Swiff lets merchants accept credit card payments using their mobile phones

There’s a lot of debate about Near-Field Communication (NFC) as the future of mobile payments. While the likes of Google and Nokia are pushing the technology hard, others are skeptical.

What’s the fuss all about? In short, NFC has the potential to reshape the way payments are done by replacing your physical wallet with your phone.

But NFC is not the only story out there. Swiff, a Singapore-based startup that was started in 2010, wants to be the future of mobile payments too. It give merchants a cheaper way of accepting credit card payments — just using their mobile phones. The founders are Jerome Cle, Etienne Van den Bogaert, and Lionel Steinitz — all possess a background in banking and finance.

Here’s how their product works: After merchants sign up for an account, they will receive a small, black Swiff card reader which they can plug into the headphone jack of their iOS mobile or Android devices. They can then swipe credit cards right away, as long as there’s a wi-fi or 3G connection. No bulky, expensive payment terminals.

Merchants are charged a one-time set-up fee, annual fees, and transaction fees for using the product. The first two applies in some cases only.

Swiff is actually very similar to US-based Square, which is doing well — they’ve secured US$169m in funding since 2009. If the company gets its execution right, it could take off in Asia, where there isn’t a similar service that has achieved prominence yet.

The founders of Swiff have not given me a firm timeline for launch, although said we can expect an announcement “in a few months”. Their services are being made available in Singapore and Malaysia, with a planned expansion to Europe, the USA, Canada and South America.

So what exactly is the big fuss about Swiff?

For one, it has the potential to disrupt the payment solutions market. Brick and mortar operations are still big in Asia (and the world), and it’ll continue to play a big role in highly urbanized cities.

With existing payment terminals being either too expensive, restrictive (since it’s tied to phone lines), or bulky, Swiff could solve all three problems. Setup is potentially much easier and cheaper. Furthermore, it allows merchants to send receipts via email to the customer.

Stephanie Yeo, head of marketing and communcations at Swiff, adds that the company does one thing better than Square — security.

“Square’s hardware does not encrypt the credit card data. Hence, a rogue developer could install an app running in the background to capture all credit card data. With Swiff, the credit card data is never available in the app itself, it is encrypted in the reader and sent in encrypted format to the gateway for payment processing,” she says.

“Therefore, Swiff also only accepts Swiff-approved hardware to ensure full end-to-end security, something that Square does not offer. It is possible to use the Square with a third-party reader.”

Their target market includes F&B entrepreneurs who want to streamline operations, the services and supply industry, and individuals like insurance agents or doctors who need a cost effective solution to collect payment.

There’s a lot of promise in the payment method offered by Swiff and Square, but I wonder how it’ll compete against NFC and its wealthy backers.

While Swiff still requires the use of physical credit cards, NFC has the potential to do away with them altogether – Google Wallet is already touting itself as a replacement for physical wallets.

It lets users for a product by simply tapping their phone on an NFC reader — the app then automatically sends payment information to the merchant. It will even process any loyalty, gift, or discount programs they’re participating in.

NFC has uses beyond mobile payments as well — it lets smart phone users share content, business cards, and play multiplayer games, simply by tapping their phones together. Marketers can even embed NFC tags in outdoor advertisements or movie posters to share content or special deals.

These uses have a knock-on effect for apps like Google Wallet: The more accustomed smartphone users are to using NFC for whatever purposes, the more likely they are to use it to pay for groceries.

But while NFC holds tremendous promise, it requires commitment from a multitude of partners: Credit card companies, mobile operators, mobile phone operators, NFC hardware and software vendors, merchants, and customers.

With so many moving parts, mass NFC adoption could be two or three years off at least, even if credit card companies promise free installation of point-of-sales terminals for merchants.

This leaves the window open for companies like Swiff and Square to operate: Their product only requires buy-in from merchants and credit card companies, since customers are still swiping their credit cards — a familiar process.

Also, there will definitely be a niche group of merchants who would be deterred from adopting NFC, especially those who are constantly on-the-go or unable to afford the technology.

But suppose NFC does become ubiquitous, there’s nothing stopping Swiff from integrating the technology alongside its existing credit card reader.

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