Payleven, The Samwer Square Clone, Surmounts Visa Hurdle With Chip And PIN Reader Now Sold In Europe

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Payleven, the mobile payment company from the Samwer bothers’ Rocket Internet incubator, is now taking orders for its chip-and-PIN readers, which makes it one of the first of the Square-style competitors in Europe to offer quick way to comply with Visa’s card payment requirements in the region. The readers were first announced in October 2012; today Payleven starts to take orders — at a price of €49 ($65) each — and will begin shipping them on February 18.

“We’ve invested heavily in a tech solution that as a merchant you can accept everything from the start,” Rafael Otero, the CTO and co-founder of Payleven, told me in an interview when the company first announced its solution in October.

The card readers will first be offered in Payleven’s European markets: the UK, Germany, Italy, The Netherlands and Poland. Payleven is also expanding in other regions such as Brazil, and a spokesperson says that the readers will later be used there, too. Like its competitors, Payleven is offering merchants a flat charge of 2.75% on transactions, and as of today works with Visa and MasterCard, but not American Express or other payment providers.

As background: chip-and-PIN transactions rely on a chip embedded in a credit or debit card along with a user’s PIN number as a way to authenticate payments, and these are now the standard in Europe, unlike the U.S. where the magnetic stripe and signature continue to be the primary way of authenticating card payments in person. In Europe, other Square-style companies like iZettle last year were dealt a blow when Visa stopped allowing transactions in most countries, because they did not have chip-and-PIN solutions in place. For now, their workaround has been to send buyers to payment sites on their phones to authenticate point-of-sale payments — a solution, but a more time-consuming one. Others like mPowa also have developed chip-and-PIN readers to work alongside their mobile apps; its solution is certified to PCI (Payment Card Industry) 1 while Payleven describes its as 3.1.

Enabling Visa payments is an important part of the equation for these mobile payments companies: Visa accounts for some 450 million debit, credit and commercial cards in Europe, covering some €1.7 trillion on payments in 2012, or 14% of all consumer spend at the point of sale in Europe. Some 80% of that is via debit rather than credit cards, and it is with debit cards that the PIN is most important for authentication (whereas signatures can be used on credit cards).

Given that Square and its European counterparts all come from a similar mission — that of enabling smaller merchants to be able to make card transactions — this is an important step for getting this to work in Europe.

“We welcome the innovation we see today in Europe to deliver solutions that enable secure card acceptance for small businesses that have not traditionally accepted cards,” noted Stanley Skoglund, SVP, Payment Systems Risk at Visa Europe, in a statement. “This kind of solution helps to increase card acceptance while preserving the important Chip & PIN functionality and all the security benefits that it provides. We are delighted to see solutions emerge that can bring Chip & PIN out of the shop and into the hands of small merchants. We are doubly delighted that the reach and flexibility of EMV is being increased in a responsible manner, giving smaller businesses the opportunity to offer the same level of secure card acceptance that larger enterprises can already do.”

In Payleven’s solution, a smartphone or tablet is still used as part of the authentication process, but instead of swiping and plugging the card into a dongle on the phone, users put it into a small extra machine (pictured) which links up with its Android or iOS apps via Bluetooth.

The news comes a couple of weeks after Payleven announced one more round of funding. In keeping with Rocket’s standard practice, neither the investors nor the amount of investment were revealed, except to note that it was in the “high single digit millions.” Named investors in the company, in addition to Rocket Internet, include New Enterprise Associates, Holtzbrinck Ventures, ru-Net, who together have put “double-digit millions” into Payleven.

Payleven, which was established in March 2012, is not yet revealing user numbers of its service to date. While the founders, who also include Alston Zecha and Alexander Zumdieck, are building up the company as an independent entity, the Samwers are well known also for building up e-commerce operations that mirror the business models of competitors in the U.S., who then end up buying them for inorganic international growth. Such exits have included CityDeal, sold to Groupon; alando, sold to eBay; and Betreut, sold to Care.com.