Why do payment terminals still use dial-up?

I’m looking for some enlightenement here.

Background: in germany, you can use debit cards and credit cards to pay in retail stores. The cashier swipes the card through a terminal, which then dials the payment service provider to authorize the payment. This sometimes takes quite a while (especially on saturdays, when everyone goes shopping – there’s no 24 hour shopping in germany…), and today it failed in my case due to a connection error. Mostly ISDN lines are used, but sometimes they even do dial-up with analog modems. The backup method was to print out a slip and do a direct debit (for you americans out there: this is like using a credit card, but instead of going to your credit card account, it gets billed on your checkings account directly). This is obviously more risky, as it can’t be authorized – the card might even be stolen, or the payment rejected due to lack of funds.

So, why do they still do this? Why don’t they use the internet with much faster connections and always-on mode? It can’t be security – there’s VPNs, and the payment terminals carry all kinds of crypto, anyway.

Is there anybody who can tell me why this is still so arcane?

PayPal Mobile launches

Now, didn’t I say so? ;)

PayPal Mobile has launched, albeit not in germany yet.

I have to disagree with Carlo’s judgement, though: the breakthrough in this isn’t that it’s mobile, it’s getting instant confirmation of a payment, thus speeding up commerce. This has been tried before with paybox and eBay in germany, and it worked just great.

Combine that with other accelerators like SemaCode to create a “point, shoot and buy” device, and you’re onto something.

Now bring it to germany, Mathias, will you?

Mobile Payments vs. GeldKarte

Irakli asks: Mobile Payments: Why exactly? and lists a lot of reasons why mobile payments don’t exactly come naturally when compared with other stuff in your wallet.

Let me first name some things that are possible with mobile payments that no other payment scheme offers:

  • Probably the biggest thing: communication combined with payment. That will allow you to update your customer with the latest details about his or her purchase – shipping notification, link to tracking, whatever.
  • Mobile content. What you consume on your mobile needs to be paid for on your mobile.
  • P2P payment. Paybox was soooo good at this it actually broke their neck (no fees for P2P payments).

Now, regarding your GeldKarte arguments: I was the product manager for germany’s first product that allowed to pay with the GeldKarte on the internet. Let me tell you one thing: it’s not the complexity of the system, it’s the lack of ZKAs ability to deal with technology. As long as they require class 3 smart card readers and all that other crap (which is by no means more secure than the cheaper ones…), this is NEVER going to take off. Also, the prepaid system and the limitation to 200 Euros makes it useless for a lot of stuff. Loading via Internet (WITHOUT requiring expensive hardware) is also crucial.

All in all, the GeldKarte’s success depends on the banks’ support for it. Currently they’re not to keen to push it – you’ll find that most germans have no idea what it is, even if they are carrying one in their wallet.

I’m not sying that mobile payment is the alternative to card based payments – but both have different usage scenarios, advantages and disadvantages, and are probably not comparable.

Right now, both are driven by the respective business owners (banks and telcos) – but where exactly is the customer demand?

Mobile Payment: Bye bye Simpay!


“Following the decision of one of its founding Members not to launch Simpay for the foreseeable future, the decision was made today at a General Meeting of Simpay not to pursue its activity on a pan-European scale as originally planned.

Instead, Simpay’s operations will be scaled back with immediate effect. Member operators will be able to exploit Simpay’s intellectual property rights at a national level, although international interoperability remains a goal. The members will make known their individual plans in due course.

All of the operators involved in Simpay continue to share the vision of the enormous potential of the mobile commerce market and the importance of providing a robust and straightforward payment facility to content providers.”


This is sad. Having worked with one of the founding members for a few years, I find it especially depressing to see how many great minds have worked in vain getting the technology ready.

I guess “scaled back” in this case really means “buried in a patent pit” – I can’t imagine how this could ever get momentum again.

OK, time for the small niche players to fill the demand (is there any?) – what do you think?

More mobile payments news

Russell mentions a Business Week report stating (the obvious):

“For U.S. consumers, it has to be simple to use,” says Tom J. Manessis, Visa’s head of emerging opportunities. “To click through six menus is not simple.”

Scott Loftesness along the same lines:

“If a consumer has to boot up an application on the phone, and then go through four or five menus, and then choose a card to make a payment, that’s an awful lot slower and less convenient than just taking a card out of your wallet.”

I’ll say it again: yes, user interface is important. But as long as you don’t succeed in convincing consumers and merchants at the same time, the UI does not matter at all – because nobody is using it.

The slow death of mPayment

Here we go – while we had so much fun speculating about endless ways mPayment could succeed yesterday, today there’s a report that T-Mobile is about to quit Simpay, the multi-operator mPayment consortium.

This is sad. Millions of investment into mPayment for nothing. If there’s one thing that this teaches us it is that it’s not the technology that matters – it’s all about bringing people and corporations together, which quite obviously has not worked so well over at Simpay.

I’m still sticking to my bet: the only company with a realistic chance to succeed in mobile payments is PayPal. I wouldn’t bet a penny on either operators or banks.

Mobile Payments – the Next Billion Dollar Market???

Russell Buckley has a huge post talking about success in mobile payments, asking for feedback.

Here goes (in relation to Russell’s headlines):

1. and 2. Usability

I am actually one of the inventors of a patented mobile payments protocol, which tried to make mPayment interoperable between all participating operators. It also tried to be able to use multiple payment methods (credit vard, phone bill, direct debit) and had to be usable in retail, on the web and in WAP. You can imagine what this meant for usability…

For retail payments, you really want RFID or something similar in the phone to make it as painless as possible. I can’t even begin to tell you how many stupid ideas I had to fight against: bluetooth (how many bluetooth and payment enabled phones are in the queue behind you?), infrared, GPRS (not enabled, not configured, no coverage).

My favourite idea: use something like Semacode that you put into ads on magazines or billboards, or even in shops or web pages. Provide an app that will hunt down the article at the cheapest retailer (or one local to you, alteratively). Click to buy, transfer address details autmatically. The ultimate in user experience.

The ‘old’ paybox system was also great, especially for eBay transaction. SMS instant notification, and easy bank transfers. Unfortunately these transactions didn’t generate money for the operators of the payment scheme, so they were abolished (or killed by adding a yearly fee). This was exactly the kind of thing that attracted enough people to sign up, unfortunately…

3. Training

Agreed. In order to be able to do this, mobile payments will need to resemble card based payments as much as possible (in terms of process) – you will need to have a receipt, be able to cancel or refund payments, amongst other things.

4. Simultaneousness

Acquiring merchants is actually quite hard, as they are very cost sensitive. This can only be successful if you already ‘own’ the merchants, i.e. as First Data Corporation currently tries to do it with their new mobile division.

Acquiring the customers is actually a lot harder – you can watch the example of paybox, that failed by not getting into the operators. The operators themselfes will only succeed if they can offer additional value. People are already quite well catered for by the credit card industry, so you’ll have to convince them to sign up. Not easy at all.

5. Point of sale

Wouldn’t it be even better if the “mPayment” sticker would allow you to ‘really’ pay with all the other ones in the background?

6. Low cost

That goes without saying, but in both directions: must be cheaper for buyers *and* merchants – might be ideal for digital goods.

I have been waiting for mPayments for quite a while – with all the billions you’re mentioning it should have been out there for quite a while already…

UPDATE: by the time I was finished, Irakli also had his comments ready.