Cell Phones and a Cashless Society

Visa Seeks to Extend Retail Dominance With Pay-By-iPhone Service

DeviceFidelity partnered with Visa to provide mobile payments using an iPhone app and a special case with a microSD payment card inside it.

May 18, 2010

Wired - A battle is heating up over the right to process payments when you wave your cellphone over a sensor to buy goods at a local merchant. Visa made waves this week by announcing a collaboration with DeviceFidelity, which makes an iPhone case called In2Pay with a near-field communications microSD card embedded in it that will allow iPhone users — whose devices lack a microSD card — to get in on the action.

To pay at any of Visa’s swipe-free payWave payment terminals, already found at over 32,000 retailers nationwide, all you would need to do is tap an app in your DeviceFidelity-encased 3G or 3GS iPhone and wave it over the terminal. Retailers like the system because it saves them time on each transaction, according to Visa.

Apparently, swiping a credit or debit card simply takes too long.

Mobile payment is fast becoming a red-hot sector. Square, from Twitter co-founder Jack Dorsey, which allows small businesses to accept credit card payments using an iPhone. Meanwhile, eBay’s Paypal allows customers to pay in stores using a simple smartphone app — no chip required.

DeviceFidelity announced a microSD card version of this system in March, but the iPhone lacks the requisite slot. This In2Pay case adds room for the slot, allowing DeviceFidelity’s microSD card to be used with the iPhone, also adding a micro USB slot for charging the iPhone and, according to the company, syncing it to a computer without Apple’s proprietary cable. DeviceFidelity expects (.pdf) to begin trials of the device and service this summer.

“Visa is working to bring the security and convenience of digital currency to mobile users around the world,” said Visa head of mobile contactless payments Dave Wentker in a statement. “Our collaboration with DeviceFidelity can extend the reach of Visa mobile payments to millions of iPhone users.”

With this move, Visa seeks to maintain its strong position in the credit and debit payment system, from which it extracts fees from retailers, who pay Visa about 30 cents when you enter in a PIN code or 75 cents when you sign a debit receipt. Under its payWave system, Visa requires a signature for any purchase over $25. When it comes to these iPhone payments, the fees will be set by banks.

“Pricing of the mobile payment services will be determined by the financial institutions,” confirmed Visa spokeswoman Carolyn Chiang. Depending on the institution, users could pay transaction fees, enrollment fees, and/or annual fees for paying by iPhone, the same way they do with Visa payWave.

In addition to Visa, DeviceFidelity will allow third-party app developers to integrate the system into other apps too, enabling secure transactions with an optional password such as access to corporate buildings and computer networks, purchasing goods from cashier-free kiosks, and paying for transit.

Retailers need to accept Visa and Mastercard, which is why those companies can extract these fees from them. But Visa and Mastercard face at least some tiny degree of potential competition from an upstart with the unlikely name Bling Nation, which currently offers a pilot program in Woodland Park, Colorado (population: 7,300).

Crucially, Bling Nation claims to undercut fees charged by traditional payment companies, “streamlin[ing] payment processing and reduc[ing] costs by eliminating processing middlemen” such as Visa. The company is focusing first on small regional banks to solve what Bling Nation co-CEO Meyer Malka calls the “chicken and egg problem” of Visa already having so many swipe-free terminals installed nationwide.

Given Visa’s massive and growing install base, it appears unlikely that Bling Nation or any other payment system can scale up in time to compete, because Visa already has swipe-free terminals at so many locations. However, Malka says, any swipe-free payment terminal that accepts Visa can be made to accept BlingTag with a software upgrade.

Merchants would prefer not to be held hostage to Visa’s and Mastercard’s fee systems, of course, and consumers have reasons to prefer Bling or something like it too. Rather than a bulky case like In2Pay, Bling Nation’s solution involves affixing a tiny transmitter card called a BlingTag to the outside of a mobile phone without increasing its overall size, which Malka said can be linked to a checking account in 30 seconds. iPhone users, whose devices are already barely small enough to fit into a pocket, might prefer such a solution to DeviceFidelity’s bulky-looking cases.

Malka says the problem with Visa’s iPhone payment announcement is that it duplicates the legacy credit card/debit system, along with the fees and privacy issues for merchants and consumers that come with it. In addition to streamlining fees, Bling allows merchants to see anonymous user data that would allow them to offer their 50 most frequent customers free merchandise. And it puts power in the hands of consumers by allowing them to pay using any of their accounts or bonus points from a bank, receiving a receipt via text message — all without handing over their name, address, and other identifying information to the merchant.

Congress is reportedly so likely to approve an amendment curbing “swipe fees” that Visa and Mastercard stocks each fell nearly ten percent on the news last week. Hopefully, for local merchants and consumers, the new rules will extend to “swipe free” payments made by cellphone as well.

Visa Mobile Payments Trial to Start Second Quarter 2010 for iPhone

May 17, 2010

NearFieldCommunicationsWorld.com - DeviceFidelity has confirmed that, as we reported on 4 May, its In2Pay NFC MicroSD solution is now available for the iPhone.

The solution, which has been certified by Apple, was developed in collaboration with Visa and uses a protective case which is designed to stay permanently attached to the iPhone and which provides a micro USB slot for users to sync and charge their devices. Users then simply insert a standard In2Pay MicroSD card into the case and can then use their iPhone to make payments at merchants equipped to accept contactless payments. Trials are scheduled to start during the second quarter of 2010.

"The more than 200,000 apps on the App Store are an integral part of iPhone users' lives,” says Amitaabh Malhotra, COO of DeviceFidelity. "With our In2Pay solution, we want to give both iPhone users and app developers the power to do even more, by putting the convenience of interactive secure mobile transactions, right at their fingertips, anywhere they are."

"Visa is working to bring the security and convenience of digital currency to mobile users around the world," adds Dave Wentker, head of mobile contactless payments at Visa. “Our collaboration with DeviceFidelity can extend the reach of Visa mobile payments to millions of iPhone users.”

Visa announced in February that it would be running a number of field trials using DeviceFidelity's MicroSD technology from the second quarter of this year.