Smartphone card payments startup iZettle to expand its territory to Germany

iZettle signed deals that allows the startup to move into its competitor's home market

Swedish smartphone card payments startup iZettle will expand its territory to Germany by partnering with Deutsche Telekom and the German DZ Bank.

IZettle provides hardware and software that can be used by small merchants to turn smartphones and tablets into mobile credit-card terminals. The startup has been operating in Sweden, Finland, Denmark Norway and the U.K, where it said it is used by 75,000 small businesses and individuals like plumbers, housekeepers and local farmers, it said.

The company is planning to launch its German service in November at selected DZ Bank branches, while Deutsche Telecom, one of the largest carriers in Europe, will distribute iZettle readers in its shops across the country, the company said Tuesday.

"Strategically, Germany is one of our core markets," the company said. "Our ambition is to become the undisputed market leader in Germany and given the partnerships with DZ BANK and Deutsche Telekom we believe we are very well positioned."

Deutsche Telekom decided to work with iZettle to strengthen the relevance of mobile payments in Germany while positioning itself as a "relevant player in the mobile market," it said. DZ Bank wants to offers its customers another mobile payment option, the company said.

By moving to Germany, iZettle will intensify the competition with the German-based mobile payments startup Payleven, which recently announced its expansion to the U.K., Germany, Italy, the Netherlands, Poland and Brazil. Payleven also recently introduced chip-and-PIN payments, which was an important step, because previously it could only accept transactions by reading the magnetic stripe on a card, which is a less secure payment method. The company started taking registrations on Oct. 15 for that form of payment.

IZettle also deems chip-and-PIN-based transactions important and has been offering them for a while through its app and mini card reader. Chip-and-PIN service isn't yet provided by iZettle's U.S. counterpart Square, but has been offered for a while by Elavon, another European mobile payments company that has been active in the U.K. and recently expanded to Ireland.

The difference between the three chip-and-PIN technologies is that both Payleven and Elavon use an external Bluetooth-connected PIN pad terminal to deal with chip-based transactions, while iZettle incorporated chip-and-PIN functionality in its mini card reader, which can be plugged directly into smartphones. Payleven and Elavon both think that the use of an external PIN pad is more secure because no payment data, such as PIN codes, is stored on the smartphone.

IZettle did not respond to an email request for comment, but states on its website that accepting chip-and-PIN payments using its mini card reader is safe: "No sensitive data is ever stored on the mobile device, and all data traffic is encrypted."

During the launch of its service in Germany, iZettle will offer 25,000 chip-card readers free for iPhone and iPad, the company said. IZettle announced an Android version of its mobile payment technology in August.

Payleven also offers an iOS and Android version, as does Square. Elavon offers its MobileMerchant chip-and-PIN terminal for BlackBerry and Android users, and its PIN pad supplier, Thyron Systems, states on its website that iOS integration is coming soon.

Mobile card payment technologies like these could be interesting for merchants, said Digantam Gurung, an industry analyst at CCS Insight. "There is no need for them to go out and spend between ¬250 [US$320] and ¬350," for a regular mobile point of sale terminal, he said. "If you already have an iPhone ... then you already bought your own POS terminal without realizing it," he added.

IZettle has been providing its terminals free in the past, said Gurung. The service has no monthly fees or minimum transaction volumes but charges 2.75 percent of every payment made. This is similar to Payleven, which charges ¬0.09 plus 2.95 percent of the transaction value, with no monthly fees for its magnetic-stripe-based service. Elavon charges a £25 (US$40) one-time setup fee and £10 a month for PIN pad rental, plus a 2.95 percent transaction fee for its chip-and-PIN service.

While mobile card payments could be a viable solution for small merchants, it is too early to tell if the technology will catch on with consumers, said Gurung. "This is yet another different form of payment that adds more complexity and more confusion for consumers," he said.

"Mobile payments as a whole is a very new and very small market that is extremely fragmented" he said, adding that the "real big focus" of the industry has been on mobile payments via NFC (near field communication), which equips phones with an NFC chip that can be held to a cash register to make a payment.

"The other focus has been on online mobile payments," which are payments that use mobile browsers for transactions, said Gurung. Which technology will prevail is anybody's guess. "That question is so hard to answer that you can't say anything about that at this point, to be honest," he said.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, open-source and online payment issues for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to

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