Loop: What the Future of Payments Looks Like
When a new technology pops up in retail, the burden is usually on the merchant to upgrade its technology. Accepting bank checks required a new point-of-sale system, as did scanning credit cards. Using rewards points or coupons--yes--a new point-of-sale system. Let's not even talk about taking reservations, in-aisle checkout, or accepting Bitcoin.
Merchants, take a deep breath: You likely already accept one of the most cutting-edge forms of payments.
It's called Loop, and it's a way for consumers to use a cell phone's case or a keychain fob instead of swiping a credit card. Today, the company debuts in the iTunes store the iOS app that controls the already-on-the-market Loop Fob (a pillbox-sized white rectangular device equipped with a chip that sends your payment information to a regular credit-card reader).
Yes, a regular credit-card reader will take payment from a regular credit card without a swipe happening. The Slanted says it "seems to run on magic." It's not magic, exactly. It's a patented technology for transmitting the data in a card's magnetic strip through a series of high-energy magnetic pulses. It's the creation of George Wallner, a pioneer of early magnetic-strip technology and chief technologist of the company he co-founded, LoopPay, which is based in Boston.
Wallner's co-founder, Will Graylin, has a complementary pedigree: He founded Way Systems, a POS-technology company, and Roam Data, a mobile-commerce company. (He sold them to electronic-payments provider VeriFone and Ingenico, respectively.)
"You see, when you swipe a card, the card reader receives magnetic signal from the mag stripe, and sends the card data on for approval," Graylin says in a product video (below). "Loop's technology transmits the same magnetic signal wirelessly emulating a swipe without any change to the merchant's card reader."
Because it's an external chip, embedded in the fob or case, it doesn't require a phone to be built with a near-field communication antennae, required for use of other competitors in the mobile-wallet space, including Google Wallet and Isis Mobile Wallet.
The pair began working on Loop a year ago. They executed a successful Kickstarter campaign in October, raising nearly $125,000 to start a supply chain for manufacturing the Loop Fobs and a not-quite-ready-yet Loop ChargeCase. (It also pulled in $10 million in venture-capital funding to make sure that wouldn't be a problem.) The fob is available for sale now at $39, which includes a silicone case designed in Italy. The iPhone case (essentially an iPhone charger case with the Loop chip embedded in the corner), is on pre-order, and costs $99. Additional chip-enabled accessories are planned to be manufactured and sold in the near future, and are the company's primary line of revenue; the app is free.
Perhaps Loop's flashiest competitor of the moment is Coin--and the battle is clearly on. Loop got a blind-item dig on its San Francisco-based rival into an explainer video. "Unlike fragile programmable cards. . . prone to breaking. . . holding only up to eight cards," a voice-over says, while a slightly blurred-out card is flexed.
Loop has the ability to store hundreds of different cards--and it's not limited to credit cards. Identifications with magnetic strips, library cards, gift cards, and rewards cards all can be stored.
That doesn't mean Loop will always work. Gas pumps with credit-card readers built in generally won't accept the Loop's pulses. And it's not advisable to try to use it at ATMs, which usually require not only a swipe, but also the physical ping of a card hitting the end of a swipe. Distance may be an issue, too, for some machines--a Loop chip needs to be within about four inches of the magnetic-strip reader to transmit the necessary data.
It also doesn't mean it's not going to freak out the occasional retail clerk.
When Jennifer Ni, Loop's vice president of marketing, showed me the Loop, which she's been using for weeks at various merchants, she shared a strategy for using it that involves a little fib about the fob.
"I tell them I'm using an American Express card. And then I say, 'Let me know when you're ready for me to swipe the card,'" she says. Once the seller consents to the "swipe" she taps her fob to the credit-card reader instead of swiping. She says the strategy works most of the time.
"Our goal is to simplify commerce for everyone," Graylin says.
There may be some adoption pains, but the technology behind Loop could be formative in the next wave of payments, so it's certainly a company to watch in its space.
CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer
Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.