LOOP: a new mobile payments startup

source: techcrunch

Loop is a new mobile payments startup making some fairly big claims. The company says it has invented a technology that lets you pay with your phone at nearly any point-of-sale across the U.S., without requiring merchants to upgrade their hardware. Nor do you have to own a particular device, like those NFC-based smartphones required for mobile payment services like Google Wallet. Instead, consumers can either use a dongle plugged into their smartphone or a special charge case that is simply held close to the magnetic stripe reader (the place you swipe your credit card) at checkout. Seemingly like magic, the payment processes as if you had swiped your card as usual.

If mobile payments were this easy, though, why hadn’t someone launched technology like Loop’s years ago? The answer has to do with how complicated the payments industry is, as well as the challenge that lies in changing consumer behavior on a broader scale.

The trick, the founders believe, is in using the POS systems and technology already out there, then getting the consumer on board with their proposed solution. “The one common interface is the magstripe reader, but that was never meant to be a contactless reader,” says Graylin.

But Wallner came up with a fix to that problem. He engineered a way to induce a strong-enough magnetic signal to emulate the same signal you would get when you moved the magnetic stripe across the reader by swiping your credit card at checkout. Wallner got this contactless magstripe transmission to work in late 2012, calling it Magnetic Secure Transmission, or MST for short.

MST works nearly anywhere magstripe is accepted, except in a few locations, like gas pumps or ATMs where the reader is encased deep in plastic or requires you insert your card (such as when it sucks in your card for you) in order to trigger a switch that turns the magstripe reader on. A few older PC-based point-of-sale software solutions will also be exceptions. But overall, Loop works at over 90 percent of the point-of-sale terminals used in the U.S. today, without any changes to the hardware on the merchant side, or a phone upgrade on your part (beyond buying Loop’s accessories).

But when it comes to payments, things aren’t quite as simple as getting things to just function.

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