As part of its drive to turn off-the-shelf mobile devices into secure point-of-sale terminals using software as opposed to a dongle, MagicCube Inc. announced Thursday that its i-Accept application has expanded to Brazil.
Acquiring banks and financial-technology service providers in Brazil can now enable merchants and retailers to accept contactless cards across all four major card networks, as well as capture financial PINs and other verification methods, without the need for additional hardware.
The move, which dovetails with an announcement by MagicCube earlier this week that it is partnering with integrated payments and next-generation POS provider Handpoint, continues to build the business case for broader acceptance of what MagicCube calls Software Defined Trust, especially in the United States.
MagicCube, which has enjoyed success with the adoption of i-Accept in Japan and the United Kingdom, in December secured it first toehold in the U.S. market when it signed an unnamed merchant to support i-Accept, says Sam Shawki, chief executive for the Santa Clara, Calif.-based company. Talks with leading merchant banks in the U.S. to support i-Accept are also progressing, Shawki adds.
“Banks and merchants in the U.S. need to monitor what’s happening in Europe with this technology, because it’s time has come,” Shawki says. “We see our technology as an alternative to hardware-based solutions, and that growth will come from addition, not replacement.”
MagicCube’s proposition enjoys two advantages. First, U.S. merchants don’t have to wait until contactless acceptance through mobile devices is ubiquitous to deploy the technology, but instead can add the app to mobile devices as needed. “A merchant can equip mobile devices with our software during the holidays, for example, so employees can use them as line busters and then scale back their use once the holiday season is over,” Shawki says.
The second advantage to MagicCube’s application lies in its encryption technology. Instead of using a chip to encrypt transaction data, MagicCube provides encryption through its software, which enables any mobile device to accept contactless transactions that require the entry of a PIN.
“MagicCube makes the secure element in the cloud truly secure,” says Thad Peterson, a senior analyst at Aite Group, a Boston-based consulting and research firm. “Their encryption technology is what sets them apart.”
Indeed, MagicCube’s lone competitor, Mobeewave, which was acquired by Apple Inc. last August, relies on a chip within the mobile device to encrypt transaction data. “The market needs a new security mechanism that lets payments truly go digital by hiding encryption in a virtual environment versus a chip,” says Shawki.
Looking ahead, MagicCube expects to announce deals with additional U.S. merchants later in the year. “The banks we are working with now are neo-banks and challenger banks that are very tech-savvy, but traditional banks will be fast followers. We are talking with several leading U.S. banks,” says Shawki, who adds the deal with Handpoint is significant, because Handpoint provides payment technology to banks that lack their own. “We’re not an innovation project supported by one or two networks.”