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iPhone payment

June 7, 2011

In a DW interview, iZettle CEO Jacob de Geer says after being inspired by an American startup, he wanted to turn his iPhone into a device that could read chip-enabled debit and credit cards, which are common in Europe.

iZettle reader
iZettle will beta test its product first in SwedenImage: Johan Bendz

For over a year now, cafes and other small businesses in the US have increasingly been using a new mobile payment system called Square. It's a little cube, about the size of a sugar cube, that plugs into a smartphone audio jack. Just open up the application on the phone, and boom - the barista can accept credit cards by swiping the magnetic stripe through the little slit on the cube.

But in Europe, nearly all credit cards use more secure chips instead of magnetic stripes. So, a Stockholm-based startup called iZettle is planning on testing its new iPhone-based credit card reader across Sweden later this month. If successful, the company hopes to expand to the rest of Europe, too.

To learn more, Deutsche Welle spoke with Jacob de Geer, the company's CEO.

How did you come up with the idea for your company, and what influence did the American startup, Square, have on you?

The background to me starting iZettle, roughly a year and a half ago, is that my wife is actually an entrepreneur. She imports reading spectacles and sells them at different trade fairs. One of the biggest problems that she had was when she wanted to rent one of the traditional point-of-sale devices - it was a very complex process. They're extremely expensive. You can only rent them for a minimum of three months and you have to go to your bank.

So she was a bit fed up, and said to me: 'Why doesn't anyone invent something that you can use with your iPhone? Haven't we come to a time when that should be possible?'

And I started Googling, and I read about Square and I told her to get one of their magnetic-stripe readers. But shortly after that she got a response saying that they were not able to respond to the demands of the European market. That was sort of when I started investigating what was needed for Europe, and why no one else had gotten started with a similar kind of venture.

iZettle CEO Jacob de Geer
iZettle CEO Jacob de Geer said his wife helped inspire the company's creationImage: Johan Bendz

Definitely, we've been inspired by Square. They've been a great inspiration. They've been doing a great job over there. We see them as a colleague in this business rather than as a competitor since we operate in such different markets. The US is a mag-stripe market and Europe - and more or less the rest of the world - is a chip-card market, with totally security demands.

Can you explain, a little bit, the difference between a mag-stripe and a chip card system?

The mag-stripe is a pretty old-fashioned way of transferring the card information and transferring it into a point-of-sale device. It's pretty easy to read the information off a mag-stripe. It's extremely easy to skim.

You mean to copy that information illegally?

Yes, exactly. In Europe, and in the rest of the chip-card reading world, we are obligated to follow the standards of EMV (the standard set by Europay, MasterCard and Visa.) to improve security.

From what I can tell based on the pictures on your website, there's a device that connects at the bottom of the iPhone, is that right?

That's right. We use the dock connector instead of the audio jack. There are several reasons for that. One of the reasons is that in order to power a chip, there's a certain voltage required and you can't get that voltage out of an audio jack. So we need to use the dock connector instead. We're trying to marry two different systems - the requirements of the mobile industry, and Apple's demands, and the other is the chip-card industry, and the chip-card demands. The least common denominator is to create the solution that we have produced.

iZettle reader
The reader won't be much bigger than the card itselfImage: Johan Bendz

Your target market, at least initially, is probably Europe. But you mentioned that the chip-card market extends to other parts of the world as well. Are you able to process payments in other currencies, in other countries?

When we start [this month], we will do a beta in Sweden to make sure that everything is ok and that the customers like our products, as well as the people who are actually paying in the terminals and that they like what they see. The interesting thing is that the solution that we have come up with, it's global. All the certifications are global. It's not a Swedish thing, or a German thing. We can go after any chip-card market with this same kind of technology.

So are you doing the Square model as well, which is to give away the readers for free, and charging a small percentage as a way to make money?

I think that whole idea is really compelling for everyone. That's what we've been trying to replicate from a business perspective. Combing the fact that we have all these requirements from EMV and the system that we live and work with, with the fact that we want to give the readers away, that has been a complex process to create a secure system that is so cheap that we can give readers away for free, but with the same security level. But we managed, and we're through that. We have the same business setup as others, like Intuit and Square.

So what percentage are you taking per transaction?

To be honest, we haven't really decided yet. We're still talking to focus groups in Sweden. We'll probably be pretty much where Square started, which is three to four percent per transaction, plus a small fixed fee.

Interview: Cyrus Farivar
Editor: Nathan Witkop