Mobile payments is an idea that has been gaining traction in the payment card industry lately, and financial services specialist ProPay is about to throw its hat into the ring with a new platform -- codenamed Zumogo -- that brings together social media and secure mobile payments to create something it calls Social M-Payments.
The concept behind mobile payments is to turn your cell phone into a digital wallet of sorts. Instead of paying for goods or services with cash, a payment card or a check, you use your phone. Currently, mobile payments more or less fall into four buckets: SMS (text)-based transactional payments, direct mobile billing, mobile Web payments (using WAP) and contact-less near field communication (NFC).
"Each of the methods described above have advantages and disadvantages to both the
consumer and to the merchant," Chris Mark, ProPay executive vice president of data security and compliance, wrote in a white paper about the ProPay platform. "One of the major disadvantages to each of the listed technologies is the protection of sensitive data. ProPay, through its ProtectPay tokenization service, adds another method of payment which addresses the security issue."
With ProtectPay, consumers upload their preferred payment information to ProPay's digital ProtectPay Vault.
"There it's tokenized," explained Scott Nelson, vice president of marketing at ProPay. "It's secure. The payment information does not reside on the customer's smartphone in any way shape or form. The payment information doesn't traverse or reside on the merchant's system in any way shape or form. That's the beauty of this platform."
Tokenization is the concept of replacing a piece of sensitive data -- payment card information in this case -- with what is essentially gibberish, a token. When a consumer authorizes a payment, the consumer is connected directly to ProPay. The data is encrypted from the point of input through secure data transport, eliminating the possibility of data thieves using sniffers to extract clear text information.
The encrypted data is sent to ProPay, which then processes and authorizes the payment. The merchant receives a token from ProPay that represents the transaction. At no time does the actual payment information traverse the network.
For consumers this means their payment information remains secure. There's an even larger upside for small business merchants, because it alleviates the burden of PCI-DSS compliance. Because all sensitive consumer payment information remains with ProPay, ProPay assumes that compliance burden.
Mobile Payments Meets Social Media
But the security benefit is only one aspect of ProPay's platform. Zumogo aims to use the social media element to create value for both merchants and consumers who use its secure mobile payments technology.
"Historically, new payment technologies or approaches have been forced upon merchants under the pretext that they will increase the number of transactions or provide greater security, thereby reducing the incidence of fraud," ProPay's Chris Mark said. "Unfortunately, many of the new or alternative payment technologies are created to provide some measure of value to the consumer, card brand or bank and typically provide a limited value to the merchant.
Mark added that Social M-Payments, including ProPay's Zumogo, are designed to offer value to everyone involved. "Specifically, merchants can benefit from the targeted marketing, interactive dialogue and security provided by the solution," he added.
The ProPay platform leverages the social media component to allow merchants and customers to interact in real time. Customers can make reservations, order, inquire about availability, check wait times and ask questions. Merchants can use the platform to upsell customers or provide targeted special deals with a direct channel to their customers and prospective customers.
Nelson noted that a restaurateur, experiencing a slow day due to weather, might push out a special to people who have opted-in to encourage them to come into the restaurant.
"This enables real-time, personal interaction," Nelson said. "You're establishing a real, personal relationship with that person."
He added, "The merchant then has the ability to interact with me [the customer]. They can interact with me in terms of promotions they may be running. They can interact with me in terms of events, like a book signing. They can push a promotion to me as an engaged customer. It doesn't matter what kind of environment it is, and it works with any kind of product or service.
ProPay's Zumogo platform consists of three components. The first is the merchant console, which will be available to any of ProPay's merchant account holders at no additional cost. It's a Web-based console, so all the merchant needs is a Web browser. Nelson noted that merchants don't need any special equipment, nor do they need to download anything. They can even run the console on an Internet-connected tablet or smartphone.
"Because we're a merchant service provider we can immediately enable hundreds of thousands of merchants with this technology, and that's what we intend to do," Nelson said.
The second component is the consumer-facing application, which will be made available as a free download. ProPay's ProtectPay Vault service rounds out the platform.
"We're very excited about the product," Nelson said. "We think it's a technology that will enable small businesses to reach their customers in a new way."
ProPay plans to unleash the new platform in the third quarter.
Thor Olavsrud is a contributor to SmallBusinessComputing.com and a former senior editor at InternetNews.com. He covers operating systems, standards and security, among other technologies.
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