Unfazed by Latecomers Like Square And Intuit, Inner Fence Soldiers on

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Like the first platoon of soldiers to arrive at a battlefield, Inner Fence LLC had the field all to itself for a while, that being the market for software applications that convert smart phones into payment card-accepting terminals. But now, the software company that provides an application called Credit Card Terminal is dodging bullets from later but well-armed mobile-payments arrivals that include Square Inc., Intuit Inc., VeriFone Systems Inc., and Apriva Inc., along with various independent sales organizations and now Google Inc.

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Inner Fence co-founder Derek Del Conte claims not to be bothered by all the new competition and in fact says it has raised awareness of what his Redmond, Wash.-based company offers. “It’s actually been good for us,” he tells Digital Transactions magazine for an upcoming story about mobile merchants. Del Conte wouldn’t say how many prospective merchants have downloaded the Credit Card Terminal app, but does say, “We’ve had tens of thousands of downloads.”

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Del Conte believes Credit Card Terminal, which debuted in October 2008, was the first native payment card application for Apple Inc.’s iPhone to be sold in Apple’s iTunes App Store. At first, Credit Card Terminal went for $49.99 and only offered card-not-present functionality. Over time, Inner Fence lured applicants with $50 iTunes gift cards, even after it cut the app’s price to 99 cents. Now Credit Card Terminal is free. The gift cards are gone, but they’ve been replaced by a free swipe device Inner Fence began offering last September that enables card-present transactions. And besides the iPhone, versions of Credit Card Terminal are now available for Apple’s iPad tablet computer as well as other mobile-phone operating systems, including Google’s Android and Microsoft Corp.’s Windows Phone 7.

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The price cuts weren’t the result of keeping up with the competition, according to Del Conte, but were intended to address an issue many merchants raised, that being set-up costs. “Yes, there certainly is market competition, but the driving force was less about that than driving down the prices for these smaller merchants,” he says.

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Inner Fence refers applicants to its ISO partner, Dublin, Ohio-based Merchant Focus Inc., for merchant accounts. The service uses the Authorize.net gateway for access to the payment networks. Merchants pay a $25 monthly fee, plus 24 cents and 1.74% to 3.79% of the sale, depending on the transaction type.

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With all the newcomers now vying for merchants using smart phones, Inner Fence differentiates Credit Card Terminal in a couple of ways. Most Inner Fence merchants use the iPhone, and the entire application process can now be done on that device, including signatures. In mid-May, the company began using an imaging application it developed so that applicants can take pictures of a voided check and upload the image as part of the account-approval process. That automates a process that formerly required the applicant to fax a copy of a voided check so that Merchant Focus had the routing and account numbers it needed to deposit funds for the merchant. “We’ve made it so the entire process can happen on the iPhone,” says Del Conte.

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Inner Fence also plays up the human-contact angle. To keep costs down in their pursuit of new mobile merchants, both Square and Intuit’s GoPayment service have automated the account-approval process so much that an applicant needn’t talk to a customer-service representative. With Credit Card Terminal, a Merchant Focus representative acting on behalf of Inner Fence is assigned to each new merchant. “We assign you an account rep right away, answer all questions right away through your first transactions,” says Del Conte. “The idea is to make that one on one. That’s a big way we differentiate ourselves.”

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Credit Card Terminal has a wide range of merchant users, but Del Conte says it has significant numbers of professional photographers, taxi and limousine drivers, contractors, and licensed professionals such as accountants and lawyers. Inner Fence gets many applicants who are new to card acceptance and are only part-time businesses, a market for which Square and GoPayment are especially competing head to head. Del Conte says chargebacks and fraud losses in his portfolio are within bounds. “We obviously don’t approve everyone,” he says. “I don’t find our portfolio is risky.”