B of A Payment Dongle War

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Bank of America is launching a Square-like card-swiping device for smartphones called Mobile Pay on Demand. The service will be marketed through B of A's Atlanta-based joint venture with First Data, Bank of America Merchant Services.

Like others looking to appeal to casual card acceptors and small businesses with digital payment aspirations, B of A's Mobile Pay on Demand will hinge on a dongle.

The free card reader will give B of A yet another tool to market to potential customers.

Bank of America Merchant Services will also provide 24-hour support for the device. Mobile Pay on Demand readers will start accepting payments on Dec. 3, says Bank of America Merchant Services' chief executive Tom Bell.

As a part of the pitch the banking giant will make to small businesses, funds from the mobile payment service can be deposited into a B of A account as soon as the next day. Pricing looks standard to that of other mobile card readers on the market - 2.7% per swipe, and 3.5% plus an additional 15 cents for keyed Visa, MasterCard and Discover transactions. Users will also be able to accept American Express cards. There are no monthly, annual or set-up fees.

First Data, the bank's partner in Bank of America Merchant Services, already offers a similar card reader. The Mobile Pay device plugs into an Android, BlackBerry or iPhone and is also paired with a smartphone app.

"You know everybody wants a piece of that right now," says Brian Riley, a senior research director in the retail banking and cards practice at CEB Towergroup. "Everybody is playing in that field because it's potentially a high-yield area."

Other banks have already made similar moves of their own. In November, VeriFone said it was partnering with Fujitsu to market its GlobalBay software that works with tablets and other mobile devices to extend the point of sale software maker's systems. That pact is targeted more at large, big box merchants than casual card acceptors.

And the terminal maker is now marketing a chip and PIN card accepting Sail card reader. In August, with the backing of JPMorgan Chase, GoPago of San Francisco began providing merchants with its Live system featuring a free Android tablet and card reader attachment.

Indeed, at first blush, B of A's attempt at mobile payments looks much like others that have quickly followed Square's lead. In May, VeriFone Systems launched its Sail mobile card reader that developers can adapt with open-source software. At the time, the terminal maker was still selling its PayWare Mobile card reader that was designed to be used off the shelf. And, in March, PayPal announced its mobile payment strategy, PayPal Here. The smartphone software accepts payments both through a dongle and by camera.

More recently, British mobile payment company mPowa began marketing its own brand of dongles to banks so that they can white-label the product and call it their own. In July, Square took issue with the unit of Powa, which operates an e-commerce platform, over some of its marketing.

But Bank of America Merchant Services' Bell is unimpressed by all that. He says he's been studying mobile commerce since its inception.

"I don't think you can get a loan from Square. I don't believe Square will do your payroll. I don't think Square will cash payroll checks for you," he said in an interview with Bank Technology News. "I don't think they have any ATMs, nor do any of the others. This is really an extension of a very broad and deep set of services."

When asked why Bank of America Merchant Services didn't just partner with a litany of other competitors that are already established, Bell answered that Mobile Pay on Demand is an obvious extension of what the joint venture already does - facilitate transactions. "I think it started more as a customer service/customer retention opportunity, as we were talking to our existing customers. We have 300,000 customers with millions of locations. They were looking for this type of [product]," he says. "They were looking for ways to leverage smartphones."

Bank of America Merchant Services has been testing Mobile Pay on Demand for roughly the past two months, says Bell. "I think that the real game that is going to be played is changing the entire point of sale and shipping experience, allowing a merchant to think differently," he says. "The whole experience is going to change when you think about integration of the shopping experience with technology."

Bell says that what is today a "standalone system" could easily work for "more established merchants." He pointed to NCR's POS system alternative, Silver, as a potential partner. "Payments are going to move to the cloud and 'payments as a service' that you can provision via the web on the tablet," Bell says, adding that NCR is already "a good partner." "We are going to be right there in the middle of all that."

NCR just began selling its Silver system at Staples in a $499 bundle that includes a receipt printer and cash drawer. Bell says Bank of America Merchant Services is looking at similar distribution agreements for Mobile Pay on Demand. He adds that even the Mobile Pay on Demand card reader's design is an improvement on some of its predecessors.

The body - which includes a hook that can be attached to a lanyard or a key chain, which allows a user to quickly change out the dongle to accept a different method of mobile device payment - is longer than some of its competitors so as to catch an entire magstripe when a card is swiped. There is also a clip that protrudes from the edge of the device that holds securely on to either a tablet or smartphone. "I think we will look at all kinds of different models as this evolves, obviously," says Bell. "This is our first step into the space."

He says that he can envision a mobile commerce app backed by Bank of America that could potentially be sold as a service to merchants. Already the service is being packaged with a so-called iDeals marketing platform that will help merchants market their wares through promotional offers, coupons and events. That promotions is being offered to users that sign up before the end of the year.

No doubt, though, Square has momentum and will be difficult to unseat. "What Square has done is they have opened up a new category of merchant: the micro merchant, the garage sale, the church festival, the one time selling opportunity," says Philip J. Philliou, a payments consultant. "I think that will always be their niche. Do I think Square will grow to a dominant, more traditional merchant category? I think that will be more difficult for them, because merchant processing is a scale game and there are traditional competitors who are very well situated to continue to control that market."

He added that Bank of America Merchant Services could be just such a player. "They can price it cheaply," says Philliou. "There is no annual fee, and no contract. That's a big deal, and that pricing is reasonable. These are merchants, if I understand it correctly, that don't generate much volume, so for them, this is great."




Bank of America is getting into the Square-style mobile payments game, and is putting the entire market on notice.

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