A New Card Swipe Device Could Move PayPal Closer to POS Payments

A seemingly unremarkable magnetic-stripe card reader from a software company specializing in payment applications for users of eBay Inc.'s online merchant marketplace and its PayPal payment system is just hitting the market, but it could mark another advance for PayPal into the world of point-of-sale payments. The reader and its companion software are intended to spare PayPal-accepting merchants the tedium of entering card data into their personal computers, according to Andrew Angell, founder of Kansas City, Mo.-based application development firm Angell Eye. But in most respects, Angell's new system, called USBSwiper, works just like conventional POS card technology?and without the need for the merchant to have a conventional bank card merchant account. The one thing USBSwiper doesn't do is qualify merchants for card-present interchange rates, and Angell says that's not in the offing any time soon. But speculation is building among acquirers and independent sales organizations that PayPal has it eye on POS payments. A Michigan camping and outdoor-goods retailer, Moosejaw Mountaineering, recently began accepting traditional PayPal payments in its seven stores (Digital Transactions News, May 1). Angell, a prominent developer in the eBay/PayPal third-party software-development community, tells Digital Transactions News that he came up with the idea for the swipe while communicating with PayPal-using merchants, especially through PayPal's online forums for developers. While they sell their wares largely through the online channel, some of the merchants also sell to customers physically but did not have conventional merchant accounts or POS hardware. When handling a conventional payment, they didn't like to enter customer names, card data, and related transaction information into their PCs functioning as virtual terminals. “It was born because people in the developer forums were using the virtual terminal quite a bit, but they didn't like typing credit card numbers,” Angell says. Hence, the idea for USBSwiper. The system consists of a small card reader?MagTek Inc. built the first but now Angell uses a contract manufacturer in China?and accompanying software. To use it, the merchant needs is a PayPal Website Payments Pro account, which lets him or her accept general-purpose credit cards in addition to PayPal. The swiper costs $49.97 and has no power cord, but attaches to the merchant's PC via a USB cable. To use it, the merchant goes to the USBSwiper.com site to download the software, which pulls his PayPal account information. The merchant is ready to go after a few clicks that include entering his PayPal application programming interface (API) credentials. USBSwiper charges a one-time $197 fee, and then $4.95 per month. The software generates various forms, including invoices that include the cardholder's name. USBSwiper system also works with PayPal's Payflow payments gateway. Angell says the swipe uses 128-bit encryption and stores card data only for as long as needed to complete a transaction. He says he will be submitting the device for certification under the Payment Card Industry data-security standard. USBSwiper would seemingly position PayPal to go full-bore into POS payments, but that's not how Angell is promoting it. It's not exactly clear why, but Angell says “PayPal won't acknowledge the card-present” aspects of the swiped transactions yet. Website Payments Pro currently charges the merchant 2.2% to 2.9% of the sale plus 30 cents. Theoretically, card-present interchange rates, which are lower than the card-not-present rates online merchants pay, could give PayPal enough margin to lower its retail pricing to compete against the big acquirers for conventional merchants. But Angell, who has sold about 25 of the systems so far, says his target customer is the PayPal merchant who wants to avoid clerical hassles when handling a physical sale, not those out for the lowest interchange rates. “Most of the feedback I've gotten is that paying a bit more for that is worth it,” he says. Angell, one of eight so-called “Certified Ace Developers” for PayPal, won the PayPal Service to the Developer Community award for USBSwiper in this year's eBay Star Developer Awards. EBay's annual developer conference is concluding today in Chicago.