The World According to Tim Green: the cupcake wars | Mobile Industry | Mobile Entertainment

The World According to Tim Green: the cupcake wars

The World According to Tim Green: the cupcake wars
Tim Green


Industry / November 8th 2012 at 1:51PM

iZettle is going after Europe's makers of cakes and fancies – and so are dozens of others. Icing could be spilled.

I don't like to make a habit of moaning about the journalist's lot. After all, things could be worse. I could work in a mine or the BBC press office.

But this week, dear ME readers, I ate cupcakes for you.

Oh yes, cupcakes.

And not just any kind. These were made from wholemeal flour and organic butter. You know, the really good/bad ones.

I kind of paid for them and didn't. The cupcake stall was present at the launch of iZettle's new mobile card reading system, which has just gone live in the UK after a four month trial. We were each given a card through which to pay for the (look away now, Northern readers) £2 cupcake. So I did the transaction myself, but iZettle footed the bill.

Here's how iZettle works. The merchant plugs the iZettle card reader into their phone or tablet, and the user inserts their card into it. They then sign on the screen and get an emailed receipt. Done.

It all worked very smoothly for me, and the cupcake maker told me that in her experience during the summer trial no one had questioned the security or reliability of the system.

And why should they?

Well, iZettle's card reader, like most in the market, doesn't support the Chip & PIN system, which is now ubiquitous in the UK and some other European markets. Instead it uses a 'chip and signature' system. There are technical reasons for this, and also iZettle recognises that users would be nervous about keying their PIN into a merchant's own device.

The Chip & PIN issue isn't the only one causing a rumpus in this exploding market sector.

There's also a problem with Visa. It's not happy with the security of the system so its cardholders get a different experience on iZettle. They give their mobile number to the merchant, get a text and then type in their card number on their own phone to pay. It's fiddly.

Visa's awkwardness may not just be to do with security. Fact is, Visa Inc has invested in iZettle's US rival Square – although strictly speaking, Visa Inc and Visa Europe are separate entities so this factor may have been exaggerated.

Still, whether there is a competitive dimension to this particular spat or not, the fact remains that the mobile card reading space is getting so crowded it's reminding some of us of the ringtone boom.

Off the top of my head, the sector is now home to: iZettle, Square, SumUp, mPowa, Payleven, PayPal Here, O2, Emu, Verifone SAIL, Intuit GoPayment, Payworks, CardEase, PayFirma, eMarit, Groupon, PayAnywhere and P'eh.

I'm sure there are more.

These firms have all rushed into the market after seeing Square disrupt its way to 1m US merchant accounts and a projected $6bn in transactions this year. And with an addressable market of millions of small businesses all over the world, you can see why so many start-ups (and major incumbents – Verifone, PayPal, O2) want in.

But they can't all survive.

I asked iZettle's CEO Jacob de Geer what made his firm any different from the rest. He cited experience and security, but I wasn't entirely convinced. This looks like a pretty homogenous market to me, with little to choose between players other than price and possibly customer support. At 2.75 per cent rev share on each payment, iZettle is cheaper than many, and it is very high profile thanks to this week's launch.

It also helps that its service has the exclusive retail support of the UK’s new 4G network, Everything Everywhere (although I've been unable to find out what EE gets out of this – I presume a rev share, as a small cut of £20 is hardly worth it, and the readers don't lock users into EE contracts).

That retail availability will be invaluable to iZettle as it reaches out the cupcake makers all over the UK.

But the question of who gets fat in the long run remains an open one.