Rules and exceptions

By Consult Hyperion posted 08/11/2012 at 11:44. Write a comment

[Dave Birch] Another general point about Money2020 last month. Before the event, I'd looked at the programme and made a point of marking off all of the sessions that were wallet-related because that is central to many of our client engagements, and I thought I would find these the most interesting talks, but actually I found the discussions on the mobile acquiring side of things the most interesting. On day two of the event came the news that American Express has taken a stake in iZettle, the chip and signature European version of Square. I'm actually an iZettle merchant already, so I know that it works.

But while iZettle has the endorsement now of two major credit card companies — MasterCard and AmEx — it has also fallen afoul of the third biggie, Visa. The company’s European operation, Visa Europe, in July cut off access to its payment network for iZettle in almost all of its markets… The claim was that iZettle’s chip-and-signature system (you put your card into the dongle to read the chip, and then you sign on the smartphone screen to verify your identity) did not meet its standards for payments.
[From Mobile Payments Startup iZettle Expands Series B Of $31.4 Million, Adds American Express As Newest Investor As It Preps Launch In UK | TechCrunch]

At the same time, Square launched its first international service.

Payments processing startup Square has now brought its service to Canada, its first step outside of the U.S.
[From Square brings its mobile payments powerhouse to Canada | VentureBeat]

This isn't just about empowering small business and individuals. Major retailers are already saying that they won't be buying any more conventional POS terminals, following the lead of Machine Guns Vegas and using iPads and iPods and iPhones to take payments out on the floor rather than at cash registers. And there are a great many other people active in this market, which is seeing some terrific innovation. Take a look at what Intuit, Verifone, mPowa, emu and many others are doing. I'm really excited about all of this stuff, because it's mobile POS that makes cash replacement a real possibility. Once every smartphone has been turned into a POS terminal, why would anyone bother with the hassle of cash?

On which topic, as it happens, I went along to the official UK launch of iZettle this week, and it was jolly fun.

The PR people did a great job. They had set up a little market with five stalls: coffee, cupcakes, sunglasses, hats and tchotchkes. They gave us a prepaid MasterCard with some cash on it to go and try out. I spent all my money on cupcakes though, so I used a "real" MasterCard and a "real" Amex card to try out the other stalls. I also tried to us a "real" Visa card, but more on this later. All the stalls were using iZettle instead of traditional POS.

The iPad version worked perfectly, so I went off for a wander and bumped into the UK MD of iZettle, Stewart Roberts. Here I am giving him a few tips on how to run an international acquiring business…

They have a new version of the dongle that uses the audio jack interface for other smartphones. Here it is in a Samsung S3, and once again I can report at first hand that it worked properly.

I also used a Visa card in this. When you use a Visa card it is a different purchasing experience. You give your mobile number and receive a text message with a link in it. When you click on the link, it takes you to a web page where you can type in your Visa card details yourself.

When you use an Amex card, it all works fine: you just sign as usual. The retailer is supposed to check the signature (particularly since they are liable for fraudulent transactions, unlike in the case of chip and PIN transactions)…

Most of the discussion with the journalists afterwards, as far as I could tell, was about the acceptance of Visa cards.

Whereas with Mastercard or American Express the consumer just presents their card and signs, Visa users had to hand over their phone numbers and tap in security details on their own phones.
[From BBC News - iZettle and the modernisation of money]

I asked Visa about this and they pointed me toward their statement on the issue:

"Mobile acceptance has the potential to be truly transformational for small retailers. iZettle is a great example of the innovations we are seeing in this exciting space. We're continuing to work with iZettle to develop a fully Visa Europe compliant mobile point of sale solution. In the meantime iZettle merchants can support Visa card acceptance through an e-commerce transaction on the cardholder's phone (often called mobile commerce)."

Personally, I think customers are going to get annoyed that they can use some cards but not others in device. So will the merchants (SMEs, generally speaking) continue to use one solution for MasterCard and Amex and then another solution (e.g., emu) for Visa? Or will they just use iZettle as a bridge until they can get hold of a chip and PIN solution that is approved by all of the schemes?

The whole issue of chip and signature is thorny. I happened to be at The Payments Council yesterday, and there I couldn't help noting that they are

raising awareness of chip and signature cards – an alternative for those who are unable to use a PIN
[From Chip and signature - Accessible payment solutions unknown to those in need | PayYourWayPayYourWay]

I heard someone behind me make an interesting passing comment on this: if an elderly person opts to use a chip and signature card, but chip and signature cards are banned from certain transactions, could the elderly person sue for discrimination and get a jumbo payout from the UK's lottery-style courts? I'm signing up for a chip and signature card right now, just in case.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

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