Woburn start-up turns your phone into a wallet
Merchants need no new equipment
When Will Graylin held his iPhone up to a credit card reader to buy lip balm for $5.29, the cashier did a double take.
“That’s the strangest thing I’ve ever seen,” said Bonnie Lingoski, a longtime employee of the Coop in Harvard Square.
Graylin used his smartphone to wirelessly transmit his card number to Lingoski's register. With the tap of a button, he completed the sale, leaving behind an astonished cashier.
He’s gotten used to that kind of reaction. Over the past few months, as Graylin has been testing a new mobile electronic payment gadget made by his Woburn start-up, LoopPay Inc., he’s wowed waitresses, shop clerks, and baristas.
“People are just blown away,” said Graylin, a veteran of the payments industry and a serial entrepreneur who launched the company earlier this year. LoopPay expects to release its first product for consumers next month.
Using still-nascent technology, most of the mobile payment systems available today are aimed at merchants and require special equipment, such as a credit card readers.
But Loop’s approach is aimed at consumers, and it involves small discrete gadgets that store the user’s credit card information and wirelessly transmit it when close to a magnetic card reader commonly attached to cash registers.
“It’s pretty ingenious,” said Karen Webster, a mobile payments expert and chief executive of Market Platform Dynamics, a business consulting firm.
Merchants don’t need any special equipment, and so far, Loop works on more than 90 percent of card readers in use.
“When you say you can make this work with your existing stuff, merchants are interested,” Webster said.
Yet only a fraction of consumers have started paying with their smartphones in lieu of pulling out wallets.
Some of the most popular systems are from Square Inc., a start-up launched by Twitter Inc. cofounder Jack Dorsey, and LevelUp, a mobile payments platform from the Boston company Scvngr Inc. Square and LevelUp require merchants to use specific software or hardware.
Last month, eBay’s payment subsidiary, PayPal, said it will introduce an app to let members pay with their phones inside stores. Its approach is to generate a payment code that will show up on the screen of a smartphone so that the merchant can scan it at the register. If a store does not have a scanner, the app can generate a four-digit number that can be used to complete the transaction. The app is expected to be available early next year.
Graylin, the LoopPay cofounder, acknowledged it could be some time before consumers are comfortable with mobile payments. Indeed, the transition from cash to checks and then checks to debit and credit cards spanned decades. And even as more people start using phones to make purchases, the credit card and cash will be around for a long time to come.
The other way that Graylin is attempting to attract more people is by letting Loop users store rewards cards, membership cards, medical information cards, and driver’s licenses with the device. For instance, if a user has a Starbucks rewards card, that can be stored within Loop and used when buying coffee.
“That piece of leather . . . is there to bound, organize, and allow us to use the cards that are inside,” he said. If Loop couldn’t make use of cards other than just debit and credit cards, Graylin said, “by definition, it can’t be a wallet.”
While LoopPay has yet to release its product commercially, it has built up a customer base on the crowdfunding website Kickstarter Inc. Some 1,200 people have contributed in excess of $110,000 to LoopPay, most of them in exchange for receiving the first generation of Loop devices.
The company is offering two options for turning phones into wallets. One is a card reader and transmission device that plugs into a smartphone’s audio jack. It also includes a microprocessor and magnetic induction loop that can transmit payment details.
The other fits onto the back of a smartphone and can transmit credit card information but doubles as a thick phone case. It includes a plug that can charge a smartphone when the battery gets low.
The $34 card reader is expected to be available in December, and the $99 charging case early next year.
LoopPay didn’t turn to Kickstarter to raise money. It was looking to gain a following among the early adopters who use the site to find out about the latest innovations, and to get reactions and ideas from potential customers.
The start-up will soon close a funding round from investors that will be in excess of $10 million.
And it’s not just getting interest from investors because of its technology.
Graylin has been involved with other successful payment companies, most notably Roam Data Inc., of Boston.
His partner, George Wallner, is the former chief executive of Hypercom Corp., a company credited with pioneering the use of point-of-sale systems that read magnetic strips on credit cards.
“We’re not just two guys out of college thinking we’re going to change payments,” Graylin said. Still, he acknowledged, altering the way money changes hands “is extremely hard.”