With Square yet to reveal when or where it might offer its mobile payment service in Europe, and PayPal apparently still only talking with would-be partners, the door is wide open for more local players to jump in and pick up some market share. Sweden’s iZettle, which often gets compared to Square, is now doing just that: today it is launching its iOS, dongle-based mobile payment service to the UK, four months after its pan-nordic live launch, and as it is preparing to launch an Android version of its product later this year.
iZettle kicking off its service by giving away 3,000 card readers to small businesses and sole traders in the country as part of its invitation-only beta, which it is running in cooperation with MasterCard, American Express and Diners Club. In its still brief life, it has seen some decent traction in Sweden, Norway, Denmark and Finland, where it now has 50,000 active merchants on its network.
iZettle is filling a practical need in the current market. The initial aim of the service, according to Jacob de Geer, the founder and CEO, is to target not those merchants that already take card payments, but those who have never signed on to using anything other than checks, cash and invoices to accept payments. There are roughly 20 million small businesses in Europe that fall into this category, he says, with the “uncarded” ranging from sole traders like carpenters to small independent cafes. “We’re not trying to go after those with existing infrastructure because switching costs are too high,” he says.
De Geer will not yet reveal the total number or value of transactions or how many consumers that have used the service to date, except to say that the company is building out its infrastructure to keep up with the demand and has grown by 10 percent in recent months. What’s interesting is that, for now at least, the service seems to be attracting high-value transactions: De Geer says the average value of a transaction is €60 ($76), compared to between €10 and €15 for the average NFC transaction in the Nordic region. (In comparison, he notes that Square transacts between $8-10 per day on any given reader, but that’s an average number and it has picked up a huge number of merchants now.)
The iZettle service works similar to PayPal’s Here and Square, in that a merchant plugs a card-reading dongle into an iOS device to process a card payment using an app downloaded to the device. Instead of reading the magnetic strip on the back of the card, iZettle reads the chip — these are now near-ubiquitous in Europe and tend to be more secure. Like other card payment services, you sign on the device screen to complete a payment, and the funds are deposited in a merchant account the next day.
Similar to other payment services iZettle works on a commission basis — in its case a percentage on each transaction, with that percentage varying by country. It actually dropped a transaction fee it used to take only days ago — perhaps a sign of how the area is heating up and so offering more competitive offerings is essential.
For now, the service is only on iOS but De Geer says that Android is coming soon, “this year for sure.” He says that the delay was due to (surprise!) fragmentation across too many versions of the platform, and too many devices. But the evolution to Ice Cream Sandwich — the latest OS — is definitely making things more standardized, he notes.
One expansion that is not coming soon is to the U.S. Not only do companies like Square and Here have a lot of early business sewn up, but he also notes that “The U.S. is not too interesting for us given that they use the mag stripe and we focus on chip-and-PIN services.”
More interesting, he says, are markets like Asia and Latin America, where there is good chip-card penetration but card payment facilities are still relatively low among smaller businesses. Still, the next launches are likely to be in Europe, with Germany, France, Italy and Spain all on De Geer’s roadmap, with “one or two of those” expected to come online this summer. To date, iZettle has received venture funding of $16.4 million from Index, Creandum and others to fund that expansion.
Interested companies can either register a request through iZettle’s web site, or via its iTunes app, and the first 3,000 will get a free card reader to get started.