as small and thin as possible. We are driven by a commitment to ergonomic design.”

Competitor VeriFone recently announced PayWare Mobile, which turns the iPhone into a card reader. A combination of an iPhone/iPod touch app, with a swipe card reader, it allows merchants to accept and process credit cards on the go. VeriFone’s product is aimed at small business merchants who need a mobile card reader for enterprises like home repair, small cafes and door-to-door sales.

Paul Rasori, senior vice president of marketing, considers his company the granddaddy in the payment business, with a 30-year track record and penetration in more than 100 countries. “In addition to the PayWare payment App, the card reader and the hardware device, the VeriFone gateway adds a fourth crucial component - connectivity. Our proprietary gateway allows the merchant to manage payment devices and credit card transactions seamlessly. It has built-in features that help merchants manage and update security and safety, provide extra reporting, and the ability to turn your device off and deactivate it remotely,” Rasori says.

The average consumer uses the VeriFone gateway in drugstores and supermarkets at check-out, but the company is striving to raise consumer awareness of its mobile brand with commercials now running in 10,000 taxis in New York City.

The PayWare Mobile card reader slips over the iPhone to accommodate card swipes and uses the secure magnetic stripe read head and certified firmware. “With the VeriFone gateway, the swipe read head is already secure even before the data gets to the phone. There’s no chance of rogue data capture,” Rasori says. “Our gateway gives PayWare a pedigree for quick adoption by iPhone users. When you buy online, making manual key entries is tedious, and the merchant pays a higher fee. PayWare is an alternative that bypasses large transaction fees.”

Both Mophie and VeriFone would like to enter the Blackberry and Android markets with their mobile Apps, but for now, Apple’s standardized ecosystem wins hands-down for ease in development and deployment.

Both companies would also like to enter global territories outside the US. “Everybody is ahead of America,” Mophie’s Howe says. “In the Asian markets, particularly Japan, they’re making big purchases on mobile as well as micro-payments for bus fare or a stick of gum. Cash is out. The younger you are the less cash you carry and ATM’s are considered an inconvenience.”

“But it’s five times more complicated outside the US with smart card chips and individual PIN’s - it’s much more complex,” Rasori says. “VeriFone is working with big bank customers in Europe to launch something later this year. It’s a solid business, but still in biz dev mode. There’s great interest in it - but how it all develops remains to be seen. Our US experience is successful so far - we’ve embraced the banks and their issues with fraud and come up with solutions that suit everybody.”

Howe agrees it’s an innovation that’s here to stay. “The greatest challenge going forward is paying attention to what’s possible tomorrow, making connections and thinking in advance.”

And then of course there’s Apple - who may outmaneuver them all with its recently announced EasyPay touch. This change to an iPod touch with Apple software would bring the entire point-of-sale (POS) system under Apple’s control.