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Summary:

Europe’s equivalent of Square has been going gangbusters in recent months, but after falling foul of Visa Europe, the company can no longer accept Visa cards in Denmark, Norway and Finland. What nobody is prepared to say is precisely why it’s happening now.

Jacob de Geer, CEO of iZettle

“Confusing”. That’s how Jacob de Geer, the CEO of payments startup iZettle, described the move by payments giant Visa to put a block on its service in some — but not all — of Europe.

On Monday it emerged that Visa Europe had told the Swedish payments service — which, like Square, allows smartphone owners to use their handsets as a terminal for card purchases — that it would no longer be able to process Visa payments in three countries. But while the block affected users in Norway, Denmark and Finland, it did not change the service in Sweden, which continues operating as normal. And, as TechCrunch reported, that scattershot approach raised more questions than it answered.

“They’ve come to an internal policy decision, and to be frank we don’t know much more than that,” de Geer told me over the phone on Tuesday. “They gave us warning, but we’ve been trying every day since we got an initial warning to get them to change their position. In the end we didn’t find a solution.”

So what’s the problem? A Visa Europe spokeswoman told me that:

“Visa Europe supports the development of new types of acceptance devices to be used by small merchants not previously accepting cards. However, Visa Europe has not yet agreed for Visa cards to be accepted on the iZettle platform, as it does not currently meet our standard acceptance device requirements.”

But De Geer is confident that the issue isn’t security compliance. iZettle provides a dongle that plugs into the bottom of an iPhone, allowing users of cards with security chips to make payments by signing their name. The service works in accordance with a range of different payment rules, including EMV, SEPA and PCI. And the fact that Visa hasn’t pulled the Swedish service suggests it’s not because of security problems.

Or does it?

The Visa Europe spokeswoman told me that the Swedish payments — where iZettle partners with the leading telco Telia — are being scrutinized too: “We are aware that some Visa transactions have been accepted on the device in Sweden and we are in discussion with the acquirer.”

That seems to suggest a block could arrive in Sweden soon, if Visa can successfully put pressure on Telia and others.

No surprise, then, that some have started to wonder whether it’s a competitive issue — particularly since Visa Inc is an investor in Square. Although Visa Europe is not actually part of the main company, merely a licensee of its services, eyebrows were raised: the company is due to launch its PayPal competitor V.me in Europe later this year.

De Geer suggests it’s not about Square, but could be about a broader sense that payments services like iZettle are competitive to the banks and payment companies who constitute Visa Europe’s members. With $31 million in the bank iZettle is in a pretty strong position to expand, but theoretically it will expand card use — good news, surely, for card providers?

“That’s why it’s so confusing. We can address a market they can’t reach themselves — we’re broadening the market for them; there are around 20 million businesses in Europe that can’t accept card payments right now,” he says. “But whenever you innovate, there’s always fear, confusion or someone thinking we’ll take away their market. This is really the first time in our young history that we have had a blip like this.”

Trying to downplay the impact, he pointed out that a problem with Visa is not necessarily a big roadblock to iZettle’s business as it stands. The countries that have had Visa support removed have only been trialling the product for the past couple of months, with around 15,000 merchants in those countries on board. But it’s clear that this is something that needs addressing, particularly as the company tries to expand to Android and to other markets.

De Geer says it’s a story we’ve seen before.

“You can either work with innovators, or you can sit back like the music industry decided to do and then watch as your industry gets cannibalized. And mobile payment is happening.”

  1. Kenneth Jensen Tuesday, July 31, 2012

    For sure it’s nets.eu who is behind the block. The old and slow giant, is doint what they can to prevent innovation.

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  2. All this makes you wonder whether Visa not playing ball may have something to do with Mastercard owning equity in iZettle (I *think*)

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  3. Ryan Harding Sunday, August 5, 2012

    iZettle says it’s confusing. I say it’s disappointing and embarrassing. I am jolly glad that I have chosen to go with mPowa. If you are looking for an alternative to iZettle go check http://www.mpowa.com

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  4. If this is related to security then Square surely has no chance of operating in Europe. iZettle adhere’s to EMV requirements whereas Square simply can’t (unencrypted mag-stripe reader).

    This just stinks of the big boys making up the rules as they go.

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  5. De Geer says: “And mobile payment is happening.”

    How is this “mobile payment”?. I would consider iZettle to be very much traditional card payment, only difference being that the payment terminal uses an iPhone/iPad as one component instead of a PC or specialized device.

    About security. iZettle does not use the EMV PIN as it does not have a pinpad. Thus the security is somewhere between using mag stripe and using full blown emv with pinpad; it’s hard to copy cards with chip but it’s easy to use a stolen card.

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