Mobile-payments solution firm LoopPay, whose technology allows users to pay via smart phones at most merchants’ existing point-of-sale systems, has an important new backer: Visa. The company announced today it has received an investment from the network.
Terms of the investment were not announced. In a statement, LoopPay said the Visa investment is part of a larger strategic funding round announced earlier this month that includes Synchrony Financial (formerly GE Capital Retail Finance) and other strategic partners not yet named.
LoopPay CEO Will Graylin spoke with MPD CEO Karen Webster about Visa’s strategic investment in his firm and what it means for the payment industry.
KW: Let’s start by talking about the implications of this investment for Visa. First off, they’ve been pretty quiet – they haven’t made a lot of investments since the new CEO Charlie Scharf came in to the organization. So, why Loop, and why this was one of their first significant investments in mobile commerce in the last year or so?
WG: I think the primary reason for making the investment in Loop is really the differentiated solution itself. I think Visa has always been committed to innovation in the payments space. It’s really a matter of looking for the right solution that can scale. And from talking to folks at Visa, they are very committed to delivering solutions that can work worldwide.
There are a couple of specific things that I can point to.
First, from a consumer experience standpoint, being able to have a new payment solution – a mobile payment solution – work at the vast majority of merchants is critical. Without that, it’s very hard to change consumer behavior. I think that particular breakthrough with Loop is a major one.
The second is the ability to have this solution embedded very cost effectively into many different devices. We can embed our solution into a handset for less than one dollar – that’s scalable. And they’re looking for scale, and to scale worldwide.
The last point, and certainly not the least, is the ability to have a more secure transaction, and delivering higher levels of security. Beyond static cards, and provisioning those onto users mobile devices, but being able to deliver dynamic cards, and tokenization, hardware security, with cryptograms that can be verified on every transaction. Effectively, EMV-like security, where we show we can deliver this kind of security over the existing infrastructure of point of sale. That’s real value that we can deliver to the entire ecosystem.
KW: Visa is obviously very committed to tokenization and they want to play a major role in defining that standard. How does your technology sync up with their vision of tokenization?
WG: Visa is certainly very committed to tokenization as another form of securing the cardholder information. They’ve already done that and are doing that with EMV security and hardware like tokens that are generated by the chip. And now they’re looking at cloud-based tokenization with tokens that are generated by the vault and are delivered by a variety of mechanisms.
We’re certainly working closely with Visa and looking at their tokenization specification. But the most important thing is we don’t see ourselves as just a particular methodology, but instead working closely with Visa to come up with the right overall security solution. Not just for card present, physical payments, but also card not present mobile payments. That’s something we are very keen to deliver to the market overall, and we’re working closely with Visa to achieve those goals.
KW: So, I’m a consumer and I have my smartphone. And, let’s say that my smartphone is NFC-enabled, and I’m at one of those few locations today that actually takes NFC. I tap and use my phone. But, I also happen to have my Loop enabled charge case, and as I’m walking down Charles Street in Boston, I encounter a number of merchants that have the traditional mag-stripe terminals. How does the phone know what to do?
WG: It’s not really up to the phone, it’s up to the consumer. The NFC technology and our Magnetic Secure Transmission (MST) technology can be perfectly compatible in an application or on the same device. Loop can peacefully co-exist with other payment types, whether it’s NFC or barcodes. It’s really the consumer themselves choosing which payment tender type and what payment method that they want to present to the merchant.
What I think makes MST interesting, is that the consumer can choose to use the LoopPay MST solution at just about every merchant today. Over 90 percent already can accept the mag stripe card. Because they can accept that, they should be able to accept MST.
We believe the mag stripe is an older technology that should be replaced. It’s static, it exists only on a piece of plastic, and we think that by securely storing content in the chip and transmitting them makes a lot more sense. And that’s the wave of the future for mobile payments.
KW: I would presume that at least part of Visa’s interest is stimulated by the interest of its issuers, who are obviously excited about the possibility that Loop provides them for their customers. Without disclosing names of course, give us a sense of what you’re hearing from the issuers as they’re being exposed to the Loop solution.
WG: The issuers have been actually very positive with the Loop solution – once they fully understood. And we’re certainly very open about how our security mechanisms work, and how we are not allowing people to skim cards into their own container and their own devices. We take a lot of different security measures to bind the device to a valid account and then to further validate for each card that they’re loading by themselves that it matches the account. Otherwise we reject the load.
For us, we are a container and a conduit and really a mobile payment platform solution to support the ecosystem. And I think card issuers see that. And it’s a practical solution that works, and works today.