Loop is an exciting new mobile wallet solution that has achieved near ubiquitous acceptance with more than 90% of POS terminals without any infrastructure change by the merchant, the acquirer, or the issuers.
While other mobile wallet players are talking about NFC, EMV, barcodes, BLE and the cloud, Boston-based start-up Loop has invented an incredible mobile solution that intelligently communicates with the existing retail mag stripe reader interface today – without another plastic card and without the merchant needing to change anything!
Compared to the recently announced Coin solution that captured the hearts and more than 7M YouTube sets of eyes of consumers and the fintech world a few weeks ago (see Bank Marketing Strategy post on Coin), Loop has been amazingly under the payments 'next shiny object' radar during its funding process. There was a wave of fintech buzz in October, including several articles and a presentation at Money2020, but not much since.
In an exclusive interview with Will Graylin, CEO of LoopPay, Inc, he said, "Loop has been focused on product development and our soft launch which will take place in about 3 weeks. We did a small PR effort at the time of our Kickstarter campaign, but we did not want to blow a lot of hot air before we had our product ready for market and had happy users." He continued, "Many have overhyped their solution and have failed. We are more interested in the long run and are building solid a foundation for our future with solid partners."
Given that Loop is delivering a solution that automatically transforms virtually every existing POS terminal mag stripe reader into a contactless payment receiver, I don't expect Loop to be in the shadows much longer.
That's right, unlike other solutions that require merchant terminal conversion or a programmable card with limited security, memory, card or battery capacity, Loop integrates the highest level of Payment Card Industry (PCI) security and can store hundreds of payment, gift, loyalty, reward or ID cards into a smartphone.
To 'trick' the mag stripe reader into thinking a physical card is being swiped, the consumer will need one of several add on devices available from Loop to emulate the card swipe including a Fob (being sent to 2,000 pre-order customers and Kickstarter backers this month), smartphone charging cases (available for iPhone 5 and 5s in early 2014 and other devices shortly thereafter) and eventually wearable devices.
Once cards are 'swiped' into the LoopWallet app using the Square like device, the user can select the card they want to use at payments. While the process initially will use additional consumer hardware, ultimately, Loop would prefer that their Magnetic Secure Transmission (MST) technology be directly embedded into the mobile device itself, eliminating the need to carry any additional hardware.
Watch the video below and see if you agree with me that this is an ingenious new mobile payments innovation.
What is Loop?
Loop co-founders Will Graylin and George Wallner think they have the killer mobile wallet solution. Their invention, which they've dubbed Loop, allows consumers to use their iPhone or Android phone to buy virtually anything anywhere they'd normally use a debit/credit card.
The best part? It works with the existing mag stripe swipe terminals that nearly all merchants use today, so merchants don't need to make any changes to accept Loop payments . This is a major milestone in the mobile payments race! The loop app can also provide timely insight (gift card balance, reward points, available balance) and can serve offers from merchants and card issuers.
Oversubscribed in initial Kickstarter fund raising efforts, Loop has just collected $10 million in Series A funding, setting the stage for Series B funding in early 2014 to will fuel future growth.
In my exclusive interview Graylin said, "We see Loop as the only contactless solution that has ubiquitous acceptance on day one." He continued, "Given that all other technologies require changes in the POS to have contactless mobile transactions, or require infrastructure or system changes by merchants, that puts Loop in a very good position to lead the way as the first wallet solution that works across merchants."
This is a major distinction to other mobile wallet solutions. Beyond mag stripe POS system readers, the only new POS interface to have achieved more than 10% acceptance across merchants is EMV, and that took 2 decades to reach 50% worldwide acceptance and is still not here in the U.S. And while EMV will come eventually, it will most likely continue to co-exist with magstripe readers for decades.
Since the mag stripe will continue to be used by most debit card, gift card and loyalty card holders, Loop could be either a 'bridge' to a full mobile solution or 'an end solution'. According to Cherian Abraham, mobile commerce and payments lead at Experian Global Consulting, "As far as acceptance, Loop has fair winds. No longer is there a need to search for merchants who accept your choice of payment. And guessing by the state of EMV – even when it's been called a 'bridge solution' – Loop can expect a very long bridge."
Tomorrow's Transactions interview with Will Graylin, CEO of Loop by David Birch, Director at U.K. based Consult Hyperion available here.
Loop co-founders Will Graylin and George Wallner think they have the killer mobile wallet solution. Their invention, which they've dubbed Loop, allows consumers to use their iPhone or Android phone to buy virtually anything anywhere they'd normally use a debit/credit card.
The best part? It works with the existing mag stripe swipe terminals that nearly all merchants use today, so merchants don't need to make any changes to accept Loop payments . This is a major milestone in the mobile payments race! The loop app can also provide timely insight (gift card balance, reward points, available balance) and can serve offers from merchants and card issuers.
Oversubscribed in initial Kickstarter fund raising efforts, Loop has just collected $10 million in Series A funding, setting the stage for Series B funding in early 2014 to will fuel future growth.
In my exclusive interview Graylin said, "We see Loop as the only contactless solution that has ubiquitous acceptance on day one." He continued, "Given that all other technologies require changes in the POS to have contactless mobile transactions, or require infrastructure or system changes by merchants, that puts Loop in a very good position to lead the way as the first wallet solution that works across merchants."
This is a major distinction to other mobile wallet solutions. Beyond mag stripe POS system readers, the only new POS interface to have achieved more than 10% acceptance across merchants is EMV, and that took 2 decades to reach 50% worldwide acceptance and is still not here in the U.S. And while EMV will come eventually, it will most likely continue to co-exist with magstripe readers for decades.
Since the mag stripe will continue to be used by most debit card, gift card and loyalty card holders, Loop could be either a 'bridge' to a full mobile solution or 'an end solution'. According to Cherian Abraham, mobile commerce and payments lead at Experian Global Consulting, "As far as acceptance, Loop has fair winds. No longer is there a need to search for merchants who accept your choice of payment. And guessing by the state of EMV – even when it's been called a 'bridge solution' – Loop can expect a very long bridge."
Tomorrow's Transactions interview with Will Graylin, CEO of Loop by David Birch, Director at U.K. based Consult Hyperion available here.
How Does Loop Work?
Unlike most other mobile wallet solutions, Loop doesn't require a special dedicated transaction network. Instead, it mimics the magnetic transmission frequency usually held on a card's mag stripe, allowing it to be received by a traditional POS card reader. When the Fob device or MST enabled ChargeCase is held close to the reader (about 4 inches), the transaction occurs exactly the same when a card is swiped.
Loop Fob Delivery Package
Loop Fob in Colorful Carrier
Initially, Loop will only work with a $34 Fob device that comes in a variety of colors (shown above). With initial shipments occurring this month, the Fob can be replaced early next year with an MST enabled charging case for owners of an iPhone 5 or 5s.
The Fob is a small audio jack device with a card reader to scan a consumer's cards. This Fob is compatible with both iOS (app available this month) and Android devices (app available in early 2014). Since the Fob also holds your payment information, it doesn't need to be connected to your phone to make payments. It pays using whatever card you selected as your default payment card. If you want to change the card, you can reconnect the Fob to the phone and select the alternative card you want to use.
When a consumer receives their introductory kit, they follow these simple steps:
- Download the LoopWallet App
- Simply swipe debit, credit, loyalty, IDs, membership and gift cards using the swiping Fob device provided (similar to a Square device)
- Use the LoopWallet app to select the card you want to use
- Place the Fob (or ChargeCase) near the POS card reader and hit 'transmit' on the screen or device to make purchases
Loop gives the consumer control over what to include in their LoopWallet. Load what cards you want and the LoopWallet app allows a consumer to organize and manage the cards as desired. A consumer can even store passwords within the application and take photos of the cards (unlockable with a pin).
The Loop ChargeCase (available in early 2014 for iPhone 5 and 5s) is a protective case that serves as both a transmission device as well as providing 60% more battery power similar to a Mophie battery case. A swiping device is included with the ChargeCase solution.
Loop Fob Delivery Package |
Loop Fob in Colorful Carrier |
Initially, Loop will only work with a $34 Fob device that comes in a variety of colors (shown above). With initial shipments occurring this month, the Fob can be replaced early next year with an MST enabled charging case for owners of an iPhone 5 or 5s.
The Fob is a small audio jack device with a card reader to scan a consumer's cards. This Fob is compatible with both iOS (app available this month) and Android devices (app available in early 2014). Since the Fob also holds your payment information, it doesn't need to be connected to your phone to make payments. It pays using whatever card you selected as your default payment card. If you want to change the card, you can reconnect the Fob to the phone and select the alternative card you want to use.
When a consumer receives their introductory kit, they follow these simple steps:
- Download the LoopWallet App
- Simply swipe debit, credit, loyalty, IDs, membership and gift cards using the swiping Fob device provided (similar to a Square device)
- Use the LoopWallet app to select the card you want to use
- Place the Fob (or ChargeCase) near the POS card reader and hit 'transmit' on the screen or device to make purchases
Loop gives the consumer control over what to include in their LoopWallet. Load what cards you want and the LoopWallet app allows a consumer to organize and manage the cards as desired. A consumer can even store passwords within the application and take photos of the cards (unlockable with a pin).
The Loop ChargeCase (available in early 2014 for iPhone 5 and 5s) is a protective case that serves as both a transmission device as well as providing 60% more battery power similar to a Mophie battery case. A swiping device is included with the ChargeCase solution.
Loop Security
From initial LoopWallet set-up, to ordering the Fob or ChargingCase to initiation of a transaction, it is clear that security has been a top priority for LoopPay designers.
When ordering the device itself, security measures are in place to ensure that the person ordering the device can be authenticated. When I purchased the Loop FOB and ChargeCase (yeah, I did both), Loop provided security questions ranging from the last four digits of my social security number to previous address validation. This ensures that if someone stole my Fob, they would still need to have access to my name and password to access my LoopWallet.
In addition, when the transaction is taking place, the device must be less than 4 inches away from the mag stripe reader and the encrypted information only gets transmitted for a few seconds. No sensitive data is stored in Loop's servers and all card information is secured by a 4-digit pin (beyond what you need to access your phone).
In an exclusive interview with Damien Balsan, COO of LoppPay, Inc., he provide a list of security measures their team has put into place for enhanced security:
- We are preventing cards from being used by anyone other than the owner himself/herself. The user has to register to LOOP Wallet thru a KYC Process and our server is authorizing any card loaded in the wallet. You could only enter cards with the users name.
- Our server is a Level 1PCI certified server. It does not store Track Data. The card information is stored in a Global Platform Secure Element.
- The LOOP experience is quite intuitive for a consumer: he/she loads all his cards one time whether payment cards or ID/Loyalty cards and he can chose the level of security he desires.
A great series of Loop usage and security FAQ's available here.
- We are preventing cards from being used by anyone other than the owner himself/herself. The user has to register to LOOP Wallet thru a KYC Process and our server is authorizing any card loaded in the wallet. You could only enter cards with the users name.
- Our server is a Level 1PCI certified server. It does not store Track Data. The card information is stored in a Global Platform Secure Element.
- The LOOP experience is quite intuitive for a consumer: he/she loads all his cards one time whether payment cards or ID/Loyalty cards and he can chose the level of security he desires.
A great series of Loop usage and security FAQ's available here.
Potential Drawbacks
The two most likely drawbacks of Loop would probably be the cost ($34 for a Loop Fob and $99 for the ChargeCase) and the desire for more simplicity. There is also the issue of 'the other 10 percent' of places where Loop won't work.
Cost
Requiring consumers to invest in specialized hardware could be a significant obstacle to acceptance. While Coin may have been able to get people to invest in their card technology at $50 (early bird offer), there is no history on the potential mass appeal of a mobile payment device at any cost and certainly not at a cost of $99.
In response to this issue, Loop's Graylin told me, "Today, consumers pay $99 for a Mophie charge case. For the same price, we give them a mobile wallet that can be used at almost every store." He added, "Obviously, being able to claim 90%+ acceptance at current retail locations is a big plus, but it remains to be seen if consumers believe the cost offsets the current convenience afforded by carrying plastic."
He also added, "Just consider the benefit of being able to pay at a store the few times that you have forgotten your wallet. Many of our pilot users and testers remind us this all the time."
Simplicity
"In the payments space, Coin has almost an Apple-like simplicity to it, stated Deva Annamalai, SVP of marketing technology and data insights at Salt Lake City based Zions Bancorporation. "On the other hand, the Fob is a form factor that is almost a step back in time."
For any payments solution to stand the test of time with today's digital consumer, it will need to be easy to understand and simple to use on a daily basis. The iPhone 5 ChargeCase with integrated Loop technology is definitely a step in the right direction, but will need to be offered for other Android and Apple devices quickly for the solution to be embraced.
The 'Other 10%'
The fact that Loop works on approximately 92% of the POS systems in the country, there are the 'other 10%' of locations that users need to be aware of. For instance, Loop will not work on most gas station devices or at ATMs or on machines that that use 'two-sided' readers (older technology). For this reason, Loop recommends that users bring along a 'go to' card for those places that Loop may not work. That said, initial tests have shown that Loop will work in most locations.
The two most likely drawbacks of Loop would probably be the cost ($34 for a Loop Fob and $99 for the ChargeCase) and the desire for more simplicity. There is also the issue of 'the other 10 percent' of places where Loop won't work.
He also added, "Just consider the benefit of being able to pay at a store the few times that you have forgotten your wallet. Many of our pilot users and testers remind us this all the time."
The Future of Loop
In addition to the shipping of an MST enabled ChargeCase ($99, 1200 mAh battery) for the iPhone 5 and 5s in early 2014, a potential thinner and more powerful ChargeCase may follow. In addition, Graylin has hinted on several occasions that other form factors (possibly wearable technology) are in development.
There have also been discussions of a Bluetooth LE-enabled plastic card (sounds like Coin) and a mobile wallet product aimed at students who prefer not to carry college IDs, payment cards, loyalty cards, etc.
Potentially more important to the industry, Loop has been having discussions with handset makers to see if Loop could be integrated into future phones. As mentioned by Cherian Abraham from Experian, "Loop's ultimate goal will be to be aggressive with its future form factors so that it no longer draws attention to itself and disappears – into phones or its accessories. Aesthetically it’s dongle has to be like Square, and that’s tough when you are not Square."
When I asked the team at Loop about the future, they said the main question that they get over and over is how will their solution work after EMV becomes more prevalent in the US. Their response was that the Loop solution will still be able to work. They referred to the fact that they will continue to co-exist with magstripe readers for decades to come and are confident that their dynamic data solutions will be appealing for many issuers.
While Loop is definitely an ingenious solution for an industry looking for a go to mobile wallet solution, the road ahead is not all smooth sailing. Not only does Loop need to convince Customer 3.0 that a mobile wallet solution with a physical Fob or ChargeCase is a value added solution worth the cost, but they also need to persuade skeptical consumers who continue to worry about security and privacy issues around mobile payments.
LoopPay LinkedIn page
LoopPay Facebook page
LoopPay on Twitter
LoopPay LinkedIn page
LoopPay Facebook page
LoopPay on Twitter
Additional Resources
Loop $10 Million Funding Press Release
Breakthrough Interview Podcast Series from PYMNTS on the Development of Loop - PYMNTS
Inside Secure to Power LoopPay Mobile Wallet - Finextra (Oct. 2013)
Consult Hyperion Podcast Interview of Will Graylin - Consult Hyperion (Oct. 2013)
Loop: The Future of Mobile Payments or a Temporary Fix? - TechCrunch (Oct. 2013)
Loop Mobile Reader Makes Contactless Payments with Mag-Stripe Tech - PaymentsSource (Oct. 2013)
Loop to Debut Breakthrough Mobile Commerce Solution at Money2020 - Loyalty Payments (Oct. 2013)
Loop Hits Kickstarter, The Absolute Greatest Mobile Payment Device Yet - The Slanted (Oct. 2013)
Breakthrough Interview Podcast Series from PYMNTS on the Development of Loop - PYMNTS
There is no doubt that strategies around mobile banking are in the top five priorities for any financial institution. Even with this focus, many bankers have a difficult time making the paradigm shift that is required to build a great mobile banking application.
As a result, I asked Scott Bales, who is currently working on a new book entitled 'Mobile Ready' to share his thoughts on the keys to mobile app development success.
Guest Post by Scott Bales, Regional Director for strategic advisory firm User Strategy
The following thoughts come from the development of my new book, Mobile Ready and are provided to assist banks in driving greater success through the mobile platform. These come with a catch, however. To truly understand mobile, you have to accept that mobile is not the answer. Instead, there are real 'human' factors that create the foundation for mobile as a viable delivery tool for banks.
What I am saying is that you should never embark on your mobile development for the sake of being on mobile. Doing so will only invite doubt, uncertainty and a constant struggle with the ROI of mobile. Instead, you need to view the interactions, engagement and loyalty that mobile can provide.
My list below is not intended to cover the technology aspects of mobile banking, like operating systems, security, transaction or payment capabilities. Instead, I have focused on preparing your mindset, so you can build a better mobile banking application from the perspective of your customer.
After that, the technology components become much easier.
1. Get Out of the Building
Let's face it, banking interactions don't happen at your desk. Trying to craft an experience inside the office, you'll struggle to develop the necessary empathy for the customer, their context and their goals. The best mobile banking applications can't be built in an innovation lab. They need to be built with the input of real people who can validate your design assumptions and engagement potential in the real world.
You need to understand where and why people choose to engage your mobile application. Is it because they want to pay bills on their daily commute, do they need to check how much they have to spend before they go shopping.
Actively engage people in the context in which they need to engage your service, learn through open ended questions the behavioral, psychological and contextual needs of those moments. Only by connecting to the real world can you create truly delightful experiences.
2. Enlist Partners
So you think you know everything about building on mobile, or you're apprehensive to engage service providers. This is typical for most banks. The challenge for most banks is mobile banking applications built by bankers will look like banking on a phone . . . which can be boring, uninspiring and lacking creative thinking of new perspectives.
Engage open application designers, partners and thought leaders early in your journey to help leverage the successes from other industries to build a truly delightful mobile banking experience. Remind your teams that what you build will determine the consumer opinion of your brand over the coming year.
Digitally engaged consumers take experiences as material grounds for evaluating brands, and are less likely to be effected by your advertising messages. So make the effort to include a strong and diverse set of creative inputs into your creation process.
3. Remove Strings
Think about the apps on your smartphone that you use daily, very few of them required you to pay or make a commitment before you understand their value. Let your customers test your app before they engage, either through trials, open features or freemium models. Clearly show the ease of navigation, the experience and entertainment appeal of your mobile banking app so they will want to sign-up.
Engaging digitally savvy consumers should embrace friction free value propositions. Creating hurdles for onboarding only works to create frustration. Try to remove the requirements for a digitally engaged consumer to engage on other channels to build a relationship with your brand. Why would you make a new customer that comes through mobile go to a branch to open an account. Why would you require an online banking account first? These are just additional, unnecessary hurdles to engagement.
Put simply, you need to let them understand the value of your offering, before they have to commit.
4. Leverage Personal Context
In the digital world, our lives are bombarded with clutter, whether its organizations trying the 'one-size fit all' model, or advertisers trying to get our attention. Not everything is relevant to everyone. So why not support some intelligence in ensuring you understand some context before jamming credit card ads in someone's face.
Create experiences that support the user’s expectations for personalization. For example, users of a new mobile app assume they can set their location or decide what information should appear on the primary screen. If those options are not available, dissatisfaction will outpace adoption. Location-based rewards and offers also can leverage what you know about the customer and what you know about where they are. People want to make the mobile banking site their own, not just the same as everyone else experiences.
Best of breed applications add active contextualisation, drawing from the 'moment of engagement' before deciding what to present before a user. Think about where and why a user is engaging your brand, what value or insight can you show to heighten the delight of engaging your brand.
5. Build Engagement
If you've been in the industry for some time, then there is a fair chance your psych is used to traditional engagement models, full of push messages, brand campaigns and sales messages. In the digital world, brand becomes a two way conversation, and consumers only want to hear form brands when they can add value.
There is a difference between being engaging and being intrusive. Allow customers to set their alert notifications based on their needs and the way they will use your app. Don't use the app to push unnecessary communication to the customer, but leverage insight to provide valid offers as needed. Think about learning a users engagement levels over time, so you tune the engagement frequently to suit their expectations. Sure some consumers want daily engagement, but some find that too aggressive, opting for only a few times a month. Simple metric tools can help you understand what relevant for each customer.
6. Make Mobile Banking Simple
This one is linked very closely with point 4. Complex, over communicating apps tend to scare off people. In the digital world, people only want to see or experience what's relevant to them. Banking as a whole is a complex industry, so mobile banking apps can quickly become too complicated, risking lost customers.
Mobile banking apps should be driven from a simple platform of what the customer is looking for and executed flawlessly against that concept. Start with the functions that provide real value to potential users and then deliver that value in the easies, most intuitive way possible.
Think about how easy it was when you first experienced the iPod, the controls were simple, with few choices, but still super intuitive. Customers should know how to achieve their goals in milliseconds.
7. Build an App Unlike Your Website
This has been banking's biggest mistake . . . replicating the content and feature of their web presence on mobile. Mobile applications should not just replicate your website. If you’re thinking that your app should just be your website, in app form, just create a mobile-optimized site.
Use of mobile applications is fundamentally different than use of websites. Take advantage. Mobile is about an contextual ecosystem. Use that ecosystem as an input to driving value. Each and every pixel on the mobile screen is vital, so use it efficiently, yet elegantly.
8. Test and Learn
The best quote for mobile development comes from boxing bad boy Mike Tyson, "Everybody has a plan, until you get punched in the face". Each punch may come as a setback or challenge, but real opportunity lies in the punches you take.
Each is a valuable lesson that helps you understand your customer deeper, giving you the best chance to delight them in the future. Mobile banking users change the way they interact with their apps over time. So ensure that right through the development and ongoing evolution of what you build, everything is driven by numbers from the market.
Whether its flow analytics, customer behaviors or simply customer discovery, each has valuable input into the directions, decisions and designs you pursue. Use hard numbers to see what components of your site they use the most, their travel path and the time they spend on your site.
Your mobile application is never done. When you stop making it fresh, stop pushing the bar and stop updating it, significant falloff will begin.
9. Focus on Performance
Guess how many banking apps there are on the mobile app stores . . . thousands. Mobile banking users have a bewildering number of choices for conducting business. Your mobile application has to compete with traditional and non-traditional mobile banking sites as well as function-specific sites like PayPal, Square, Google, etc. Therefore, performance is the easiest and best way to stand out.
Digitally savvy users have no tolerance for slow performance, but a strong appreciation for mobile sites that get the job done. Ensure you take the time to ensure quality outputs. Build beta communities if you want to test things in the wild, therefore protecting your core mainstream users. Users that opt for beta programs have higher tolerances for bugs and performance, and often will passionately help you fix issues.
Scott Bales is the Regional Director for the strategic advisory firm, User Strategy out of Singapore and Innovation Director for NextBank. Scott is a self-proclaimed extrovert, who has meshed his fascination with people and what motivates them, with his enthusiasm for technology.
Bales is 'the most influential in financial services and mobility', with over a decade of international experience in innovation, thought leadership, implementation planning and strategy. He is an avid blogger and can be found often on Twitter.
Scott Bales
Scott Bales is the Regional Director for the strategic advisory firm, User Strategy out of Singapore and Innovation Director for NextBank. Scott is a self-proclaimed extrovert, who has meshed his fascination with people and what motivates them, with his enthusiasm for technology.
Bales is 'the most influential in financial services and mobility', with over a decade of international experience in innovation, thought leadership, implementation planning and strategy. He is an avid blogger and can be found often on Twitter.