Two startups race to offer pan-European chip-and-PIN transactions on mobile phones

Smartphone card payments startup Payleven will start accepting chip-and-PIN transactions in Europe from Oct. 15, enabling small and medium-size businesses there to accept payments from major credit and debit cards via smartphones, it announced Wednesday. Its competitor Elavon, meanwhile, announced the expansion of its European mobile chip-and-PIN reach to Ireland.

Payleven, based in London and Berlin, announced its chip-and-PIN technology during the App World show in London. It uses a secure device that links to a smartphone or tablet via Bluetooth, the company said. Customers can slide their cards into the device and then enter their personal identification number (PIN) on a keypad.

Transactions are as secure as on a traditional card terminal and merchants are fully protected, said Payleven, adding that chip-and-PIN transactions will be offered in the U.K., Germany, Italy, the Netherlands, Poland and Brazil.

Enabling chip-and-PIN is important, because until now Payleven could only accept transactions using magnetic stripes, said company co-founder and CTO Rafael Otero via email.

In the U.K., roughly 85% of the 4 billion card transactions that take place annually involve either debit cards or Visa-branded cards, he said. Visa only accepts chip-and-PIN payments, he said, while debit cards transactions in the U.K. require the payments processor to accept a PIN.

Without chip-and-PIN capabilities, a mobile payment terminal in the U.K. can only accept the 15% of transactions that rely on either the magnetic stripe or a combination of a chip readout and a signature (chip-and-sign) for authentication, said Otero.

Accepting a PIN via a magnetic stripe reader in combination with a smartphone app could be possible, said Payleven co-founder Alston Zecha . " But you don't want to do that on a phone," he said, adding that it is not secure to let people type in their PIN on a smartphone. In other countries, like the Netherlands and Germany, payment processors are allowed to accept transactions based only on magnetic stripe data, and in those countries that technology is in use by Payleven, he said.

Payleven is compatible with iOS and Android devices for which it offers a payments app. For its existing magnetic stripe service, Payleven charges ¬0.09 or £0.07 per transaction, plus 2.95% of the transaction value, with no monthly fees. While the company promised there would be no monthly fees for the chip-and-PIN service, it declined to say what transaction fees it will charge.

Also on Wednesday, Elavon extended its smartphone chip-and-PIN service, MobileMerchant, to Ireland. The service has been available in the U.K. since January, Elavon said.

Like Payleven's service, Elavon's MobileMerchant allows cardholders to authorize transactions using a Bluetooth-connected PIN pad. Using a separate PIN pad ensures that no confidential information is captured and stored by the smartphone, the company said. But unlike Payleven, Elavon offers its technology to users of BlackBerry and Android smartphones and tablets for the moment. Its PIN pad supplier Thyron Systems states on its site that iOS integration is coming soon.

Elavon charges SMEs a £25 one-time setup fee and £10 a month for PIN pad rental, plus a 2.95% transaction fee for its chip-and-PIN service. Companies with bigger sales volumes can get a tailored deal, with cheaper transaction fees but added costs for system maintenance.

Loek covers all things tech for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com