Will Twitter co-founder Jack Dorsey’s new venture in mobile commerce pay off?
Not likely, said one analyst, though no one predicted the huge potential of Twitter either.
Dorsey, now chairman of the micro-blogging site, stepped down as Twitter CEO a year ago. He is widely rumored to be at work on a new concept: a hardware dongle and associated app that to transform an iPhone into a credit card reader.
Dubbed the Square iPhone Payment System, the service would turn an iPhone into a sort of mini cash register, accepting credit card payments with Dorsey’s company getting a cut of each transaction.
The Web site Cool Hunting reports that the card reader fits into the headphone jack of an iPhone or iPod Touch and transmits the swipe data to the app. The customer would key in the purchase amount and endorse the transaction by signing with his finger and entering his or e-mail to receive a digital receipt, complete with a map plotting the location of the deal.
Square would process the payment for a fee and a percentage of the deal, and transfer the money to the seller’s bank account.
While no one can argue with the impact Twitter has had, Sucharita Mulpuru, vice president and principal analyst at Forrester Research, said online payment processing is a bit more complex as it entails a host of compliance issues.
The Dorsey project differs from traditional mobile commerce. Rather than processing a payment over the iPhone through the Web, it turns the iPhone into a point-of-service payment device.
“I think that may work for some small companies but I can’t see this taking off in any big way because there are a lot of reporting, compliance and security issues that are built into a point-of-service payment system that are way beyond the capabilities of an iPhone,” Mulpuru told InternetNews.com.
In March, new rules went into effect requiring e-tailers accepting credit cards to adhere to data protection protocols. The rules, which fall under the Payment Card Industry Data Security Standard, were handed down from the Payment Card Industry Security Standards Council, comprised of all the major players. The rules are generally referred to as “PCI Compliance.”
While all e-commerce operations are required by the credit card companies to be compliant with PCI DSS, or else face stiff fees and penalties, smaller online vendors can usually meet the criteria by using payment gateway services that are already certified.
Storing and collecting the credit card data, however, means the seller must adhere to more stringent and complex PCI DSS rules.