The Dinube digital payments network plans to bypass legacy card networks while providing merchants and consumers in Europe's Single Euro Payments Area a real-time payment system without interchange pricing.
Barcelona-based Dinube is hoping to address the same issues in Europe high interchange rates and an inability to retain customer transaction data that initially led mega-retailers like Walmart and Target to form the Merchant Customer Exchange together in the U.S.
Dinube recognizes that it has the same goals as MCX, and is open to exploring their combined potential, though the companies do not currently work together.
"We would love to be able to work with MCX in the U.S.," said Dinube CEO and founder Jonathan Hayes. "We have very significant merchant backing here in Europe, through the retail confederation in Barcelona representing 90,000 small stores."
Dinube's technology enables direct-debit transfers from a cloud-based payment system that utilizes Near Field Communication for smartphone payments. It relies on a PIN code and biometrics for security.
European supermarket chain BonPeru has committed to the Dinube system at 170 of its locations, making it the largest retailer to integrate, Hayes said.
Dinube plans to get the new payments network deployed in the SEPA zone across more than 30 countries by promoting the benefits of its alternative to card-based payments. For example, Dinube is designed to be resistant to chargeback fraud.
Dinube "looked long and hard at the chargeback problems for legacy players" and instead designed a model in which consumers receive a digitized token representing a certain value, such as 50 euros. The token is exchanged through the user's Dinube "wallet" over the merchant contactless NFC reader and, along with the user's PIN number, initiates and completes the transaction.
"The notion of a chargeback in a card scheme, as we know it, would not affect us," Hayes added.
Dinube is not the first, and likely won't be the last, to attempt to create "new payment rails that bypass the traditional card networks," said Zil Bareisis, a London-based senior analyst for research firm Celent. Similar networks focus on enabling debit payments, such as IKO in Poland, or credit payments, like Zapp in the U.K., Bareisis added.
"Few have been particularly successful to date, partly because of the massive challenge to create the necessary network effects by reaching scale amongst merchants, banks and consumers," Bareisis said.
A decline in card interchange rates and Access to Account regulations in Europe may lead banks to be more receptive to an alternative payment network, but the card networks made "a brilliant move" in introducing tokenization as a way to ensure their rails remain well-positioned for digital payments, Bareisis said.
The Access to Account provision is part of the updated payments service directive in the European Union, effectively giving third-party payment providers like Dinube the ability to access banks' payment infrastructures as a way to spur innovation in payments technology.
But that provision can work against Dinube, which will likely face a flood of competition in Europe, said Gareth Lodge, also a London-based industry analyst with Celent.
"Access to Account will revolutionize payments in Europe," Lodge said. "If Dinube has found a solution, then they have a very small window of opportunity in being first to the game."
For now, Dinube simply makes the pitch that its payment system carries the same privacy and anonymity for consumers as if they were paying in cash. In addition, Dinube feels merchants can lower costs because all transactions less than 10 euros ($11.34 U.S.) are covered through a flat monthly fee, and an additional fee of .075 euro per transaction takes hold on those more than 10 euros. Merchants also pay a fee of 7.50 euros per month if they have to obtain a PIN pad through Dinube.
Users receive their transaction receipt on their phone immediately after a Dinube payment because Dinube software is integrated into the merchant POS. They can also monitor loyalty rewards programs through the app.
If the Dinube user does not have a smartphone with NFC capabilities, a QR code comes up on the phone screen to scan at the POS, or Dinube issues a one-time-use random number for checkout.