A San Francisco startup is offering a mobile phone payment system based on bar codes, on the assumption that wireless carriers and merchants will continue to resist near-field communication technology.
A number of banks and card companies have tested contactless payments using NFC chips, but Christopher Boone, the president and chief executive of Cimbal Inc., said there are "major problems" with making the technology widely available to consumers.
The problems center mostly on the cost of installing the chips in phones and the cost of upgrading merchants' terminals to accept contactless transactions, Boone said.
The payments system that Cimbal announced Tuesday uses two-dimensional bar codes to initiate person-to-person payments, point of sale transactions and online purchases. The software turns a smartphone's camera into a scanner that reads bar codes displayed on another phone or on a computer screen.
The application is available for Apple Inc.'s iPhone and "in the near future" will be available for phones that use Google Inc.'s Android operating system and Research in Motion Ltd.'s BlackBerry devices, Boone said.
The service can currently be used only for person-to-person transfers between Cimbal users, but Boone said his company expects to begin offering other payment options when it announces merchant partners. Cimbal also plans to support coupons, merchant loyalty programs and location-based offers.
Users must register online and link their Cimbal account to a valid bank account.
To initiate a person-to-person transfer, the recipient creates a payment request on his phone or online. Cimbal's system then produces a single-use bar code on the phone or computer screen; the bar code does not include transaction details or other sensitive data.
The person making the payment launches the Cimbal software on a phone, enters a PIN and uses the device's camera to scan the bar code. Cimbal authenticates both parties and prompts them to confirm each other's identities before authorizing the transaction.
Payments at the point of sale would work in a similar way, Boone said. A bar code would appear on a screen or paper receipt, and the buyer would scan the bar code and enter a PIN to complete the transaction.
For online purchases, the bar code would appear on the seller's screen during the checkout process.
"We wanted to develop an application that is universal enough" to be used and viable in different payment environments, Boone said.
Bar code technology is just starting to make its way into the mobile payments environment. Both Starbucks Corp. and Target Corp. are using bar codes for closed-loop gift card payments.
Unlike the widely used bar codes using vertical lines, two-dimensional bar codes more closely resemble a chessboard, with a pattern of black squares and white squares.
Beth Robertson, the director of payments research at Javelin Strategy and Research in Pleasanton, Calif., said 2-D bar codes are a viable option to NFC payments technology.
But Cimbal will likely struggle to gain market share in an already crowded alternative payments environment, especially online, Robertson said.
"If name-brand merchants get involved with this, that will help consumer adoption," she said.
Cimbal is testing the bar code technology with at least two merchants, which Boone would not name. Nor would he say who is processing the transactions.
Cimbal plans to offer merchants a transaction fee that would be about half or less than what they pay for typical credit or debit card transactions, Boone said.
"We've designed this system to be extremely merchant-friendly," he said. "The benefit of that approach is that we're having great dialogue about different [payment acceptance] with merchants."
