Mobile Payments & Replicating the Credit Card Experience
While various forms of mobile payments continue to launch and evolve around the world, there’s still no clear single solution for the masses.
The payment system from Isis, owned by the major wireless carriers, requires a new SIM card to be added to a compatible Android phone for it to work. Then you have to find an Isis-compatible point of sale terminal, which can be challenging in itself, as I’ve written about here (The Continuing Search to Use Isis Mobile Payments).
Payment systems from apps like Starbucks and LevelUp don’t require consumers to do anything other than download the app and open an account, though the merchant needs to install necessary hardware to accept the mobile payments.
Now along comes Loop, a nine-month old startup that with a mobile phone add-on that works on just about any POS terminal that takes credit cards.
The Loop approach is to essentially transform a smartphone to allow it to mimic the mag stripe on a credit card.
I visited the Loop headquarters in Woburn, just outside of Boston, to spend some time with Damien Balsan, COO and a member of the founding team. (One of the other members is George Wallner, who was instrumental in creating the mag stripe for credit cards a few decades ago.)
Balsan has been involved in various aspects of mobile payments, having worked on related areas in several companies, including Nokia and PayPal.
“I saw that NFC was going to take a long time,” says Balsan. “Meanwhile, there are 50 million mag stripe readers in the United States.”
The well-funded startup created an FOB and a phone add-on (essentially, a small case that fits on the back of the phone) to test the concept.
A consumer plugs in a dongle, somewhat like those from Square and others, and swipes their credit, debit and loyalty cards to enter them into Loop. From then on, the consumer can open the app, select the credit or debit card desired, and with the push of a button send the credit card information directly to the POS terminal rather than swiping a card.
The company charges no transaction fees and plans to make its revenue from advertising, according to Balsan. Security is built into the system with the low frequency transmission of the credit information in milliseconds and only when the phone is within three inches of the POS terminal and the consumer pushes the button.
After our time at Loop, Balsan and I went shopping at several stores so I could see how (and if) the payment works, which it did in all cases.
More interesting than the actual technology working was the reaction I saw from every place we visited.
After paying at Dunkin’ Donuts, the cashier said: “That’s awesome. I’ll have to get one.”
After paying at A.C. Moore, the 20-something cashier said: “I like hate cards. I have a good feeling about this. You’re going to be a billionaire.”
After paying at a liquor store: “That’s interesting.” Same positive reaction after paying at a Stop & Shop.
None of the cashiers asked about how the technology worked.
Perhaps more significantly, they didn’t have to do anything differently from how they normally process a credit card transaction.