Since July 10, small and medium-sized businesses in Austria have been able to accept payments from their customers using debit or credit cards (Visa and MasterCard) and a chip and PIN reader on a smartphone. The Berlin-based startup payleven introduced a chip and PIN reader and a smartphone app for this purpose. The reader is currently available for EUR 69, and merchants are charged 2.75 per cent in fees for each transaction. There is no minimum contract period and no complicated registration process.
payleven has joined a series of other companies including SumUp, iZettel and Square that offer mobile card payment solutions for smartphones. But what sets payleven apart, and what target group can really profit from the card reader? futurezone talked with Konstantin Wolff, Chief Marketing Officer (CMO) of payleven, about this.
You recently began operating on the Austrian market. Are you satisfied with your start here? What companies are interested in your solution?
Our solution has generated a lot of positive response here, similarly to the other markets that we have entered. We are very satisfied. The companies that use our solution come primarily from four areas: taxis and transport companies like small bus companies; retailers like fashion boutiques; hair and beauty companies like cosmetic studios and mobile foot care; and restaurants and bars. The latter are primarily small bars, cafes, restaurants, pensions and hotels that have not accepted cards up until now. There are of course more exotic use cases like physicians who host botox parties and chimney sweeps who use payleven.
What do you expect from the Austrian market?
The Austrian market is very attractive because there is an extremely high rate of smartphone penetration. The Netherlands and Germany don't even come close. And Austrians like to pay with cards. Based on this, we anticipate potential much greater than would be typical for a market of this size.
Were there legal issues that caused problems in launching your service in Austria?
No. We act as a payment services institution under the Payment Service Directive and have a license from London. This allows us to offer payment services in Europe's markets. It covers all the legal requirements.
The market for mobile payment solutions is growing constantly, but there are also numerous competitors – above all SumUp in Austria, which is also ramping up its business. What sets payleven apart from SumUp?
The biggest thing that sets us apart is our chip & PIN technology, which allows payments to be verified by direct PIN entry. This has allowed us to meet the highest security standards in terms of technology. Our chip & PIN device is just as secure as a conventional POS terminal but can be used anywhere. And because the customer has to enter a PIN code, the merchant bears no risk in connection with the payment, the risk is transferred to the bank.
And we offer more than just simple card payments. For example, our app has a multi-account function. When a bar has three or four employees, for example, the master account shows how many payments have been made, and the employees work with company accounts. We want to offer our customers added value beyond conventional card terminals.
When we feel that NFC has become sufficiently established, will will add this technology to our hardware. But I think that the market needs a little while before that happens.
So you don't think that the time has come yet for NFC payment solutions?
There is definitely a market for them. NFC is good everywhere where speed is a primary concern. For example during half time in a soccer stadium, when you don't have any change, and when a conventional card payment would take too long. But the biggest problem with NFC is the infrastructure. And not enough cards have the function. Plus, new payment methods require customers to change a lot of their behavior. Merchants have to advertise a lot to explain how it works. It will be a while before the general public knows what NFC is. We have little influence on the market in this respect, so we can't really drive this development.
NFC payment is especially intended to provide advantages for small transactions. However, cash is still used for a very high share of payments for amounts of less than ten euros. What does payleven wish to achieve in the area of small payments?
We set our pricing policy at 2.75 per cent per transaction specifically so that it is also viable to make small payments with the system. It always costs the company the same, because the price is always the same percentage of the amount. We have no fixed costs, like a certain number of cents per transaction. We often see card payments in the amount of EUR 3.50.
You charge 2.75 per cent per transaction. Is your business model based on this?
Yes. In the end, our business model needs a lot of smaller companies so that our gross earnings can cover our fixed costs. We earn money from every transaction, but we have to remit part of this percentage, for example to MasterCard. So in the end, we rely on merchants who have large numbers of transactions so that we earn something.
What do you think are the greatest hurdles for mobile payment on the German-speaking market?
Our target group is small and medium-sized business, especially companies that did not accept payment cards in the past because there was no offer that was attractive enough for them, just offers with high basic monthly fees and long minimum contract periods. That has changed. But we have to invest a lot of work, time and resources into making our development known and in communicating that card payments are now also interesting for one-person companies.
What are the concrete benefits for businesses?
They can generate more revenue, for example. A mobile hair stylist that cuts hair at home and that also sells care products often has the problem that a customer only has a certain amount of cash at home. Card payments would help to increase revenue here, because the customer might then also buy a care product – and pay with a card. Companies that render services and then submit an invoice instead of receiving payment immediately often have to invest a great deal of time in collection when customers do not pay on time. Companies that work this way, such as plumbers, have a lot of advantages when they use payleven. A lot of our customers recommend us because they see the benefits immediately.
We also offer payleven for private people, but the majority of our volume comes from SMEs. But there are people who want to sell the products they make, for example crafts, at markets, or eBay sellers who want to offer card payments when a customer collects their goods.
Are there any areas of business that you will not serve?
Yes, we do not serve the adult entertainment industry, for example. We will not offer our services to companies working in this industry. We assess all companies that register according to risk parameters. When someone has had problems because of certain kinds of activities in the past, we usually find out. For example, when a flower shop completes most of its transactions at 4:00 in the morning, we get suspicious.
With payleven, customers can only complete transactions in the country where they are registered. This precludes cross-border activity. Is that correct?
Yes, the default setting restricts transactions to the country in which a customer has registered. This is for risk reasons. We have some merchants in Germany who want to sell at fairs in Austria. This is enabled for these customers temporarily upon request. We make such decisions together with the customer.
You entered a cooperation agreement with O2 in Germany. Are you planning cooperation agreements with mobile communications providers in Austria?
We are working on cooperation agreements. There is a lot of interest. But we won't be making any official statements for a couple of months yet.
payleven is being backed by different financiers, including the Samwer brothers and Rocket Internet. How much are they involved in day-to-day business?
As the founding team, we generally have free rein and make our own decisions. But Rocket Internet is involved, as is every investor, and can contribute ideas to make us better based on its many years of experience. But we make the decisions.
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