Consumers in the United Kingdom, the United States and Canada soon may use their smartphone as a contactless payment device and mobile wallet using an application from Yespay International Ltd.
The London-based company’s application, set to launch in May, will enable consumers to create virtual wallets that store multiple credit, debit and virtual payment cards without any restrictions, Yespay CEO Chandra Patni tells PaymentsSource. Consumers may create the wallets through participating merchants’ websites, at Yespay’s website or via the mobile application, which supports a wallet-registration function, he says.
Consumers pay for in-store purchases by launching the application, selecting the card from information stored in the wallet and holding the smartphone in front of a scanner that scans a barcode on the phone screen.
The barcode image represents the payment card. Yespay would not comment on how processors identify the image to process the payment.
Consumers making purchases online or through a mobile website need to log in to the wallet, select the card and then confirm the payment, Patni explains.
Many merchants, however, may not want to participate and accept the payments because the purchases are considered keyed-in transactions, which are costly for merchants to process, one observer notes.
Keyed-in purchases, which usually cost as much as card-not-present transactions, especially in the U.S., are substantially more expensive than card-present purchases, says Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC.
Depending on the acquirer, card-not-present transactions are at least 30 basis points higher than card-present transactions, and many merchants typically will not accept card-not-present transactions because of the expense, Ablowitz explains.
For small U.S.-based merchants, the interchange applied to keyed-in and card-not-present transactions initiated with a MasterCard credit card is 1.89% of the sale plus 10 cents, which compares with 1.58% plus 10 cents for card-present transactions, Ablowitz says. That means for a $100 purchase, the interchange fee for a keyed-in transaction would be $1.99, 31 cents more than the $1.68 fee for a card-present transaction.
Keyed-in and card-not-present transactions made with a debit MasterCard cost merchants 1.64% plus 16 cents (81.6 cents on a typical $40 purchase) compared with 1.05% plus 15 cents (57 cents) for debit MasterCard card-present transactions.
Small merchants pay 1.8% of the sale plus 10 cents ($1.90 per $100) for Visa-branded credit card keyed-in and card-not-present transactions compared with 1.54% plus 10 cents ($1.64) for card-present transactions. Merchants pay 1.64% plus 15 cents (80.6 cents per $40) for Visa check card keyed-in and card-not-present transactions, while swiped transactions cost merchants 0.95% plus 20 cents (58 cents), Ablowitz notes.
Despite the potential for cost concerns among merchants, Yespay’s mobile wallets will offer consumers several perks, such as the ability to create virtual versions of their credit or debit card that link to the card accounts, Yespay’s Patni says.
When consumers use the virtual card, the merchant processes the payment using the credit or debit card linked to the virtual card account, Patni explains. Virtual cards use an issuer identification number, a unique, six-digit number, that identifies a bank in electronic transactions. The issuer ID numbers belong to Yespay and are registered with the International Organization for Standardization, Patni says.
Because the virtual cards generate an issuer ID number instead of a bank ID number, “they are safer to use on the Internet and in the mobile environment. Consumers do not have to provide their actual credit or debit card information to the merchant,” Patni notes.
The first version of the virtual card will not be a prepaid card because it links to an actual credit or debit card account. Consumers can just create a new virtual debit or credit card after the original is used, Patni says.
The virtual cards will have a 30-day expiration date, a maximum spend limit based on the linked card and may be transferred between wallets, Patni says.
For example, consumers may create a $100 virtual card tied to a Visa-branded credit card to transfer the virtual card to a friend or family member. The recipient of the virtual card then may use it at any of Yespay’s participating merchants, says Patni.
Yespay eventually plans to launch a prepaid virtual card with no maximum spending limit. Consumers would add funds into the card account using cash or a debit or credit card at participating merchants or through the mobile-wallet application. Consumers also would be able to add funds to the card from a bank account.
The mobile-wallet application also enables consumers to manage their virtual and credit or debit cards, check their virtual card balances, reload their virtual cards, check for merchant-discount coupons, and locate participating merchants.
Yespay initially will launch its free downloadable Yespay-Wallet mobile application for select Research In Motion Ltd. BlackBerry devices, Google Inc.’s Android phones and Apple Inc.’s iPhones, Patni says.
The concept of paying for purchases with a barcode on a mobile screen is not new and is gaining momentum in the U.S. Starbucks Corp. in January, for example, began enabling customers nationwide to use an application that displays a barcode to make payments (
Paying via a mobile-phone screen may draw some excitement, but sometimes the barcode function “does not work properly, and consumers may have to adjust the brightness of their screens to enable the reader to read the barcode,” Ablowitz says. Adjusting the screen takes time, which negates the quick convenience of the contactless mobile payment, he adds.
What do you think about this? Send us your feedback.
