First Checks, Now Cards: How Entrepreneurs Are Harnessing Cameras for Payments

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It was probably only a matter of time before the payments business figured out how to harness the widespread availability of cameras in PCs and phones to help process transactions. First, there was remote deposit capture of checks using the cameras embedded in smart phones to scan and capture necessary data. Now e-commerce startups are applying a similar idea to cards.

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Jumio Inc., a startup based in Mountain View, Calif., this week introduced a system that lets consumers scan credit and debit cards using the Webcam built into many PCs. The launch follows a similar application introduced earlier this year by Card.io, San Francisco, that lets mobile phones scan and capture card data.

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What these diverse applications have in common is the ability to streamline payments by relieving consumers of the tedium of entering card credentials and other data. But while the Card.io application is intended for mobile developers who want to enable card payments within their own apps, the Jumio product is aimed at the broad e-commerce marketplace. “We believe there’s a new solution required,” Daniel Mattes, Jumio’s founder and chief executive, tells Digital Transactions News. “We’re turning online transactions into [point-of-sale] transactions, like swiped transactions.”

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And unlike either remote check capture or Card.io, the Jumio technology captures a video stream, rather than a snapshot. Mattes says this allows Jumio to run checks that can rule out counterfeit cards. Still, the time needed to capture sufficient video is short. Users must hold their cards up to their Webcams for a minimum of 250 milliseconds (a quarter of a second). Once Jumio’s servers receive the video, the company can capture key data and determine whether the card is made of plastic and whether it is embossed, and check its hologram, among other things, Mattes says. To enable PIN debit transactions, users enter their PINs using mouse clicks. Prepaid cards can’t be accepted because too few are embossed, Mattes says.

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Jumio estimates more than 90% of PCs shipped in 2009 came with a Webcam, thanks to sites like YouTube that encourage users to make and upload videos. “That’s a huge market,” Mattes says. An app for mobile merchants will launch at a later date, he adds.

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The company has signed contracts with five unnamed merchants that will be live with Jumio within the next two months, Mattes says. Smaller merchants using a cloud connection will pay a flat 2.75% fee per transaction to Jumio. Larger merchants that do a direct integration will pay a negotiable rate. Direct integrations take about a week, not counting testing time. For now, though, the startup is targeting larger online retailers. “We want to grow rapidly,” says Mattes.

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Jumio stands in as merchant and recoups interchange and other costs through its own fees. While Mattes characterizes a Jumio transaction as similar to a swiped POS payment, he concedes the card networks have not yet agreed to cover the transactions under card-present interchange rates, which are lower than card-not-present rates. “We’re working on that,” Mattes says.

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Other applications Mattes envisions include video streams of documents such as government-issued ID cards that some sites might require for age verification.

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Meanwhile, Mitek Systems Inc. on Wednesday announced a cloud-based version of its imaging system that developers can use within their own apps. While San Diego-based Mitek is best known for pioneering the software that enables consumers to scan and capture checks with their mobile-phone cameras, its new Mobile Imaging Cloud system is intended for a wider array of documents, including receipts, prescriptions, invoices, tax filings, and yes, gift cards, according to a news release from the company.