Mobile technology vendor 1OAK says it can enable any point of sale machine to accept payments from a smartphone without changes to infrastructure or back-end payment processing systems.
Called Sequoia, 1OAK's product uses adhesive to attach to existing point of sale systems. Consumers initiate a payment with the Sequoia smartphone app, which sends an encrypted signal that the device interprets as a card-present transaction.
"Sequoia is the bridge for the gap between smartphones that are on the market and essentially all point of sale machines," says Gary Rayner, chief innovation officer for 1OAK.
The Sequoia app sends an encrypted wireless signal to the adhesive device, which communicates to the point of sale terminal using magnetic waves. These waves are interpreted by the magnetic stripe reader head the same way it picks up the information from a swiped card.
"To the POS terminal, the Sequoia is identical to a credit card swipe, which is why there are no changes needed in the POS terminal or in the payment processing system for retailers to use Sequoia," says Fred Zimbric, product portfolio manager with 1OAK.
The Sequoia consumer app can store credit, debit or loyalty data and runs on iPhone, Android, Windows Phone and BlackBerry handsets. The application does not require Near Field Communication, Bluetooth or any smartphone attachments.
"There's no modification of the back-end system and no configuration at the point of sale," Rayner says. "NFC requires an upgrade to the terminals, and Apple's not supporting it anyway," Rayner says. Apple's iBeacon, which uses Bluetooth Low Energy, requires a level of internet connectivity in a store that not all retailers have, Rayner says.
While 1OAK has taken work out of setting up mobile payments, it still has to convince users to adopt the system, analysts say.
"The company has taken on quite a challengecreating a consumer and merchant network from scratch," says Zil Bareisis, a senior analyst at Celent.
1OAK doesn't need to issue payment credentials, but still has to convince consumers to download and use its app and register their cards, he says. "Equally, while the merchants don't need a new acquiring relationship or expensive changes to the point of sale, they still need to install the technology."
Other companies are also trying to use existing rails to enable mobile payments. Loop, for example provides a smartphone add-on that sends a magnetic signal to a terminal's mag stripe reader. The signal comes out clearer than a card swipe, Loop says.
"It's a tough sell to get merchants to upgrade their point of sale terminals. But that's not the biggest factor that's impeding adoption," says James Wester, a research director at IDC Financial Insights. "The problem is that a solution must add value to the transaction process if it is going to add effort or additional steps, whether that's using existing equipment or not."
Sequoia's value is in its simplicity, and its ability to add other cards beyond payments, Rayner says. Consumer scan also "use it in other ways, such as a pass to open the front door," he says.