Start-Up Says Fob Is Key to Contactless Payments

NFC Data Inc. is reintroducing the key fob form to contactless payments with its Sqwizz mobile decoupled debit card.

Sqwizz looks similar to popular small MP3 music players. 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 clearing house system.

Though many companies are working to build contactless into mobile phones, NFC Data argues that this development path for the technology does not eliminate the audience for other forms.

"There are a lot of compelling reasons why NFC [phones] can be complemented by a device that fits on your key chain and not cannibalized by the phone and vice versa," said Ken Mages, NFC Data's co-founder and co-chief executive.

NFC Data, of Chicago, has an agreement with a Silicon Valley-area company to distribute 100,000 Sqwizz devices in August, Mages said.

NFC Data is positioning Sqwizz as more than just a payment device. It also is intended to mimic functions an NFC-enabled smartphone might perform, but at a lower cost.

For example, Sqwizz can communicate with near-field communication tags in smart posters, exchange data with NFC-enabled smartphones, store multiple loyalty cards and redeem coupons.

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 functions.

NFC Data has many distribution models in mind for Sqwizz.

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

NFC Data is seeking bank partnerships to cobrand Sqwizz's contactless payment function, he said. The company also is in talks with manufacturers of keyless automobile-entry devices.

If the device is given away, "we want to find the one strategic partner who shares the vision as clearly as we do and gets behind it and pushes," Mages said. "It could be a bank, retailer or telco."

Indeed, finding the right partnership will be crucial, said Todd Ablowitz, the president of Double Diamond Group LLC of Centennial, Colo.

"Clearly, for anything to roll out you need a big entity to capture it, or you need a viral uptake," he said. "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 said. Banks, retailers or telcos could pay NFC Data to brand the device with their name and colors, and advertisers would pay a fee to NFC Data each time Sqwizz captures information from an NFC tag, he said.

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

NFC Data has had some pushback on Sqwizz from potential partners, mainly because of its strategy to focus on a key chain device as the form factor.

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

Nick Holland, a senior analyst at Yankee Group, said NFC Data is "assuming NFC is going to be cumbersome."

Instead, a mobile phone's ability to connect to a network is a selling point that NFC Data does not seem to match.

"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 said. "There's no immediacy with the device."

Sqwizz can connect to a smartphone through the audio jack, Mages said. 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 application that would enable NFC phones to perform the same functions as Sqwizz.

Ablowitz said 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," he said, noting a small but vocal percentage of consumers will have security concerns based on their interpretations of the product.

In that case, "I'm not sure there is enough of a market for an alternative device," Ablowitz said. "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 said.

Mages previously was the chairman, president and CEO of HomeATM ePayment Solutions. He left last March.

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