iZettle turns iPhones into POS payment terminals

On June 28th, 2012, just before I spoke at the marketforce future of cards and payments conference in London, I was lucky enough to attend Jacob de Geer’s presentation on iZettle. De Geer started his career by being the first employee of Tradedoubler as its MD in 1999. He was introduced by the moderator as a “serial entrepreneur” and his latest invention is an amazing device which turns your iPhone into a payments point-of-sale terminal; let’s delve into the details of this magical device.

a business born out of the frustration of a small business owner

image“I’m a bit of a payments rookie” Jacob de Geer admitted as an introduction. In fact, the idea for his latest invention came from his wife when she once came home and she was very frustrated about the fact that she was not able to accept payments and therefore she missed 50% of the business she could have done. “It is time you do something useful!” she added and that was what prompted Jacob to found this new start-up. Devices turning smart phones into payment terminals aren’t something entirely new though, there is already one company in the US called “Square” which does this, but it is using magnetic stripe technology whereas “Europe is a different animal” as Jacob pointed out.

The company was started in April 2010, and it partnered with “talents from all over Europe in order to form a virtual company” de Geer said. What is most amazing about this is that “90% of the infrastructure’s in the cloud and 5% in the hardware”; yet, the most important thing is that Jacob de Geer managed to get his device EMV – certified.

iZettle video: payments made easy

There aren’t any fees, only 2.75% of transactions taken from individuals and small businesses. Daily deposits are then transferred to individual bank accounts.

On day one, 10,000 merchants signed up to the service in Sweden “a country in which there are only 9 million inhabitants” de Geer said, so this is a real achievement! But the traction which iZettle got from that was from all over the world, and not just from the Nordics.

The target is that of “sub-SMEs and prosumers”; a market which, according to Jacob de Geer, is not very well catered for. It is mostly made of 1– 2/3 employee companies but it represents “10 to 15% of the GDP of Europe!” he added. These are the only ones that iZettle is catering for de Geer added.

The smartphone penetration has gone up 33% versus 2% estimated point-of-sale penetration Jacob said. “We can therefore broaden revenue streams in this market”, the Swedish entrepreneur said. The main target is electricians, blacksmiths, plumbers, taxi drivers, etc.

“This is good business, there isn’t any competition with Banks” he added. In the Nordics only there are now 50,000 merchants in operations who were signed up by iZettle in the past six months according to its owner and founder.

launching in the UK … without Visa

And for the past few weeks, iZettle has also been available in the UK: “We signed up a couple of thousands in the first day” Jacob announced. And yet, “we use no advertising at all”. The device is approved by most card schemes thanks to the creation of a commission split between card schemes and iZettle; but a major setback is that Visa is not part of the experiment in the UK: “they didn’t want to participate” Jacob de Geer added.

So far, iZettle is available in five different markets (4 Nordic countries and the UK). There aren’t any plans that I’m aware of for expanding to other countries, but I can see no reason why what worked in England wouldn’t work in certain countries such as Germany or France, the latter having a 22 year-old field experience with chip and pin.

are consumers worried?

“No! they aren’t” Jacobs declared “because of the benefit of the chip”; as to fraud levels, “they are significantly lower than standard chip and pin” Jacobs said, mostly because transactions are carried out face to face. Yet, the entrepreneur is “not naive” and he knows that “someday something bad will happen”.

But this is the reason why the iZettle company has set up a limit for how many payments can be received daily: “€3000 for individuals, and €6000 for businesses” and “this is sufficient” Jacob de Geer added. The average transaction is at €65, which is “significantly higher than the rest of the industry” de Geer added.

convenience over security …

Once again (as we did when we started Internet Banking in the 1990’s) this is proving that convenience is more important than security. iZettle is changing the ballgame by bringing payment terminals to places where they weren’t available before. That in itself is worth the risk which by the way is carried by insurance companies and iZettle themselves.

a bright future for iZettle

I think it is pretty easy to predict a very bright future for the company. There is an area which puzzle me a bit though: the fact that Visa wasn’t part of the scheme in the UK, is a bit of a shame in my eyes. I find the device so clever … I hope they will jump on the band-waggon soon. There are two other directions in which iZettle could well develop in my opinion: for one, other European countries with much bigger footprint, and second the ability to cater for smart phones which aren’t iPhones and mostly android phones. This of course would make it a lot more difficult because a lot of devices exist in the market but I’m certain that an elegant solution can be found. After all, the mobile world is all about Android now, as MWC demonstrated in Barcelona last February (see our full coverage here).

Last but not least, Jacob de Geer is a very impressive entrepreneur: soft-spoken, cool-headed and extremely professional, yet anything but smug or haughty. And while he talked, all were listening in the room. It’s true that we’d looked into how to use mobiles for payments for one and a half day and a young entrepreneur from Sweden was showing us how to do it.

mobility in retail industry: main security challenges and prospects

This is an original guest post by Roger Hockaday (picture below and bio at the end of this piece), Aruba Networks. Aruba’s Atmosphere Corporate blog is dedicated to mobile devices. Aruba Networks is a leading provider of next-generation network access solutions for the mobile enterprise (disclosure: Aruba Networks is also a North American customer of my company, Orange)

Risk and Reward: Tablets and Smartphones in Secure Retail

The introduction of smartphones and tablets into the retail environment brings great rewards to the forward looking retailers. They present a disruptive technology and provide an opportunity to innovate both front-of-store and back-of-store operations, yet they also introduce new security risks if their adoption is not properly developed.

The iPad, Android tablets (large and small) and iPod Touches or smartphones are altering the retail experience around the world. Retailers are the midst of a point-of-sale (PoS) transformation from terminals to smartphones and tablets. In fact, many retailers have started embracing them as best practice and, according to a recent poll (Aruba Networks 2012 Retail Survey), 56% of retailers plan to use iPads for Point of Sale in the next two years.

[source: the Aruba networks 2012 retail survey full results at http://bit.ly/arubaretail]

Sales executives in car showrooms use tablets to engage better with prospective customers, remaining by the car to access colour charts, model specification and instantly check stock levels without having to return to their desk. One well known US department store identified the challenge of walk-away customers in the shoe department as sales associates went to bring stock to the customers. The retailer justified the costs associated with the use of tablets by sales assistants simply to prevent customer walk-away as the assistant could now check stock levels, order shoes to be brought onto the sales floor, or offer alternates should the first choice item be unavailable, all while remaining with the customer.

To enable the use of tablets and smartphones in retail it is of course necessary to deploy in-store wireless (more than 50% of retailers surveyed intend this) but this requires a significant overhaul of the legacy networks first put into stores just to facilitate back-office functions such as stock-checking.

The last few years have already seen wireless networks extend onto the sales floor to support Point-of-Sale (hence the need to meet Payment Card Industry standards to protect cardholder and authentication data), but it is a more challenging proposition to support tablets for sales assistants, and even more to offer hotspot services to shoppers (as planned by 37% of retailers by the end of 2014).

In-store wireless enables a new set of mobile applications to allow retailers to engage even further with customers; applications that can push information to customer smartphones and iPads as they walk in the door enabling them to download rich content when and where they want. Combined with store associates empowered to access stock data and process transactions with tablets, it all adds up to an outstanding customer experience.

The challenge is how to manage this expansion of devices, users and applications on the retail network.

Front-of-store wireless requires pervasive coverage (there’s no secret to making a wireless network that works; good coverage combined with proven RF management tools and a management platform that provides real time visibility into the coverage, device location and application performance). The ‘secret sauce’ for retailers is the choice of platform used to manage the discovery of devices on the network, the provisioning of large numbers of devices and users without overwhelming the IT department, the ability deliver guest access with advertising, and delivery of context-based / role based connectivity.

[souce: ibid.]

While the cardholder associations of PCI (PCI standing for Payment Card Industry, with companies such as AMEX, VISA and MasterCard) require different levels of compliance based on transaction volumes, the use of Wi-Fi in an organisation brings a layer of requirements that the retailer must comply with.

Role-based access (as required in PCI DSS) can be as simple as separating employees from customers (or guests). However, in order to provide a more flexible infrastructure it is more logical to create roles based not just on the person (employee, manager, customer), but also the device (iPad, smartphone, handheld scanner), the location (retail outlet, hotspot, corporate office), and application (PoS, database, Internet access). This more holistic approach – one that understands the context in which the network is being used will ultimately provide a more flexible and efficient wireless network than one that simply separates employees from customers.

Security, capacity and flexibility will become the watch-words of the next generation in-store networks. Security to comply with the needs of PCI DSS, capacity to meet the needs of employees and customers using tablets and smartphones, and flexibility to cope with the new applications and rapid changes needed to work in a competitive environment. Tomorrow’s retail network will be very different to yesterdays.

read more

  • the Aruba Networks retail survey with full results at http://bit.ly/arubaretail
  • using Wifi security on mobile phones and devices
  • my report on Kaspersky’s statement about mobile crime at MWC
  • Kate Bourdet’s own wrap up of mobile security at MWC
  • an interview with Roger Hockaday at IP EXPO ONLINE

about the author

Roger Hockaday is Director of Marketing, Aruba Networks, EMEA. A former executive of Alcatel, Infoblox and Packeteer he is currently responsible for developing end user opportunities and channels to market in the secure government communications sector across EMEA for Aruba Networks.