Friday, September 27, 2013
The card brands set a deadline of October 2015 for U.S. merchants to have their POS terminals upgraded to accept Europay/MasterCard/Visa (EMV) chip-based payment cards. Whether or not merchants will meet that deadline is open to debate, but Milan, Italy-based mobile POS (mPOS) solution firm JUSP S.p.A. is gearing up to have its EMV-compliant device ready for the U.S. market.
On Sept. 25, 2013, JUSP launched what it calls the first "all-in-one" chip-and-PIN compatible mPOS in Europe. JUSP said the device measures about 5 centimeters per side and integrates a chip card reader with a PIN pad into one unit that fits into the audio jack of smartphones and tablet computers.
JUSP, which manufactures the device and operates the payment gateway over which the mPOS transactions are processed, will sell the device through its website and reseller agreements with third-party ISOs to merchants in Italy, and in the 27 other European Union countries, at a retail price per unit of 39 euros ($49). JUSP offers a flat per transaction fee of 2.5 percent.
JUSP Chief Executive Officer Stefano Calderano said the device offers several advantages over the mPOSs of JUSP's competitors. The other devices are bigger in size than standard smartphones, over twice as expensive for merchants to purchase as the JUSP device, and only function wirelessly with mobile devices, according to Calderano. With competitors' systems, salespeople must operate the mobile device in one hand and the reader in the other, which makes it "a completely different user experience than the mobile POS that's been in the U.S.," he said.
JUSP's solution and business model is fashioned after the dongle-based scheme of mobile payment firm Square Inc. Calderano believes that for JUSP to be successful in the United States, it had to adopt Square's approach. "Our competitive advantage is that, as Square does in the U.S., we control the whole value chain," Calderano said.
There are significant differences between the Square device and JUSP's offering, however. Square's dongle, which also fits into the audio jack of mobile devices, is simple in comparison to JUSP's solution. The mag-stripe reading dongle has no PIN pad component and is much cheaper to manufacture than JUSP's chip card reader and PIN pad combination, which comes embedded with the more complex EMV security logic, Calderano said.
Additionally, Square can afford to give away the dongle to merchants and subsidize the cost with merchant fees (2.75 percent for swiped transactions and 3.5 percent plus 15 cents for manually keyed-in transactions). Calderano noted that JUSP research showed merchants were willing to pay at most 50 euros (including taxes) for the mobile chip-and-PIN reader. "So we basically designed it to be able to reach that cost," he said.
Bank issuers in the United States are reportedly leaning toward adopting the EMV chip and signature approach because it will be less costly to implement. Calderano expects the U.S. market to eventually adopt the more secure chip and PIN. But based on what happened in Italy, he believes the U.S. market will be a mixture of both.
Individual issuers in Italy were given the choice of chip and PIN or chip and signature, with some issuers choosing chip and signature, Calderano said. He noted that, in Europe, issuers of credit cards could choose between the two EMV methods, but that debit card issuers were forced to adopt chip and PIN.
JUSP recently opened a satellite office in Singapore, where chip and PIN is widely used. The Singapore base was ideal for JUSP because of it's proximity to Asia, including Australia, where chip and PIN is also prevalent, Calderano said.
He noted that the next version of the JUSP device will support near field communication (NFC) technology to make the mobile payment experience contactless. He said NFC adoption has been hit-and-miss across Europe, with no clear-cut reason why the Italian market has not adopted it while the Polish market has.
Calderano theorized that NFC adoption depends on the cost of upgrading payment infrastructures to support NFC payments, how hard governments push for adoption and whether consumers in those regions are willing to use NFC-enabled devices to make payments. Concerning that last factor, recent reports suggest U.S. consumers are not that interested.
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