A crinkle for Clinkle? Timing is everything… Your Contactless Intelligence Weekly News Review

A crinkle for Clinkle? Timing is everything…

Here’s the thing; one of my colleagues at Contactless Intelligence was talking to her contact at a certain card technology company last week and both agreed an important point. Namely that after a rather depressed 2013, the contactless and NFC industry suddenly seems to be buzzing again. There could be a variety of factors for it; Apple Pay, Contactless payment acceptance on London’s public transport or something else - it does’t matter. What is important is there is a certain ‘something’ that makes the industry exciting to be in, once more. All of this means that cycle times will decrease as things speed up. Good news for some - perhaps bad news for others…

Let’s talk about Clinkle. For those not in the know, this was an interesting one. Supposedly a mobile payment wallet-type app that attracted between $25 million to $30 million of seed funding before it had even launched its first product, counting such luminaries as Richard Branson among them. Branson, no stranger to attaching himself to products as the ‘face’ of said product lost no time in grabbing a phone and ‘mugging’ for the cameras. All par for the course, but one element stood out: Namely that Clinkle would not say a damn word about their product. Clinkle was thought to be developing a prototype application that used high-frequency sound waves to transfer payment signals between mobile devices and merchant terminals but no-one knew anything for sure. We mentioned them briefly in an editorial last year but with nothing to really go on other than the massive amount of funding behind them - what was there to say?

The startup had promised to revolutionise the world of payments – creating a product that would allow mobile solutions to rival cash and cards with no need for extra hardware. And then, last week, they launched. Not to massive fanfare but to a rather deafening ‘ho-hum’. In this case, the story of this mobile wallet app  company was perhaps more interesting than their product, that promises ‘treats’. I say launched. What actually happened was that they updated their website and Silicon Valley magazines exposed it just after it went live. Clinkle say there are still a few kinks to be ironed out when explaining the service, which is currently only available on a few college campuses in the US. As Lucy England over at Mobile Payments Insider said, “One thing is clear – the Clinkle app might be slick and sociable, but it is not the product that was promised.”

Instead of replacing cards, Clinkle will send you a physical one, which you can load and reload with money. After swiping the card for a purchase seven times, you can earn ‘Treats’, which can be sent to friends. Friends then have to make a purchase using the card in order to access the treat, which is then ‘spun’, possibly paying for their purchase or allowing them to get something for free, like Baskin-Robbins ice cream. Clinkle can also be used to send money to friends, like Venmo. The service claims to be free when sending money from your bank account or loading your Clinkle card. But there are some fees involved, which are explained in a lengthy cardholder agreement. However, Clinkle has taken some time considering one aspect which tends to put potential users off mobile payments – security. The app employs 128-bit AES encryption, lets you set up a special PIN code to open the app, and insures its cards up to $250,000. 

What Clinkle doesn’t do is allow instant peer-to-merchant payments via high frequency sounds without a card, as it was hoping. Talking up a mobile wallet payment app is probably what lured investors in the first place. Techcrunch’s Josh Constine weighed in by saying that, “The trick is that Clinkle gamifies payments. You can only see Treats sent to you by friends if you pay with your Clinkle card, and you can “Spin the Treat to see if you won a refund on your last purchase.” Oh, and Clinkle trumpets “we’re not into fees” but will charge you them for a dozen different reasons. After raising $30 million only to endure a talent exodus, layoffs, and product delays, at least Clinkle got something out the door. Even if its doubtful anyone will use it… But arrogant, late, and without that technology, most people are asking themselves why they would need Clinkle.”

The startup appears to have altered its original plans after the launch of Apple Pay, with Clinkle founder Lucas Duplan telling Business Insider that the app is changing its focus. “Last year, we made the decision to focus our product around consumer engagement, not the hardware layer of storing payment instruments, so we are excited that this will give customers yet another way to use their Clinkle card,” he said. I am emphasising this story, not to demonise Crinkle but to point out that there have been a lot of investment in the last few years put into ill-thought out mobile wallet apps that are floundering, have flopped or are just not crossing the finish line as time runs out and Apple, PayPal and the like, started the final push. On the plus side – it has also made the industry exciting again!

Last week, Contactless Intelligence was in Marseille for the NFC World Congress (you can see some of our tweets in the listing below). Here’s a couple of things we took away from the keynotes - all seemed to involve Apple (!). First off, both Visa and MasterCard were very happy that Apple has now entered the mobile payments market with Apple Pay. When it came to the topic of security there was was a lot of buzz about the topic of ‘tokenization technology’; a technology that ensures payment transactions are not vulnerable through the use of clear text, as this solution replaces sensitive payment account information found on plastic cards with a digital account number or 'token', meaning that merchant POS systems do not have to be PCI compliant anymore.

The topic of tokenization has gained a lot of traction recently with both Visa and Mastercard championing the technology, albeit it under different guises. Visa has announced their Visa Token Service. “Visa Token Service is yet another example of where we have opened up our network to create meaningful solutions in the form of new standards, tools and services that can enable digital payment experiences that are both engaging and secure. When you make the payment environment safer, you open up a world of possibilities where commerce can take place in different forms and consumers can shop anywhere, on any device, with confidence,” said Charlie Scharf, Chief Executive Officer, Visa Inc. As we would expect, MasterCard have also announced their MasterCard Digital Enablement Service (MDES), and say that, “… this service, provided by MasterCard to banks, allows a connected device to be used for everyday shopping and payments. In addition to the banks announced by Apple, MasterCard is working with its partners to bring additional banks on board quickly through the MasterCard Digital Enablement Service”. 

Tokenization technology looks to also be getting the US Government seal of approval. The US Federal Reserve’s Mobile Payments Industry Workgroup (MPIW) has given cautious backing to the potential of tokenization in mobile payments and formed a subgroup dedicated to exploring the impact of the technology in more depth. “The security of mobile payments has always been a top concern and one of the main barriers to widespread adoption of certain mobile and digital payment technologies,” says Marianne Crowe, vice president of payment strategies at the Federal Reserve Bank of Boston and chair of the MPIW. “With the recent introductions of new platforms that use tokenization technologies, including Apple Pay, we are even more convinced of the need to evaluate the optimal approach to tokenization and determine how the payments industry can better coordinate efforts to protect consumers and businesses alike.”

This specific security technology is gaining traction among service providers however, Stefan Schmidt-Egermann, security expert at mobile IT security company certgate, voiced a note of optimistic caution, “Tokenization is a great way to to increase the level of security in online payment systems but it is only the beginning, because cyber-attacks are no longer a hobby - they are crimes that have become a billion dollar business. If you want to secure a holistic ecosystem - of which payment undoubtedly is – you can’t relax if you have only secured the way data is transported from A to B. But tokenization is a start; a good start.” There are a variety of tokenization models and specifications currently under development but one thing is for sure, if brands as big as Visa, MasterCard and Apple get behind the technology – while not a sure thing, people will listen to what they have to say.

PayPal was also there but were not so ecstatic about the the Apple launch - as you can expect. Although they did say, “Tech suppliers, including Apple, will not create the spark for ignition. That will come from the application developers and their smart applications. Expect to accept and embrace chaos!”

Contactless Intelligence asked speaker Koichi Tagawa, Chairman of the NFC Forum if Apple had looked to join the NFC Forum. His answer was "Apple was not part of the NFC Forum", however Apple had joined Global Platform, an association that Tagawa was keen to point out had many overlaps and connections to the NFC Forum. Apple, it was confirmed, had also declined to join the FIDO Alliance. Although later both speakers for the NFC Forum and FIDO Alliance hinted at back room talks. We have nothing more concrete to expand upon this. Apple does not conform to the NFC Forum standard, Tagawa confirmed, but attendees were told that this is not a problem as Apple have chosen the 13.56MHz range. By choosing that range, Apple have opened the doors for other opportunities, the audience was told.

One interesting question posed to the panel was, “How did Apple achieved something that no else was able to achieve, namely the ability to get paid within the Apple Pay system?” This was concerning the news that according to a report from The Financial Times, Apple stands to make quite a bit of money from its payments service. Banks and payment networks are to give over 0.15 percent of each purchase to Apple, which equates to 15 cents out of a $100 purchase. Jeremy Nicholds, Executive Director for Mobile, Visa Europe’s answer was simple and to the point; “It’s the sheer force of their brand!” he said.

Enough said.

Until next week,
Steve Atkins
Contactless Intelligence

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