Earlier this year, mobile social network MXit was using an instant messaging-based payment system with a selection of restaurants in Stellenbosch so that staff could spend the lunch allowance the company grants them.

The problem was that one restaurant had poor mobile signal. Six weeks and some developer hours later and MXit had created Gust, a “geo-fenced” payment solution that relies on Wi-Fi for close-proximity payments.

For now, Gust is still in pre-beta and only runs on Apple’s iPhone and iPod touch, with merchants using an iPad to request and receive payments. The devices connect over the same Wi-Fi network and the merchant is presented with a list of names and photos of Gust users that are in range.

The merchant requests a payment, the user approves it, and only then is there any outbound communication for verification. Joe Botha, founder of opt-out service TrustFabric — which works out of MXit’s offices — and one of those behind Gust, says there are various security measures in place.

“There is cryptography and privacy so that the traffic can’t be sniffed”, he says. He adds that the bulk of the communication happens between the devices over Wi-Fi, with “only one [3G] call at the end of the transaction”.

Botha says the service was built in March, was created in six weeks, and has been running since April. He expects it to move into a full beta in mid-June, at which point it will probably still only work in Stellenbosch but will eventually be extended to Cape Town and be used for more niche applications such as payments at events”.

Though there are no associated transaction costs, Botha says there may eventually be a small fee for merchants. The fee is likely to be flat-rated, regardless of the transaction size. — (c) 2012 NewsCentral Media