In the Mobile Payments Dongle Battle, Does EMV Matter?

Dutch payment services company Adyen is taking the grand tour of Europe this week, hitting London, Berlin and Amsterdam to sell a new mobile payments technology that would appear to give it a built-in advantage over competitors in the U.S. such as Square and Bank of America.

Adyen has developed a reader called Shuttle that accepts card payments that are in compliance with the Europay, MasterCard and Visa (EMV) chip-and-PIN standards. As EMV starts to become adopted in the U.S., Adyen's technology would potentially place it ahead of mobile payment players like Square and Bank of America. Square is a startup that's generated lots of buzz with its dongle that attaches to mobile devices as a means to accept card payments; its founder, Jack Dorsey, was recently named American Banker's Innovator of the Year. Bank of America (BAC) recently shook up the payments market with a competing card-swipe device developed in partnership with First Data.

Both Square's and B of A's technologies support traditional magnetic stripe cards. Neither seemed to be itching to develop products to accept EMV-compliant cards as Adyen introduced its new product on Monday.

Bank of America Merchant Services spokesman Joe Rauch said, "As with all major mobile card readers currently available, Bank of America Merchant Services' Mobile Pay does not support chip transaction functionality. We are closely monitoring EMV and mobile payment developments and, as with all of our products and services, will pursue and implement those new technologies that best fit our customers' overall needs and demands." Square also told BTN that at this point, its reader only accepts magnetic stripe and not chip and PIN cards. Another competitor, VeriFone, is selling EMV-compliant mobile readers, though it's primarily targeting overseas markets.

Square and Bank of America did not elaborate on their magnetic stripe card focus, but it's likely due to the fact that most merchants in the U.S. still primarily accept magnetic stripe card. While the major card networks have issued a series of deadlines that will shift fraud liability to merchants for non EMV transactions, there haven't been signs of major movement toward migration. Square and Bank of America would not predict U.S. migration toward EMV payments, and how the pace of that migration would affect plans to change mobile acceptance strategy.

Adyen itself is initially offering the EMV compliant mobile attachments in Europe, but would like to move into the U.S. "I would love to say that we'll be in the market in January…but the market acceptance has to be there," says Peter Caparso, president of Adyen in North America. Adyen also has a magnetic stripe attachment, but Caparso says its differentiating factor in the U.S. will be EMV acceptance, so it's hopeful that a market for EMV-compliant mobile acceptance will emerge soon. "There are a lot of [competitive mobile] products in the U.S. that already accept magnetic stripes," says Caparso.

Thus far, Square has made inroads by targeting businesses that visit consumers in their home, such as plumbers or contractors; and other very small businesses. It's also targeted fund raising for political campaigns and charities. Adyen is positioning itself a bit differently in use case, targeting larger merchant chains by selling mobile acceptance as a space and time saver.

"I see mobile acceptance is going more to retailers, we are working with one in particular that's planning to remove registers because they take up too much space. Their plan is to have people roaming with the devices, where they're able to connect with consumers in a faster fashion, and to get rid of dead space in their stores," Caparso says.

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