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    Home » News » CheqOut promises to shake up SA payments

    CheqOut promises to shake up SA payments

    By Editor27 March 2012
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    Bradley Elliott

    South Africans using Apple and Google Android-based smartphones can look forward to being able to accept credit- and cheque-card payments using their mobile phones from early next month, thanks to a Cape Town-based start-up that is launching a new service called CheqOut next month.

    CheqOut founder Bradley Elliott says the service will also support BlackBerry devices in coming months. The service is aimed mainly at small businesses with low turnover that can’t justify the cost of a dedicated card machine for accepting payments. It’s similar, in a way, to the popular Square solution available in the US.

    Those wishing to use the service will receive a card reader for free, with CheqOut recouping the money from the fees it levies on transactions. Though the fee structure has already been finalised, Elliott says this won’t be made public until the official launch in early April.

    The CheqOut readers analyse the magnetic stripe on credit cards and cheque cards. Chip-and-PIN technology is not yet supported.

    “Chip readers present a number of problems,” Elliott explains. “They’re only available for Apple products, they’re quite expensive — which drives up operating costs and, in turn, fees – and you have to pay a licensing fee to Apple to use those readers.”

    However, CheqOut is in talks with a supplier about the possibility of introducing chip readers in future.

    According to Elliott, the service works like an online payment system, except users swipe a card instead of entering the card number and other information. The transaction still goes through the bank. “It’s an online payment, but through a mobile interface,” he explains.

    Elliott says he doesn’t expect resistance from local banks and that if there is any pushback it’s likely to come from card companies. “They might look at it as us taking clients [from them], but we look at it as a value-add in the retail chain.”

    He says CheqOut is ideal for merchants who don’t want or can’t justify the cost of a credit-card machine. “We are opening up card companies’ services to new markets,” he adds.

    CheqOut uses what Elliott calls a secure three-layer security system and although it is possible to do a card-less transaction by inputting the necessary information manually, this should only be done in instances where a card is damaged or fails for a similar reason. Customers will still be required to sign on-screen to “protect the merchant”.

    Elliott is a director at digital marking company Platinum Seed and although CheqOut is a separate company, Platinum Seed has provided the first round of funding for the venture.

    Though there are plans to take the service into the rest of Africa and possibly into other emerging markets, Elliott says CheqOut wants to focus on SA for now and realises there are specific obstacles in each country that make roll-out challenging.

    CheqOut is meant for a wide range of users, from small business owners with low turnover to open-air markets to formal-sector taxi drivers.

    The application uses HTML, which is wrapped in a proprietary interface and Elliott says this is one of the reasons the app won’t be launched on BlackBerry devices at first.
    “We wanted to have first-mover market by being first to market and we could do that with the high-quality iOS and Android products. We know that BlackBerry is still hugely popular in SA and we intend to cater for that market, but getting to market quickly was most important.”

    Elliott says CheqOut is not a payment gateway, in part because of the amount of regulation that entails. “We would like to become one in time to reduce the fees, but doing that comes with server infrastructure costs in addition to the legislation and regulation surrounding it.”

    Regarding the as-yet-undisclosed fees structure, Elliott says there is “no sliding scale, only a flat rate”.

    “We’ve done the maths and if you turn over R30 000/month through a card machine, you’re paying around R900/month for the machine, fees of R200 and a rate of around 5,2% per swipe,” he says. “The fees to us will effectively be around R900 on R30 000, which gives you an idea of the rate we’re looking at.”

    Although anyone can sign up for the service, and can receive cash payments in much the same way one can with Square in the US, CheqOut users will only get a reader if they enable card payments on the app. Interested parties can sign up at www.cheqout.co.za before the launch.  — Craig Wilson, TechCentral

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