SumUp is preparing to bring its mobile point of sale device to a number of new countries, and hopes its practice of developing its technology in-house will help it contain the costs of chip and PIN card payments.
"We discovered that the only way to really make this work for us was to do a deep dive into the technology ourselves," said Daniel Klein, co-founder and CEO of SumUp, which has headquarters in London and Berlin.
Last week, SumUp received an undisclosed amount of funding from previous investors including Groupon and BBVA Ventures. SumUp will use these funds to continue building its payment system, including a gateway, hardware, and operations.
The company will also use the investment to extend its EMV-compatible PIN+ card terminal, which debuted in Switzerland and Poland, to Spain and then Russia in the coming months, with other markets to follow next year. SumUp is active in 14 markets in Europe and Latin America.
SumUp's strategy is different from some other mobile point of sale providers in that it does not use technology from external partners. It has hired engineers, hardware builders and software programmers to build its technology.
"We're not taking anything off the shelf," Klein said, adding SumUp would add more merchant and payment services in the future as it attempts to build a full point of sale and business management suite.
The company's internally built technology provides more control over development, which in turn gives SumUp more control over fees. The company charges 1.95% per transaction, which is less than the approximate 2.75% that most providers charge.
SumUp is also charging about $108 for the mobile attachment, or about $78 for UBS clients (UBS is marketing SumUp to its merchant clients). The cost of the attachment is similar to other EMV-compliant mobile point of sale devices. Devices that accept only magnetic-stripe card payments, such as Square's card reader, can be found for $10 or less (Square plans an EMV version of its hardware, but has not yet disclosed its pricing).
EMV-chip cards improve security over magnetic-stripe cards, but require different hardware to read data from the chip.
The cost for the EMV mobile point of sale readers is due to the difficulties in accepting EMV cards on a mobile device, Klein said. "It's important to have super-fast and reliable payouts," he said. "Mag stripe is simple to do. The card is read, and the data transfers to your [software] or your tablet or smartphone. That can happen quickly."
With EMV, there is a larger "decision tree" because the chips contain more information. "The card can be declined for a number of reasons. The chip is very intelligent, and it's a huge undertaking to accept that on a mobile device."
Zil Bareisis, a senior analyst at Celent, predicts that there will be some variance in mobile EMV hardware costs as more companies experiment with pricing.
"Various businesses have often discounted, or given away the initial hardware and recouped their money on follow-on products and services," he said. "Typically the degree to which the reader is discounted depends on the overall market conditions, such as how competitive the market is and expected volumes from the particular merchant."