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The competition among mobile credit card readers is heating up between Square, Intuit (s intu) and VeriFone (s pay). But dongles and hardware accessories aren’t the only way to process a mobile payment. AisleBuyer, a Boston start-up I previously profiled, is introducing a new photo card capture technology that allows merchants and small businesses to process a payment just by taking a picture of the front of credit or debit card with a smartphone.
The technology, which will be rolled out in the next couple months, uses proprietary optical character recognition (OCR) to isolate the card number from the other information on the face of the card and pull it into a secure form. The account number is processed and the photo of the credit card is discarded. Essentially, AisleBuyer is using the camera as a card swiper instead of relying on hardware.
That distinction is important, said AisleBuyer CTO Dan Preston, who said it will allow more merchants who don’t rely on traditional credit card readers to process payments through a smartphone without the need for any additional equipment. Card capture transactions will take about the same amount of time as competing mobile card swipe solutions. The system is designed right now for merchants, who will need to sign up for an account. Peer-to-peer payments are also being looked at down the road.
“By not having to sign up for hardware it lowers the barrier to entry,” Preston said. “Because it’s built into the phone, it makes it easier for transactions to happen.”
Preston said the card capture technology will work alongside AisleBuyer’s current offering, which allows consumers to conduct self-checkouts at stores using their mobile phone. Consumers could take a picture of their credit card in store to complete a self check-out. Or it could also work online with consumers using the technology to enter in credit card information. AisleBuyer hopes this will appeal to consumers, giving them another way to add a payment option to their personal accounts, potentially reducing the possibility of fraud.
“The applications for card capture technology are vast, and just another part of how retailers can personalize and improve the customer experience,” said Andrew Paradise, CEO of AisleBuyer. “By cutting out this payment barrier, retailers are more likely to close a sale and customers are able to easily conduct a transaction, making this a valuable technology to both parties.”
With the recent face-off between Square and VeriFone, which questioned the security of Square’s system, a key issue for AisleBuyer will be how secure it is. Preston said card capture technology is no less secure than competitors, and is subject to the same safety limitations of all cards. Any thief who gets a look at a credit card could try and charge purchases on it so it’s still important to keep the card secure. But because merchants must sign-up for an account, it’s unlikely a thief would try to use the technology to run fraudulent purchases, said Preston. Consumers must also sign the transaction just like in other mobile payment system and can get email receipts. And again, the photo capture is discarded after the transaction and no data is stored on the phone or on AisleBuyer servers.
There are still a lot of questions around the service. Preston did not divulge who AisleBuyer’s payment processor partner is or how much merchants will be charged per transaction, though he said rates would be competitive with the market. Service charges could have a big effect on merchant adoption, depending on whether AisleBuyer can undercut competitors or is markedly more expensive. It could also instill more confidence if the processor partner has a reputation for diligence in monitoring for fraud.
The technology, which is being tested on iPhones (s AAPL) but will move to Android (s GOOG) devices soon, also faces a lot of competition. As mentioned in a previous article, Square is coming on strong with 100,000 merchants signing up a month. The company offers its dongle for free so there are no hardware costs, just the need to set-up an account. Intuit and Verifone are also big players here and are working hard to capture this end of the mobile payment market. AisleBuyer will have to stand out among this group to get noticed.
Still, it’s an interesting use of smartphones and optical character recognition. And it follows in the footsteps of banks who are allowing customers to deposit checks by taking a picture of their check with a smartphone. AisleBuyer’s ability to take pictures of a credit card may provide an attractive novelty initially, but it will need to nail down more details if it wants to break out. But it shows that there’s going to be plenty more competition and approaches in the mobile payment space beyond the current set of players.