Company: Smart Transaction Systems Inc.
A new service from Smart Transaction Systems Inc. has taken a popular practice among teenagers and made it into a payments platform. Text-2-Transact enables mobile merchants to process gift and loyalty transactions through cell phone text messaging.
"It solves the problem of having to distribute relatively expensive wireless terminals out to a vendor," said Ray Clopton, President, STS. "Instead they can just use their cell phone as a terminal."
Clopton said the system, which was introduced in February 2009 and works with any cell phone that has text messaging (no download required), functions the same way as a mobile POS terminal, except it lacks a paper receipt function. But he added that merchants do receive a mobile receipt (also text-messaged) at the end of a transaction, and that customers who register for the service can receive one too.
He said the service is intended for both mobile merchants, like pizza delivery outfits and farmers market vendors, as well as "multimerchant programs." Regarding the latter, Clopton used the example of a shopping mall where "if you've got a lot of different merchants that accept the same card, ... we'd say if you're a small store and you don't see too many of the mall gift cards coming in, you can just use Text-2-Transact."
Text-2-Transact functions through an interfaced network between STS and the cellular companies (Clopton said all the major telecom providers are participants).
A merchant texts three separate numbers - first a code indicating the type of transaction, then the gift or loyalty card number and finally the sale amount - before sending the message by a special sending number. The text first goes to the phone company and then is routed to the STS gateway for processing.
From there, STS sends a response to the merchant's phone (and simultaneously the customer's, if he or she is registered with Text-2-Transact) approving or denying the sale and listing the purchase information as a receipt. A test of the service found the back-end processing took about 10 seconds, similar to the speed of a normal POS terminal transaction. Clopton pointed out that the texting itself was no less efficient.
"In most cell phones you can switch between numeric mode and alpha mode, so they just stay in numeric mode, and they can do the whole transaction without switching," Clopton said. He noted the service is restricted to prepaid and loyalty card programs to limit the security risk of using unencrypted phone networks.
"With the gift card it's typically a one- or two-use transaction, so the average value on a gift card is typically about $40 to $45," he said. "We're sending them out over the cellular networks, and it doesn't have the type of encryption you'd want to use with a credit card transaction.
"So somebody could potentially figure out somebody's gift card number, but the incentive for fraud isn't really there. They'd have to work pretty hard for that $40."
Smart Transaction Systems Inc.
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