A software-based proximity payment offering that uses two-dimensional bar codes as payment drivers has reignited discussion about alternative POS payments.
The service, an offering of Calif.-based software firm Cimbal Inc., was introduced Aug. 31, 2010, for person-to-person (P2P) payments. The service is available on the Apple Inc. iPhone and will soon be made available on Google Inc.'s Android operating system and Research in Motion Ltd.'s BlackBerry devices, according to Florian Brody, Vice President of Marketing for Cimbal. He also said consumer-to-merchant payments with Cimbal would be available in the coming months.
The service requires that merchants and customers register their respective bank account data with Cimbal. To conduct a payment, the payee creates a two-dimensional bar code on a smart phone or POS system; the payer then accesses the system by entering a glos PIN code, and uses his or her phone's high-resolution camera to capture the bar code, at which time the transaction is authenticated through Cimbal's back-end payment network.
"We collect the bank account information," Brody said. "Then the customer goes to the store, and the merchant presents the code. You open the application; there is a PIN; then you just hold the phone and phone camera to the code; it makes a 'bing' and you're done."
According to Brody, the service helps protect payment information by keeping it out of every transaction. The bar code created by the payee "refers to the payment transaction with no personal information in the code," he said. Instead, the processing of payment information and subsequent transfer of funds from one bank account to another is conducted through Cimbal's back-end network, in conjunction with the automated clearing house (ACH) network.
"The code itself is completely useless and expires; it is a one-time code," Brody said.
Cimbal is not technically a near field communication (NFC) payment product because it does not use radio frequency transmissions to convey payment information, although it does function in a similar way by allowing consumers to make quick POS payments using a cell phone and without having to key in numbers.
While NFC and other proximity payment products have waited for years in the offing in the United States, Cimbal has the potential to break that stalemate because it is more easily integrated than conventional NFC offerings, Brody said. While most NFC products require that merchants obtain new hardware for their POS systems, Cimbal requires only a quick POS software upgrade, he said. Cimbal also allows two consumers to make P2P payments if they both have smart phones, a function not allowed by some NFC networks.
Brody added that Cimbal will offer merchants the same marketing advantages touted by NFC providers - namely that they will be able to market to consumers by targeting the same device (a customer's phone) used to make payments. He said that the system, by bypassing the use of an intermediate payment device like a credit card, will be able to charge merchants "about half" of their customary interchange rate for transactions.
"For merchants, the opportunity to integrate everything from loyalty programs to specialty coupons to benefits to additional features creates a very interesting additional incentive," he said
Industry observers who have watched proximity payments struggle to take off over the years are more skeptical about Cimbal's prospects. Adil Moussa, Analyst at Aite Group LLC, said that, while the product would be easier for merchants to integrate, it may lack the incentive to spur widespread consumer adoption.
"It's premature to say if this is going to work or not," he said. "Looking at what has happened so far, every development [with proximity payments] has faced a gigantic barrier of entry. This has going for it the P2P offering and the linking to the ACH system... but they're touting the 'wow' factor as the first selling point, that it's really cool, but cool itself doesn't sell, especially in the payments world.
"What is my incentive as a consumer to do this?" he added. "That's really what most people forget. What value are you bringing to the consumer besides the 'wow' factor that I can pay with my phone? I don't see anything else, quite honestly."
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