Visa backs Square

In a significant move, Visa had invested an undisclosed in startup Square. Founded by Twitter's Jack Dorsey, Square offers merchants a piece of kit which pulgs into the headphone jack on iPhones, iPads and Android devices, allowing them to process card payments.

Square is doing well; Dorsey recently revealed it is processing $1 million per day and a reported 10,000 merchants are signing up each month. However, they face competition from similar products offered by Intuit and Verifone. Visa's public display of support should help their market share, despite concerns about the system's security. These have most notably been expressed in a video posted by Verifone and accusing Square of "serious security flaws".

NY Transport Authority Pushes for Contactless Payment

Bus and subway users in New York could soon be using contactless payments to pay for their journeys. The Metropolitan Transportation Authority (MTA) has decided to step up plans which have been trialling since 2006.

It has this week released a Concept of Operations (ConOps) for a contactless, open standards fare payment system. The document sets out provisions for the system's design, creation and implementation and the MTA is asking for firms working in payments to get involved. Comments can be submitted until 25th May and a presentation is scheduled for 10th May which already has AmEx and JP Morgan Chase signed up.

Get the full ConOps here:

1.4 mb PDF download

Trouble Ahead for Contactless

Contactless seems to be just getting into its stride but it may face stormy waters in the US. A provision in the Durbin Amendment could "take the wind out of the sails" of contactless payments, according to Brian Riley who is a senior research director in retail banking and cards practice at TowerGroup.

The Durbin Amendment allows merchants to set card payment minimums in order to protect their margins from interchange costs on small tickets. The highest this minimum can be is $10. On the flipside, once a transaction goes over $25 a signature is required. This would therefore limit the scope for contactless payment to transactions which are $10-$25 rather than the previously expected $0-$25.

The problem becomes apparent when you learn that Riley's research has shown an average contactless payment of $8.42. This news will stall merchant takeup of the technology. The number of merchants choosing to install near-field communication (NFO) readers for contactless payment is already "lacklustre", says Andy Schmidt (also of TowerGroup).

UK Contactless Merchant Plans to Launch Loyalty Trial with Stickers

UK sandwich and coffee shop chain Eat plans to trial contactless loyalty using stickers customers can attach to the back of their mobile phones.

Dan Balaban

Sandwich chain Eat, one of the first merchants to roll out contactless payment in the United Kingdom, plans to introduce a contactless loyalty scheme using passive stickers.

The chain, which has more than 100 UK locations, will use a contactless loyalty and likely also a closed-loop payment system of Zapa Technology. Zapa now mainly serves its home base of Ireland. Eat is to launch an eight-week trial in early May at its new store in Liverpool. Plans call for then rolling out the contactless loyalty system throughout the chain, assuming the trial goes well.

Eat would issue stickers, branded both Eat and Zapa, to customers, enabling them to tap to receive points and redeem rewards. They could also view coupons and rewards, along with account details via a smartphone app on their phones. The chain might also enable customers to pay for sandwiches, soups, salads and coffee with a prepaid stored-value account. That would be in addition to open-loop contactless credit and debit cards the chain now accepts.

“We (want to) have that one-to-one relationship with customers; getting to understand individual buying patterns,” Rene Batsford, head of IT for Eat, told NFC Times.

He said the chain is planning to upgrade its point-of-sale terminal system and this would enable it to support the contactless loyalty launch. The same terminals are expected to accept open-loop contactless applications, such as Visa payWave and MasterCard PayPass. Eat was the first merchant in the United Kingdom to introduce an integrated contactless POS system, which reduces the steps when consumers tap their cards to pay.

Zapa has recorded more than 2 million contactless transactions to date. About 200,000 customers have stickers and nearly 800 merchant locations accept them. They include more than 100 locations of the Insomnia Coffee chain in Ireland. Another 450 locations are gearing up. But the implementations have required standalone Zapa terminals.

Zapa Technology chief operating officer Donal McGuinness, said the Zapa Tags, or passive stickers, serve as a bridge to the coming of full NFC mobile phones. But the company already can link transactions conducted by consumers using the stickers to apps on smartphones, which it has developed for the iPhone and Android smartphones, along with a couple of others, he said.

The transactions go through the Zapa server and to the customers’ handsets. But the move to NFC would enable more integrated delivery of offers and coupons and redemption.

Eat would be the first of the British merchants accepting contactless payment to also introduce contactless loyalty.

Amazon to take on Apple this summer with Samsung-built tablet?

You really should pay attention when Engadget's founder, Peter Rojas speaks about the tech industry. Especially when he leads into a story like this:

It's something of an open secret that Amazon is working on an Android tablet and I am 99 percent certain they are having Samsung build one for them.

The GDGT piece goes on to present a very reasoned argument that paints Amazon, not Samsung or the rest of the traditional consumer electronics industry, as Apple's chief competition in the near-term tablet space. An idea that'll be tough to argue against if Amazon -- with its combined music (downloadable and streaming), video, book, and app ecosystem -- can actually launch a dirt-cheap, highly-customized, 7-inch Android tablet this summer as Pete predicts. Oh, and the fact that Amazon already has our credit card details will certainly make for easy adoption. Hit the source below for the full read or, better yet, stay tuned for the next Engadget Show where we'll be nerding-out with the son of the father of the father of Engadget. 

Norwich firm develop contactless interaction with phone giant

From its offices on Prince of Wales Road, Proxama has created near field communications (NFC) technology which allows users to interact with advanced billboards and posters simply by swiping their phone across a special sensor.

The company will now work with Nokia to integrate the technology into upcoming versions of the C7 handset.

Proxama has designed a complete package known as TagCenter that will also enable Nokia NFC phone users to interact with similar sensors built-in to posters, product packaging and point-of-sale displays.

In the past Proxama has also worked on projects with Virgin Mobile, BT and MasterCard.

Company founder and chief executive officer Neil Garner said: “This collaboration with Nokia means that, very quickly, consumers around the world will be able to enjoy much more rewarding interaction with their favoured brands.

“Proxama’s TagCenter will breathe new life into traditional media chan-nels that have been in decline, by enabling them to deliver to consumers a much more engaging experience.

“Mobile is truly coming of age this year so I am delighted that we have secured a deal that will reap benefits for so many. Consumers have increas-ingly placed more importance on the role their mobile plays in their lives and this is a natural step-change.”

Proxama has also announced a new appointment, David Harbige, who will head up product development work on its contactless payment technology.

With 15 years’ experience in similar industries, he will manage the relationships with handset manufac-turers, network operators, banks and card schemes such as MasterCard to develop new opportunities.

“I am delighted to be joining Proxama at such an exciting stage of its growth”, he said.

“With NFC technology about to revolutionise mobile phone use around the globe, Proxama is at the forefront of the development work with handset manufacturers and payment schemes.”

Keynesianism's systemic failure

While the United States has been hit with a prospective debt downgrade in the wake of President Barack Obama's defiant statism, the even more statist European Union is trying to keep the lid on the consequences of its own regulatory pretensions and its members' fiscal fecklessness.

Greece denies any need to restructure its debt, but the market doesn't believe it, and has forced its borrowing rates to junk levels. There is backroom panic over the recent Finnish election results, which saw the rise of an anti-bailout party called True Finns. Since EU bailout packages have to be approved unanimously, there is fear that True Finns may bring the game of European musical chairs to a halt, revealing a paucity of seating. This puts the unwanted spotlight on Portugal, which needs to keep jigging through a major bond redemption in June. It is even more necessary to keep the Spanish castanets clicking because Spain is "too big to bail."

The real question about the still-mounting subprime government crisis is why anybody would have imagined that it had been solved -or even addressed -rather than exacerbated by the kind of trillion-dollar Keynesian pronouncements made at the G20 by the likes of former British prime minister Gordon Brown, whose successors are struggling with the disaster he left them. Indeed, it was arguably the G20 mentality, with its delusions of universal economic security, well-planned regulatory "architecture" and panoptic "macroprudence" that created this fiasco in the first place.

Free markets are based on risk and will always be prone to particular failure. Only government attempts to prevent or compensate for particular failure can threaten the systemic variety.

Post-crisis stimulus stimulated little but insupportable government debt -and now inflation. It was joined by a downward manipulation of interest rates that has promoted what Austrian economists called "mal-investment," plus asset inflation.

The astonishing aspect of all this -as pointed out numerous times in this space -is that spend-yourself-rich Keynesianism had already been comprehensively refuted in theory and had spectacularly failed in practice by the late 1970s.

The good news is that fettered capitalism has made the world a good deal richer since then, and thus arguably more able to withstand policy incompetence. The bad news that the tax-and-spend interventionist state has grown in parasitical lockstep, if not even faster, thus both hobbling progress and mortgaging people's future via increasingly unsustainable health and welfare commitments. Few would dare to question the validity of a welfare state; but few could deny that it consistently threatens to grow out of control.

The Obama administration's solution is more of the same. It wants to up the government's credit-card limit, which the EU now does on an ongoing basis. Brussels and the European Central Bank are reluctant to acknowledge the obvious need for a Greek restructuring (i.e. default) because the EU banks that were rash enough to take on Greek debt are allegedly not strong enough to take the required "haircut." They thus require further time at the state spa on the taxpayers' tab.

All this further weakens institutions and economies and promotes even greater moral hazard. However, if you suggest this to the agents of the regulatory state and its elaborate multinational offshoots such as the IMF, their response would be: What other way is there?

Friedrich Hayek identified the "fatal conceit" of believing that markets are flawed and can always be rectified and/or improved and/or fine tuned by bright people with big brains and good intentions. However, the fatal conceit is not just, or even, a cognitive error; it also inevitably features a good deal of self-interest. People come into government to do good and stay on to do well.

The EU started out as a thrust to reduce trade barriers and enable industrial rationalization across postwar state borders, thus reducing the chances of further intra-European conflict. It was also promoted as a bulwark against Soviet aggression. However, in their inevitable hunger to acquire more power, the agents of the European regulatory state sought monetary union, knowing that monetary union would require central co-ordination of economic policy if it wasn't to fall apart. However, economic policy remained in the hands of individual states, so the system is falling apart. Some governments inevitably pursued (extra) feckless policies precisely because they knew that Brussels would have to bail them out to keep its expansive dreams alive.

As my colleague Terence Corcoran noted yesterday, Standard & Poor's warning about a possible downgrade of U.S. government debt should come as no surprise, and certainly no comfort that either ratings agencies or global regulators have a clue about how events will unfold. Indeed, they are in a state of professional denial. In the Borglike mind of super-bureaucracy, policy failure is merely a temporary glitch, the prelude to more and bigger -and invariably "smarter" -policy. Indeed, policy failure is regarded as synonymous with the acquisition of valuable input that will make the next policy truly potent. The one policy that is rarely countenanced is more reliance on market freedom. Liberals might at this point rage at all the Wall Street malefactors who have dodged the slammer, but that reflects yet another failure of fundamental state responsibility. Any state should deal with the issues that are within its mandate and competence before it seeks to confirm the political Peter Principle that the more expansive the scope of regulation, the more likely it is to fail.