Friday, February 25, 2011

Fledging Company’s Sqwizz Device Offers A Different Option For NFC Interaction

PaymentsSource | Friday, February 25, 2011
By Will Hernandez

The anticipated proliferation of Near Field Communication technology has prompted a fledging company to create a device that features contactless functionality consumers would use to make payments, store loyalty cards, and communicate with NFC-enabled smartphones and posters, PaymentsSource has learned.

NFC Data Inc.’s Sqwizz device is a key fob that looks similar to popular small MP3 music players. The front of the device features a light-emitting diode screen and scroll buttons to navigate a menu. The back has a secure PIN pad consumers would use as a security measure to access and use the device’s multiple areas.

A contactless decoupled debit card would sit at the front of the device. Users would link the card to any checking account via the automated clearinghouse system using bank-routing and account information from a personal check.

NFC Data has an agreement with a Silicon Valley-area partner to distribute 100,000 Sqwizz devices in August, according to company co-founder and co-CEO Ken Mages.

Chicago-based NFC Data is positioning Sqwizz as more than just a payment device. Sqwizz also is intended to mimic functions an NFC-enabled smartphone might perform but less expensively–$29.95, or free, depending on distribution models.

Other Sqwizz functions include communicating with NFC tags found in smart posters, exchanging data with NFC-enabled smartphones, storing multiple loyalty cards, and receiving and redeeming coupons.

“There are a lot of compelling reasons why NFC [phones] can be complemented by a device that fits on your keychain and not cannibalized by the phone and vice versa,” Mages says.

NFC Data envisions several different scenarios for Sqwizz distributions models.

Telecommunication companies could sell the device in their stores as a precursor to NFC-enabled smartphones or as an accessory when those phones are available. Banks wishing to connect to their customers directly could give Sqwizz devices away as a promotional item, or electronic stores such as Best Buy Co. Inc. could sell the device as an “NFC thumb drive,” Mages says.

The company is seeking bank partnerships to cobrand Sqwizz’s contactless-payment function, Mages says. The company also is in talks with technology companies that produce keyless automobile-entry devices.

If NFC Data gets itself in a situation where the devices are given away for free, “we want to find the one strategic partner who shares the vision as clearly as we do and gets behind it and pushes,” Mages says. “It could be a bank, retailer or telco.”

Indeed, finding the right partnership will be key, says Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC.

“Clearly, for anything to roll out you need a big entity to capture it, or you need a viral uptake,” he says. “When you’re talking about getting a hard product into people’s hands, it’s pretty rare that you’ll get a viral uptake.”

NFC Data plans to earn revenue from Sqwizz in various ways, Mages says. Banks, retailers or telcos would pay NFC Data to brand the device with their name and colors, and advertisers would pay a fee to NFC Data each time the Sqwizz captures information from an NFC tag, Mages says.

Mages is not interested in capturing revenue from decoupled debit cards. The company is more concerned with the NFC-initiated activities outside the payments environment the device would conduct, he says.

Sqwizz is designed to hang from a keychain, making it easier to access compared with a smartphone, Mages contends. The process of removing a phone from a pocket or purse, unlocking the phone, finding and opening the right mobile application, and paying fails to fall in line with the idea of speedy NFC transactions, he says.

At least one observer disagrees with Mages’ description of how NFC would work with mobile phones. “[NFC Data is] assuming NFC is going to be cumbersome,” Nick Holland, a senior analyst with Yankee Group, tell PaymentsSource, noting he has seen NFC phones work without having to open an application.

NFC Data has experienced some pushback on Sqwizz from potential partners, mainly because of its strategy to focus on a keychain device as the form factor. But Mages views the device as a way to consolidate loyalty cards and even to incorporate building access.

“When you first look at the Sqwizz, you might think it’s another piece of something you don’t need,” Mages says. “But I really feel strongly the mobile phone can’t be a Swiss army knife for everything.”

But the mobile phone is a network-connected device, which Holland believes illustrates an initial problem with Sqwizz.

“Where the real value-add [is with NFC] is getting access to real-time information [through the mobile network], not information at some point when you plug the device into your computer,” he says. “There’s no immediacy with the device.”

Sqwizz can connect to a smartphone through the audio jack, Mages says. Users capturing data on the device can see a preview on the screen and move the information to the phone for viewing. But if a user lacks a smartphone, information cannot be downloaded from the Sqwizz until connected to a computer.

NFC Data also is developing a mobile app that would enable NFC phones to perform the same functions as the Sqwizz.

Ablowitz believes it is difficult to determine Sqwizz’s viability because of the unknowns about NFC technology. “If [NFC] is like other things in payments like I’ve seen, it’ll settle out in a way that a bunch of people will sort of ask a question or two about security and quickly get comfortable,” Ablowitz says, noting a small but vocal percentage of consumer will have security concerns based on their interpretations of the product.

“If that plays up the same way with NFC, I’m not sure there is enough of a market for an alternative device,” he says. “I think those people are more likely to stick with what they have.”

Sqwizz could be “an idea that just might be a little ahead of its time because NFC hasn’t been proven out yet,” Ablowitz adds.

Mages previously was chairman, president and CEO of HomeATM ePayment Solutions. He left the company last March, (see story)
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Debit Interchange Fact Sheet

Debit Card Usage

  • An average debit card is used to perform 17 purchases per month.
  • 72 percent of consumers used a debit card, up from 65 percent a year earlier.
  • 58 percent of debit transactions were for less than $20, up from 47 percent of transactions a year earlier.

Cost of Processing Debit Cards versus Other Payment Types
  • For the consumer, merchant, bank and central bank, the cost of a non-verifiable check is 39 cents higher than a signature debit transaction.
  • A merchant’s resource (includes costs such as processing, transport to bank, bank charges, other direct costs) costs for a $54.24 grocery store transaction was 16 cents higher for a check than a debit payment.
Customer Transaction Speed for Debit versus Other Payment Types
  • On average, debit card transactions take 30 percent less time than check transactions.
  • If all debit transactions were processed as checks than the average person would waste an hour per year waiting in lines.
Lost Revenue Resulting from the Fed Rule
  • With a proposed interchange fee cap of 7 to 12 cents – an estimated $12-$14 billion in revenue could be lost.
  • On average, large issuers get 44 cents per transaction in interchange revenue

Cost of Providing a Checking/Debit Account
  • The cost of opening an account runs between $150 and $200
  • The yearly cost of maintaining an account runs between $250 and $300
  • About half of checking accounts are unprofitable in a “good year,” and with the coming regulatory changes that percentage could increase to 75 percent.
Fraud Losses
  • The Federal Reserve’s proposal does not include the cost of fraud losses or fraud prevention.
  • Debit card fraud losses to all parties was approximately $1.36 billion in 2009.
  • Fraud losses represent 0.04 percent of an issuer’s transaction volume, but 9.4 percent of transaction value.
  • Most common types of debit card fraud: counterfeit card, lost and stolen card fraud, card-not-present fraud.
Cost of Handling Checks vs. Debit
  • Signature debit has the lowest social cost to parties involved in a transaction. The estimates below are based on a grocery store cash transaction of $54.24.
  • The cost of a non-verifiable check is 39 cents higher than a signature debit transaction. However, the difference for a verifiable check and PIN debit is same – this is due to the interchange fee being included in the cost of PIN debit.

Payment Type Social Marginal Cost

Cash $2.66
Non-verifiable Check $1.40
Verifiable Check $1.08
Credit $1.22
Signature Debit $1.01
PIN Debit $1.08

A check transaction requires a merchant to spend 16 cents more on resources to clear a transaction than a debit transaction (for a grocery transaction of $54.24).
unit in cents

Cash $0.42
Check $0.31
Credit $0.24
Debit $0.17

Debit Card Reward Programs

58 percent of Issuers in 2009 offered some type of rewards program, up from 53 percent in 2008.

1 The Federal Reserve Debit Interchange Survey;
2 2010 Pulse Debit Issuer Study;
3 Javelin, "Credit Card Spending Declines", March 2009;
4 First Data White Paper, “Now You See It, Now You Don’t: A Review of Fraud Costs and Trends”. 2009.;
5 Estimate by Celent, a unit of Marsh & McLennan Cos, May 2010, as reported in the Wall Street Journal, June 17, 2010, “The End is Near For Free Checking.”
6 “Banking Strategies: Retail Delivery Insights Special Edition,” March 11, 2009, BAI;
7 AEI-Brookings Joint Center fro Regulatory Studies, “The Economics of a Cashless Society: An Analysis of the Cost and Benefits of the Payment Instruments”
8 Elizabeth Klee, “Paper or Plastic? The Effect of Time on Check and Debit Card Use in Grocery Store

ROAM Data’s Universal Secure Mobile Card Reader Solution Chosen by Intuit, Sage, Total Merchant Services, North American Bankcard and Others

Major merchant service providers (MSPs) have chosen ROAM Data’s patented mobile card acceptance solution to penetrate the largely untapped SMB market (estimated at 22 million small businesses and sole proprietors in the United States) competing against Square and each other.
BOSTON--(BUSINESS WIRE)--ROAM Data, the mCommerce solutions leader, announced today that several more large merchant services providers (MSPs) have contracted with ROAM for its mobile card reader and software solution.
“Our solution enables our partners to tap into a whole new market segment while increasing value and stickiness to their existing merchant base.”

What differentiates ROAM’s solution from offerings by companies like Verifone and Magtek is device reach and price point. Because of ROAM’s mobile software expertise and its unique reader design, ROAM’s solution supports the most number of device platforms in the industry, with one hardware SKU that securely runs on iPhones and iPads, Android phones and tablets, Blackberry devices, as well as PCs, Macs, and Netbooks. Its revolutionary price point, allows MSPs like Intuit GoPayment, Total Merchant Services, and North American Bankcard to give away readers to support their small business owners, and others like Sage Payment Solutions to offer extremely competitive rates for their merchant base.
“The uptake has been amazing, we are now getting orders into the hundreds of thousands of units, and have tripled manufacturing capacity the past 2 months to keep pace, and new resellers are calling us daily.” Said Will Graylin, Founder and CEO of ROAM, “Our solution enables our partners to tap into a whole new market segment while increasing value and stickiness to their existing merchant base.”
ROAM’s turn-key mobile solution helps its partner MSPs compete on a more level playing field against merchant service providers like Square that have developed its own unencrypted reader solution. Unlike Square’s reader however, ROAMswipe fully encrypts cardholder data before it gets to the phone to prevent skimming (capturing track data on the phone to be replicated for fraudulent use). It is the world’s first encrypted audio-coupled reader with patent pending technology that allows the reader to be more secure, have much better read rates, and cover more phones.
Beyond hardware, ROAM has a patented software platform and payment gateway that enables all sorts of mCommerce applications for small and larger merchants, turn-key or customized, for face-to-face or remote transactions. ROAM’s turn-key card acceptance application for mobile merchants is called ROAMpay. MSPs like Sage Payment Solutions have private labeled this offering to have their own branded mobile application and support systems all powered by ROAM as a service. Companies that have chosen ROAMpay can leverage ROAM’s mobile expertise so they can focus on their core business instead of mobile app development and maintenance. For those that have already built their own smart phone apps and support infrastructure, ROAM helps them integrate ROAMswipe into their native app with ROAM’s SDK and software libraries.
ROAM provides a suite of mCommerce solutions and tools to help MSPs and their merchants deliver the best mobile commerce solutions possible. ROAM currently has over 150 MSP that resell ROAMpay and ROAMswipe. For more information about ROAMpay visit: and for more about the full range of ROAM’s mCommerce solutions including ROAMbiz, ROAMbuy, ROAMstores, visit
About ROAM Data
ROAM Data provides patented mCommerce software, hardware and services that enable merchants to win customer spend and loyalty. ROAM Data securely delivers faster more convenient transactions for small and large merchants across virtually any mobile device. ROAM’s mission is to enable mCommerce to improve lives.
ROAM’s team has been innovating in this space for over 10 years and has cracked the four major problems that have held back the full scale adoption of mCommerce namely: device complexity, payment security, legacy system integration and app deployment/maintenance. ROAM partners and customers include some of the largest payment providers e.g. Intuit Payment Solutions, Ingenico, First Data, Chase Paymentech. ROAM won the 2010 Technology Innovation Award sponsored by the Electronic Transaction Association and is setting the standard for scalable mCommerce solutions for merchants everywhere. Visit us at

Verifone Outlines Six "Key Rules to Ensure Success of Mobile Commerce

 VeriFone Says Merchant Buy-In Key to Success of Mobile Commerce

Service Providers Must Shoulder Acceptance Infrastructure Costs to Successfully Bridge Gap Between Mobile Phones and Retailer Point-of-Sale
SAN JOSE, Calif.--(BUSINESS WIRE)--VeriFone Systems, Inc. (NYSE: PAY), the leading payment solutions provider in the U.S., today urged aspiring mobile payment service companies to engage with retailers in determining market requirements to enable mobile phone-initiated payments and services at the retail point of sale.
“Mobile commerce must be ironclad secure. Security, both real and perceived, is imperative to the adoption and sustainability of mobile commerce. Even minor setbacks in security could compromise consumer adoption and stop the movement in its tracks.”
Responding to growing interest from major industry players intent on claiming a stake in emerging mobile commerce opportunities, VeriFone CEO Douglas G. Bergeron articulated key guidelines to ensure that mobile payments don’t follow the path of previous alternative payment schemes that only succeeded in alienating merchants. VeriFone supplies a large majority of card payment solutions employed in the U.S. by retailers large and small and over the past 30 years has led the way in retail adoption of new payment technologies.
“Emerging mobile payments platforms represent a leap forward in electronic payment transactions, but those who want to claim leadership in this space have to reconcile merchant resistance to the imposition of costs to implement new infrastructure that will be managed an increasingly complex environment,” Bergeron said.
“The retail point of sale represents a point of convergence for smartphone-initiated payments, social networking and electronic couponing, but it won’t happen if retailers are expected, on faith, to absorb the costs of making it work,” Bergeron added. “This isn’t just an issue of adding an NFC reader, it requires deep software richness at the point-of-sale to interact with the smartphone and manage a services-based model encompassing new applications and deployments without disrupting operation of existing card systems.”
Bergeron outlined six key “rules” that industry participants need to adhere to in order to ensure success of mobile commerce:
Rule #1: “Deployment and management of complex NFC technologies will require significant ongoing services from the retailer’s payment systems provider. Until retailers are assured of receiving real value from mobile commerce, service providers who stand to gain from either carrier fees, advertising revenue or transaction charges must be willing to bear the costs of this highly disruptive paradigm shift.” 
Rule #2: “Mobile commerce must add value to the consumer. Tapping a phone is a gimmick, no different from tapping a card or fob. In addition to providing the ability to pay for stuff by phone, service providers and retailers need to provide real additional value –- such as coupons, loyalty rewards and discounts -- for consumers to leave their wallets at home. 
Rule #3: “Mobile commerce must be streamlined with existing POS services and managed well for the retailer. Retailers won’t tolerate the need for multiple methods of acceptance to accommodate what will become a wide array of mobile commerce schemes. All ideas, regardless of where or who generates them, must converge at a unified point-of-sale.” 
Rule #4: “Mobile commerce must go from zero to 90 mph in five seconds. Consumers will not embrace mobile commerce without the confidence that it is being widely accepted. If it only works at a few select retailers, it dies a quick death. Ten percent acceptance is not sustainable.” 
Rule #5: “Mobile commerce must be integrated with other forms of payment. Mobile commerce won’t lead to the quick death of plastic cards and must work with existing payment systems that are certified by all major processors and installed in the vast majority of large and small retailers.” 
Rule #6: “Mobile commerce must be ironclad secure. Security, both real and perceived, is imperative to the adoption and sustainability of mobile commerce. Even minor setbacks in security could compromise consumer adoption and stop the movement in its tracks.
Bergeron’s rules are based on years of experience working with retailers to implement payment technologies and adapt to changing security requirements. As the trusted supplier of payment solutions, VeriFone has the ability to work with retailers and service providers in assessing market requirements and integrating existing infrastructure with complex new technologies required to make mobile commerce work smoothly.
About VeriFone Systems, Inc. (
VeriFone Systems, Inc. (“VeriFone”) (NYSE: PAY) is the global leader in secure electronic payment solutions. VeriFone provides expertise, solutions and services that add value to the point of sale with merchant-operated, consumer-facing and self-service payment systems for the financial, retail, hospitality, petroleum, government and healthcare vertical markets. VeriFone solutions are designed to meet the needs of merchants, processors and acquirers in developed and emerging economies worldwide.


VeriFone Media Relations
Pete Bartolik, 508-283-4112

Beauty and Brains

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    Retailers Say Federal Reserve Proposal to Lower Debit Card Swipe Fees Doesn’t Go Far Enough

    WASHINGTON--(BUSINESS WIRE)--The National Retail Federation told the Federal Reserve this week that a proposal to cap debit card swipe fees at 12 cents per transaction does not go far enough, and that banks should honor debit transactions at or close to face value, the same as checks.

    Under swipe fee reform included in last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fed was instructed to establish regulations that would result in “reasonable” debit card fees proportional to banks’ cost of processing debit transactions. Debit swipe fees are currently one to two percent of each transaction but the Fed proposed in December that they be capped at a flat fee of no more than 12 cents per transaction. Financial institutions with less than $10 billion in assets would be exempt.“History has shown that by adopting at-par presentment for checks, Congress and the Board got it right,” NRF said in comments filed with the Federal Reserve Board of Governors on Tuesday. “A century later, Congress has provided the Board with the opportunity to get it right again by renewing the principles embedded in the Board’s at-par checking rules. When every party bears its own costs, the free market will force all parties to strive to minimize their costs and every party will have the potential to win.”
    The Fed is currently reviewing comments on the proposed rules, with an April deadline to approve a final version so the reforms can take effect in July.
    NRF said the proposal’s “only shortcoming is its failure to carry the principles through to the extent necessary to achieve true market correction in a realm long lacking transparency and competition.”
    NRF noted that banks in their own filings with the Fed have claimed only 4 cents as their cost of processing a debit transaction, and that a study by the respected financial research firm First Annapolis Consulting estimates the cost at one-third of 1 cent for PIN debit and 1.36 cents for signature transactions.
    NRF said it “strongly urges” the Fed to further reduce the cap “toward a level that more accurately reflects the actual costs.”
    NRF argued that debit cards are merely plastic checks that draw on the same bank accounts as paper checks and therefore should be treated the similarly. The Fed has required paper checks to be cashed at face value since being directed by Congress to do so in 1916, reasoning that if each party involved with a check had to absorb its own expenses they would have an incentive to reduce the cost, and merchants, customers and banks would all benefit.
    The introduction of debit cards a generation ago dramatically lowered banks costs of giving customers access to their checking accounts, and some banks even paid retailers as much as 5 cents per transaction to accept the cards. But instead of continuing such practices, the banking industry has turned debit cards into a profit center, charging fees that “have increased the price of everything our customers buy and dampened merchants’ profitability as well.”
    Debit card swipe fees currently total about $20 billion a year, and card company practices compel merchants to pass these fees along to customers through higher prices. The Fed estimates that its proposed cap would save merchants and their customers about 70 percent, or about $1.2 billion a month.
    The Fed’s proposal also offers two alternatives intended to give merchants a choice of at least two unaffiliated, competing card processing networks to use when swiping a card. The first option would require that one PIN network and one signature network be available while the other requires that two of each type be available. NRF said it “strongly supports” the second option to ensure that true competition to give merchants the lowest costs will exist.
    NRF’s National Council of Chain Restaurants division filed separate comments raising concern that the 12-cent cap is too high because it is a greater percentage of the small-ticket transactions often conducted by restaurants than it would be on the larger sales typically made by general merchandise retailers. Like NRF, NCCR called on the Fed to lower the 12-cent cap to a figure more in line with banks’ actual “reasonable and proportional” costs.
    As the world's largest retail trade association and the voice of retail worldwide, NRF's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.4 trillion.


    National Retail Federation
    J. Craig Shearman, 202-626-8134

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