Sweden is the world’s most successful
country in implementing new technologies and using them for
economic and social growth. Alternatives to card payments are
abundant, but one in particular as caused a storm: iZettle. Duygu
Tavan profiles a company that has widely been described as a better
alternative to Square
Go deeper with GlobalData
The Global Information Technology Report put
Sweden once more on the top rank among 138 countries that
successfully implement technology for economic and social growth.
The report found that Sweden provides a perfect climate for
innovation in information and communication technology (ICT). New
technology penetration is among the densest in the world, and, in
“Sweden more than anywhere else, ICT improves access to basic
services and gives rise to new organisational models as well as new
business models, products, and services,” the authors of the report
concluded.
That statement fits Stockholm-based iZettle
perfectly, and more so than others (see below).
Much like with Square in the US, iZettle
manufactures mobile POS devices that can be attached to an iPhone,
iPad or iPod Touch. The hardware works in conjunction with a
downloadable app.
While Square has been developed around the mag
stripe that is still prevalent in the US, iZettle is EMV
chip-based, and should, therefore be easier to export to
non-domestic markets. As such, the company has caused a storm in
the past few months. It has been described by the Wall Street
Journal as “a new, better Square”.
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By GlobalDataiZettle, which works through cloud technology,
charges 2.75% (same as Square) and SEK1.50 ($0.23) per sale. There
is no monthly fee and the minimum payment is SEK10 ($1.50).
de Geer is very clear when it comes to
identifying iZettle’s target customer groups. Besides small
independent retailers, the service should appeal to “from-home
merchants” like plumbers, gardeners or housekeepers.
The benefits of iZettle for the small,
independent merchant is very clear, particularly in Sweden, where
card transaction volumes are high and smartphone penetration is
dense. For the merchant it is cheaper than setting up a merchant
account, paying for the POS and payments processing.
The ease and low price of the product also
makes it an attractive P2P service aimed at those “from-home
merchants” as well as the consumer directly.
For business transactions, the limit for
individual payments is €2,500 ($3,300) and there is a €5,000
($6,600) daily cap. For individuals, the cap per day is €3,000
($4,000) and €1,500 ($2,000) per transaction.
The iZettle app can work without the POS
device, as the merchant is able to type in the card number
manually. But in that case transactions are limited to €50 ($65)
per day, both for consumers and businesses.
Payments on iZettle are transferred to the
user’s bank account within a working day. The product supports
EMV-technology and complies with PCI DSS, AML and KYC
standards.
As soon as the user has signed up for the
iZettle account and downloaded the app and received the POS, they
can start accepting payments. With the POS plugged in, the merchant
types in the amount they are charging, and types in a short
description of the product sold. They then take a picture of the
item and place in the buyer’s card into the POS, tap the pay button
and ask the buyer to sign on the mobile screen. The buyer then
receives an electronic receipt to their email address. The
merchant, too, gets a copy of the receipt.
iZettle assures users that data traffic
remains encrypted and that no data is stored on the device.
Impressive initial growth
MasterCard has already
hailed iZettle’s co-founder and CEO Jacob de Geer as a “cashless
pioneer”.
According to MasterCard
Europe’s head of emerging payments and mobile, Jorn Lambert, the
difference between iZettle and a normal POS device is that the
iZettle device is fully internet based.
Because it is a chip and
signature system, the merchant is responsible for any card
fraud.
Surely this would mean
merchants would be put off from getting iZettle, and they might as
well get a normal POS?
But Lambert disagrees,
arguing that risk of fraud is outweighed by the benefit of the low
cost of implementing the iZettle service.
“We have seen extremely
low fraud rates – three cases, in fact – and we will continue
to monitor this. I think iZettle is providing more choice for the
merchant community,” he says.
Provided the fraudrate
stays low, this will not be an issue for the merchant. So far, have
clearly not been put off in Sweden.
Between August and
mid-October 2011, iZettle attracted 10,000 new users (which equates
to over 110 new users signing up per day). Within 90 days of
launching, it had single-handedly expanded the Swedish POS market
by 5%.
In October 2011, secured
a venture fund agreement from Index Ventures, Creandum and Charles
Dunstone (co-founder of The Carphone Warehouse) in order to expand
into new markets. de Geer says he expects the service to be
available across Europe by Q3 2012. De Geer identified UK, Spain,
Italy and France as markets of specific interest.
