Startup helps merchants accept credit card payments via smartphone

A Vancouver-based start-up company is competing against some big players in the financial services industry by offering small businesses a way to accept credit card payments with a smartphone or tablet.

Payfirma Corp. was named Canada’s best new startup of 2011 at KPMG’s Startup Awards this month. It is offering small merchants a full slate of payment transaction services including traditional point-of-sales terminals, e-commerce tools, and a smartphone dongle used to swipe credit cards.

See Payfirma’s mobile transaction process in action.

Targeting trade specialists that are on the road, delivery companies, moving companies, and other independent and mobile merchants, Payfirma CEO Michael Gokturk says the firm’s latest mobile payments app was made based on customer feedback. The company was exhibiting its product on the show floor of Toronto’s DX3 Canada conference.

“Once a merchant finds out about us and how low the service costs, it’s so easy to switch them over or board them as a new client,” he says. “We’re boarding about 500 clients on a monthly basis, and it just keeps going up.”

Payfirma’s product competes in Canada against Moneris Solutions’ e-Select plus Mobile app, and Intuit Canada’s GoPayment Mobile. In the U.S., Square Inc. has attracted much press and got Sir Richard Branson, entrepreneur and founder of the Virgin Group, to invest in its smartphone attachment that allows merchants to process credit card transactions.

Visa is also a stakeholder in Square. Derek Colfer, business leader for global mobile product innovation at Visa, says it’s a product the company has a lot of focus on.

“You can’t get into a cab in San Francisco these days without seeing Square. It makes sense for a niche merchant,” he says. “I think it’s going to become more popular in Canada, for sure.”

In the face of competition from larger companies, Gokturk points to his product’s simplicity. It takes just three taps for a merchant to accept a credit card payment, and an average of seven seconds to complete.

Payfirma is “targeting a different customer segment, going after the micro-merchant,” he says. “We’re so nimble, we’re able to move on a dime. Typically small businesses want to do business with small businesses. We’re there in the trenches with them.”

Payfirma looks to compete on service rather than price, Gokturk says. It has developed its application in-house and also uses proprietary card swiping technology.

Payfirma charges its mobile customers a monthly fee of $10, and skims 1.99 to 2.92 per cent off each transaction depending on the type of credit card used (70 per cent of transactions are charged 1.99 per cent, according to the company). Intuit’s GoPayment pricing is 2.7 per cent per transaction with no monthly fee. Moneris doesn’t list pricing details on the eSelect Web site.

The POS terminals offered by Payfirma accept contact payments such as Visa’s Paywave and Mastercard’s Paypass, as well as payments via smartphones with near-field communications (NFC) chips.

Visa is also focusing on NFC, because consumer demand for it is high, Colfer says. “I think consumers want to be able to use their mobile device to pay, and we’re getting one step closer now.”

A major hurdle for tap-to-pay transactions with smartphones will be the consumer adoption of smartphones with NFC chips embedded. Currently in Canada only three such devices are on the market: Samsung’s Galaxy Nexus and Nexus S, and the BlackBerry Bold 9900.

With Canadian smartphone ownership projected to be at more than half the population by 2014 according to Cisco, Colfer is optimistic. “A quick turnover on mobile devices in Canada means we’re a great breeding ground for NFC payments.”

Brian JacksonBrian Jackson is the Associate Editor at ITBusiness.ca. Follow him on Twitter, read his blog, and check out the IT Business Facebook Page.

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