Squaring up Mobile Payments in Europe

Squaring up Mobile Payments in Europe


*Update: An iZettle representative has written in to address some of the issues that are discussed in this article. You can read her statement in the “Comments” section below the post.


Square, a service that enables consumers to accept credit and debit cards for payment through a reader attached to their smart phones, has done extraordinarily well in the U.S. since its launch in October 2010 and, if anything, has been going even stronger since one of the biggest names in the industry mounted a stiff challenge to its supremacy. Since PayPal launched its Square-like device two months ago, Jack Dorsey’s company has accelerated its growth, increasing the aggregate volume of processed transactions from $4 billion to $5 billion on an annualized basis in a single month, according to Bloomberg. I do have a slight preference for PayPal’s service, but I like both of them and the competition between the two will certainly benefit their American users.


But what about the rest of the world? Neither Square, nor PayPal Here is available to users outside of the U.S. and we don’t know whether either of them, or indeed any of their other U.S. rivals, has any plans to venture abroad anytime soon. What we do know, however, is that there is a Swedish start-up, called iZettle (it has no link to Apple), which has taken up the task and has just made its first foray outside of Scandinavia and into the U.K. I thought it was about time I said a few words about it.

What Is iZettle?


iZettle is a service which does the same thing that Square and PayPal Here do: enabling consumers, not just businesses, to accept card payments. However, iZettle users cannot accept Visa cards (as of the date of writing). At present, iZettle is only compatible with iPhones and iPads and it does not support Android-based devices.


The service was launched in May 2011 in Sweden and soon afterward it expanded into the other three Scandinavian countries: Norway, Denmark and Finland, before launching in the U.K. earlier this week. The company has signed up 50,000 users so far, according to various reports.



iZettle’s website is very sleek, as you might expect from a Swedish technology company. It is also very Square-like, which, I guess, Jack Dorsey should take as a compliment, while taking secret pleasure in the fact that his website still stands out head and shoulders above the competition.


The similarities between iZettle and Square are not confined to the two companies’ websites. Jacob de Geer, the co-founder and CEO of the Swedish company, sounds very much like Dorsey. Similarly to his American counterpart, de Geer is fond of pointing out that there are many millions (20 million by his count) of small businesses across Europe that are now only accepting cash, but would love to take cards, if only they could do it cheaply and conveniently. His following statement, as quoted by the Wall Street Journal, could easily have been uttered by Dorsey (in fact, I think Dorsey did say that):

If you are a plumber or an electrician, you could take a payment there and then, rather than have to invoice your customer and then wait for days for them to pay you.


Then there is this one, as quoted by Econsultancy.com:

The problem with chip and PIN is that you can’t target a large part of the retail industry as the sign up fees are too expensive. Then you also have subscription and transaction fees.


I am not intimately familiar with the European credit card processing landscape, but my limited observations suggest that a traditional merchant account is indeed a great deal costlier in Europe than it is in the U.S. But iZettle would remedy the situation by pulling a “Square” in Europe, we seem to be told. So how much does the Swedish processor charge?

How Much Does iZettle Charge?


When we attempt to answer this question, we immediately run into a problem. The company’s website says absolutely nothing about its fee structure. Now, I may have missed it, although I looked hard and long, but even if that were the case, it would still be inexplicable and inexcusable. iZettle’s fees must be clearly stated on the company’s website. There can be no acceptable explanation for not disclosing them.


As it is, we are left to rely on what others are telling us about iZettle’s fee structure. And, unsurprisingly, we hear different things from different sources. Econultancy.com, for example, tells us that “iZettle only charges transaction fees: 2.75% for MasterCard and Diner’s Club, or 2.95% for American Express.” Arcticstartup.com, on the other hand, claims that “users must only pay a 2.75% charge for MasterCard, Visa, or Diners Club card payments, or 3.75% for American Express.” Note that Visa isn’t even supported by iZettle.


So I’m not going to make any comments on iZettle’s fees, other than to urge the company to state them clearly and prominently on its website for everyone to see. If there are going to be different pricing models for different countries, say it and explain why. But don’t attempt to hide your pricing from your customers. They will find out soon enough anyway and all you can achieve by doing so is to set yourself up for a PR disaster.

The Takeaway


So it is clear that iZettle is still very much a work in progress. Apart from the pricing issue, the start-up is yet to add the biggest payment card brand to its list of supported cards and to enable payment acceptance on Android-based devices. These are all significant shortcomings and need to be addressed just as quickly as possible. So far, the start-up has benefited from the lack of competition, but if Square or PayPal entered the European market tomorrow, iZettle would quickly go the way of the dodo (or MySpace or Google Buzz, if you prefer). At the end, sleekness can only take you so far.


Image credit: Mutewatch.com.

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