Transaction processor Vantiv Inc. plans to offer its new Mobile Accept card reader to help brick-and-mortar merchants handle payments outside their stores — without paying more than they do for in-store payments.

The strategy is somewhat different from others offering similar readers and apps, including Square Inc., whose target market traditionally has been merchants that lack a storefront presence. That may have changed, however, with Starbucks' investment in the company and an agreement to use Square to process transactions. 

Because Vantiv is offering Mobile Accept to qualified customers within its existing merchant base, which spans 400,000 retail locations, it will charge them the same negotiated discount rate applied to their in-store card purchases, Ben Love, Vantiv vice president of mobile, said in an interview. It can do so because of Vantiv's existing relationships and the qualified merchants' relatively low fraud risk, he says.

Merchants generally pay about 2% as their discount rate, which covers interchange, processing and other acquirer expenses. Among other companies providing mobile card acceptance, GoPago charges 2.85% of the sale, Square charges 2.75%, and Intuit Inc.'s GoPayment charges 2.7%. But while Vantiv is charging $60 per reader (the app is free), the others may not charge for the hardware.

But over time, the differences will begin to narrow, notes Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC.

Moreover, a processor cannot compete in the marketplace with a good mobile-acceptance offering, he adds.

“Vantiv has aggressive rates for all their clients,” Ablowitz says. “The bigger story is they are focused on merchants with a real presence.”

Targeted merchants include those that deliver food via trucks, caterers, event holders and others that either use standard mobile POS terminals or the old "knuckle-buster" readers to accept cards – "all the horror stories you've heard about," Love says.

Though Vantiv will ramp up a pilot to test Mobile Accept later this month with about 40 merchants, the product is available now, he says, noting the test mostly is for internal purposes to determine where tweaking might be needed.

The product works for devices using Apple Inc.'s iOS and Google Inc.'s Android operating systems, Love says.

In developing the product, Vantiv found one of the most challenging aspects of mobile payments is security, partly because of the limited best practices and guidelines outside of the Payment Card Industry data security standards, Love says.

"Because we are who we are, we did our own internal security audits, and we believe what we have here is how mobile security should be, absent guidelines and best practices in this field," he says.

Vantiv used the requirements for in-store POS terminals as a guide. As such, the mobile reader encrypts information as the card is swiped, and the phone never stores any of the data, Love says. The processor is using readers from IDTech of Cypress, Calif., he says.

Another challenge was the usability and obviousness of the app. Merchants know the process to accept cards at checkout lanes, so Vantiv's design staff worked to make the process appear as similar as possible on mobile devices used away from stores, Love says.

Though Mobile Accept will not support contactless payments, Vantiv will be working closely with its issuing business side to develop improvements, and it plans to incorporate other elements Vantiv has available, including its Jeanie electronic funds transfer network, he says. Mobile Accept will not initially support PIN-debit payments.

"We can use Jeanie in a number of different ways," Love says, noting Vantiv is in discussions with various entities on the potential options available, including companies that support PIN-debit acceptance online. "We don't have an answer yet for all the technical and operational issues."

Vantiv also is in talks with companies that support the scanning of cards for payment acceptance that create a different type of interaction with consumers, he says. He would not name those companies.

"There are dozens (of options) we are looking at and will be testing our hypotheses on," Love says, referring to how merchants and consumers might react.

Though Vantiv is not using independent sales organizations to distribute Mobile Accept during the pilot phase, it plans to do so during the full rollout process, making the mobile app and reader something the ISOs can sell along with traditional card acceptance, Love says.

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