A new mobile wallet called CloudPay may undercut traditional payment processing fees that merchants typically pay.
Announced earlier this week, CloudPay from New Media Insight Group Inc., a Phoenix-based company, says merchants pay only 0.5% per transaction, a markedly lower rate than traditional pricing that might be as high as 2.9% using discount rates that assess interchange and other fees. That’s because CloudPay is akin to a branded loyalty card, a spokesman says, and transactions are treated as payments between two mobile-wallet accounts.
To use the service, merchants must set up an account to accept CloudPay. They also need a WiFi-enabled smart phone or tablet. Consumers must set up a mobile-wallet account with New Media Insight’s mCard service. Consumers enroll a card on file with CloudPay. Charges are made against that card when they make purchases. Consumers also can set per transaction maximum amounts.
It works like this. A customer needs to pay for a haircut by going to the checkout counter in the salon. The customer asks to pay with CloudPay using her mCard account. The customer selects the salon, enters the amount, clicks send and confirms the payment.
The payment appears on the merchant’s account on her smart phone or tablet. The merchant taps confirm to accept the payment.
Merchants also can create offers to present to consumers on their smart phones, which can be tracked and customized as needed, New Media Insight says.
“New Media is not focused on making money out of the transaction processing,” the spokesman says. “Transactions are just one side of our business. The other side of our business is helping merchant drive more business, acquire new customers, and collect valuable feedback from their consumers.” New Media charges fees to run targeted marketing programs or rewards campaigns through its service. Initially, New Media is eyeing small and mid-size businesses and retail chains, with a variety of marketing efforts.
CloudPay may have an edge on other mobile wallets, suggests Jordan McKee, an analyst at Yankee Group, a Boston-based consulting firm. “Whereas the vast majority of mobile- wallet solutions are essentially a credit card in a different form factor, CloudPay has chosen a different approach,” McKee says.
Paying interchange rates is a merchant pain point, McKee says. “However, creating a two-sided value proposition is no easy task, especially when it requires shifting consumers away from their beloved rewards credit cards,” he says. Evidence of that challenge is that just 16% of mobile device owners made a mobile payment in-store in the prior three months, according to a Yankee Group report released in December. “More so, of those who use mobile wallets, 73% are doing so less than five times per month,” McKee says.