A decade ago, Square Inc. stunned the world with its dongle that allowed iPhones to accept payment cards. This technology quickly transformed the way merchants and customers viewed the payment process. Fast forward to today, purpose-built payment terminals are now facing new, unique challenges.
With the spread of the fears of Covid-19, consumers have become increasingly concerned about touching POS terminals supposedly teeming with the virus. As a result, contactless-enabled chip cards and smartphones for mobile payments are growing in popularity faster than ever before. All past trepidations about the security of smartphones for payments have quickly fallen away.
Recent developments are also strengthening and cementing the new role of mobile phones as payment terminals:
- In August 2020, Visa Inc. invested in MagicCube. This relatively new tech firm specializes in software-based contactless acceptance for commercially available mobile phones and tablets.
- That same month, Apple Inc. shocked the payments industry with its acquisition of Mobeewave Inc. (Back in 2019, with Samsung Electronics Co., Mobeewave launched a feature that allows mobile phones without dongles to process transactions.)
- In October 2020, JPMorgan Chase & Co. revealed a new checking account for small businesses that includes the QuickAccept feature. This allows merchants to accept contactless or contact payments via smartphone.
- When combined, these latest developments could easily be dubbed “Square II”, according to experts.
“It is the logical evolution of the dongle plugged into the iPhone to have the payment capability built into the iPhone,” explains senior analyst at Boston-based Aite Group LLC Thad Peterson after assessing MagicCube’s technology.
According to MagicCube, its technology works on the major networks: Visa, Mastercard and American Express. The middle of last year, the company also announced its venture with Japanese tech firm NTT Data Corp; their aim is to bring PIN-on-glass technology for entering PINS to merchants in Japan.
“What MagicCube has done is create a unique security technology that creates a virtual chip,” says Mary Kay Bowman, senior vice president of buyer and seller products at Visa. “It’s not specifically dependent on any hardware components, proprietary hardware, or ancillary devices. It does enable the mobile phone to be turned into a software point of sale.”
Peterson went on to say, “MagicCube is essentially a virtual secure element. It frees up the transaction from the device.”
The Scramble
After launching its contactless payment with Samsung in 2019, Mobeewave is now expected to switch from the Android mobile operating system – on which Samsung’s phones rely – to Apple’s operating system. As Apple creates a wall, other payments companies are scrambling to find their place. Square and mega-processor Fiserv Inc., for example, are busy working on their own smartphone contactless projects.
Mark Bunney, director of go-to market strategy at Ingenico’s Atlanta headquarters in the U.S. and Canada says, ultimately, “We want the customer to be able to choose what the optimal path is.”
He went on to say, “That’s the path Ingenico has been going down, offering more software and services. It’s a very logical evolution.”
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