Camera-to-Credit Card the Next Mobile Trend?

NEW YORK (MainStreet)—Point, click and get paid?

That could be the next step in the evolution of mobile payments, as a new trend is allowing businesses to process payments by capturing a credit and debit card's information with a phone camera. While this technology eliminates the need for awkward dongles or additional credit card-swiping hardware, it also may bring up a fundamental consumer security question: is it safe to let someone take a picture of your credit card?

"Our process just allows for it to read the card," said Greg Goldfarb, co-founder and chief executive of Flint Mobile, a Bay Area startup developing such payment technology. "The information is uploaded through the phone and sent to the cloud. It is never stored in the phone."

Flint's mobile app — which uses the camera on an iPhone to "scan" credit or debit cards — launched in November of last year. Since then it has more than 100,000 downloads and business has increased tenfold since January, according to Goldfarb. In March, the company — which has nearly $3 million in funding — announced a partnership with NXGEN's subsidiary Fidano.

"People have to be more and more self-sufficient in this world, and with this you just need a phone in your pocket," Goldfarb said.

Flint is not the only player when it comes to no-swipe technology. Less than a year ago, PayPal bought one-year-old Card.io, which had developed a mobile payment process initiated by a smartphone capturing an image of a card and requiring no additional attachments. PayPal integrated the technology in its PayPal Here offering. Palo Alto-based Jumio also offers camera-to-card payment technology for businesses.

"My concern is consumer perception of someone using a camera phone to take a picture of their credit card," said David Kaminsky, a senior analyst with Mercator Advisory Group. "I'm not saying it's not secure, but rather what are people's perceptions? That's what's going to matter."

Rick Oglesby, senior analyst with Aite Group, said he agrees providers of such payment technology will have to eliminate consumer concern in order to find a niche.

"There is consumer sensitivity to this type of mobile transaction," Oglesby said. "While the technology itself is secure, consumers don't necessarily know that, so they get concerned about having their card numbers used in inappropriate ways."

Goldfarb said while he understands the concerns, security is one of Flint's top concerns. He said he knows continued growth in the industry will rely on consumers and service providers feeling it is safe to use.

"We're in a pretty exciting stage," Goldfarb said.

Goldfarb said Flint's targeting non-countertop businesses — those run by the likes of accountants or photographers who normally go to their customers and are unlikely to have the technology handy to swipe cards.

"We are all about driving and enabling small business," he added.

Still, not everyone sees a long life for such technology even beyond security concerns.

"I'm just not sure there is a market out there for it now," said Kaminsky, adding the company's hardware-free mobile payment technology doesn't provide a huge benefit to businesses since merchants typically do not have to pay for such add-ons.

"While the technology does have some advantages, it does have some downside," Oglesby said. "Transactions processed in this way are more expensive than transactions that are swiped, which makes it a deal breaker for larger merchants and large transaction merchants who will feel the pain from higher fees."

Oglesby said such technology has proved better suited for smaller merchants, but that also provides a problem.

"It's been very difficult to make any money in this micro merchant segment — not enough transaction volume to bring much revenue," said Oglesby.

--Written by Chris Metinko for MainStreet

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