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Emerging Payments

Bank of America Launches Square Competitor

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Bank of America is launching a Square-like card-swiping device for smartphones called Mobile Pay on Demand. The service will be marketed through B of A’s Atlanta-based joint venture with First Data, Bank of America Merchant Services.

Like others looking to appeal to casual card acceptors and small businesses with digital payment aspirations, B of A’s Mobile Pay on Demand relies on an add-on card reader for mobile devices.

The card reader will give B of A yet another tool to market to potential customers.

As a part of the pitch the banking giant will make to small businesses, funds from the mobile-payment service can be deposited into a B of A account as soon as the next day.

Pricing looks standard to that of other mobile card readers on the market — 2.7% per swipe, and 3.5% plus an additional 15 cents for keyed Visa, MasterCard and Discover transactions. Users will also be able to accept American Express cards.

There are no monthly, annual or set-up fees.

First Data, the bank's partner in Bank of America Merchant Services, already offers a

similar card reader. Its Mobile Pay device plugs into an Android, BlackBerry or iPhone and is also paired with a smartphone app. 

“You know everybody wants a piece of that right now,” says Brian Riley, a senior research director in the retail banking and cards practice at CEB Towergroup. “Everybody is playing in that field because it’s potentially a high-yield area.”

Other banks have already made similar moves.

In August, with the backing of JPMorgan Chase, GoPago of San Francisco began providing merchants with its Live system featuring a free Android tablet and card reader attachment. 

Indeed, at first blush, B of A’s attempt at mobile payments looks much like others that have quickly followed Square’s lead.

In May, VeriFone Systems launched its Sail mobile card reader that developers can adapt with open-source software.At the time, the terminal maker was still selling its PayWare Mobile card reader that was designed to be used off the shelf.

And in March, PayPal announced its own mobile reader, PayPal Here. That system reads card data both through an add-on reader and the smartphone’s camera.

More recently, British mobile payment company mPowa began marketing its own brand of add-on readers to banks so they can white-label the product and call it their own. In July, Square took issue with the unit of Powa, which operates an ecommerce platform, over some of its marketing.

No doubt, though, Square has momentum and will be difficult to unseat.

“What Square has done is they have opened up a new category of merchant: the micro merchant, the garage sale, the church festival, the one time selling opportunity,” says Philip J. Philliou, a payments consultant. “I think that will always be their niche. Do I think Square will grow to a dominant, more traditional merchant category? I think that will be more difficult for them, because merchant processing is a scale game and there are traditional competitors who are very well situated to continue to control that market." He added that Bank of America Merchant Services could be just such a player.

“They can price it cheaply,” says Philliou. “There is no annual fee, and no contract. That’s a big deal, and that pricing is reasonable. These are merchants, if I understand it correctly, that don’t generate much volume, so for them, this is great.”

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