MagicCube has launched i-Accept, a software-based replacement for traditional terminals, allowing acquiring banks and financial services providers to offer merchants an option for contactless and PIN payment acceptance through Android devices.
American Express, Discover, Mastercard and Visa all support i-Accept as a model for retailers to quickly adapt to a growing contactless environment, as well as a way to expand their transaction volume.
It took several years to garner attention, but MagicCube CEO Sam Shawki says his payments tech company is finally attracting investors as the coronavirus pandemic creates strong demand for contactless payments.
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"This is like changing from a fax machine to e-mail, or like videotapes changing to Netflix," Shawki said of the technology. "You get away from hardware expense and cost, and put the entire functionality of a serious, large, expensive payment terminal to accept all cards securely and you use virtual chips instead of physical chips. For the first time, we manage to protect the screen of a regular consumer device to accept payment keys on it."
The Santa Clara, Calif.-based vendor views i-Accept software as a way to compete against traditional terminal manufacturers, though Shawki acknowledges that much of MagicCube's push for i-Accept is fueled by Apple's acquisition two months ago of startup Mobeewave, a tech company that would help Apple convert iPhones into payment terminals.
MagicCube CEO Sam Shawki
The speculation from that acquisition and the potential for MagicCube's technology to change the terminal landscape well into the future also has triggered a call for banks to get on boardquickly with these types of providers and to prepare their network infrastructures to adapt.
The last year of development was the most difficult, Shawki noted, because it included moving the card brand kernels, with all of their coding, into the i-Accept software. The result was essentially to have, within an app, what a hardware device has in terms of multiple chips and domain separation.
Currently, Apple is blocking MagicCube from using its NFC kernel as part of the i-Accept software, a signal it doesn't want anyone else stealing its ability to convert mobile devices into payment terminals. It's a similar stance to how Apple has protected its own Apple Pay NFC wallet.
"Apple has always prevented other NFC readers on its devices for payment purposes," Shawki said. "We are not sure if they are going to open up to i-Accept at some time or not, but in either case, we envision that we should be a player because it is a huge market."
Because the pandemic has changed so many attitudes about payment methods at traditional terminals or with cash, the term "contactless" is quickly becoming synonymous with "touchless," said Thad Peterson, senior analyst with Boston-based Aite Group.
"The pandemic has accelerated adoption of touchless and a significant number of people who use it and understand it for the first time, a lot of them are not going to go back to the way they paid before," Peterson said. "If the merchants they know accept touchless, there really is no reason to go back."
Because consumer behavior regarding touchless "is an easy shift," Peterson said, MagicCube and other providers are on the right path regarding which way payments technology is heading.
"In a matter of a decade, we went from 1970s technology with magstripe, to '90s technology with EMV chip, and then to 21stcentury technology with NFC," Peterson said. "We couldn't have done NFC contactless without doing EMV, so it's an evolutionary path that was necessary."
i-Accept operates through global payments standards for PIN acceptance on mobile devices and tap-and-go. It will include over-the-air updates, remote provisioning, risk management and mitigation and integration through APIs.
Shawki is targeting acquiring banks and other providers to distribute the product, and the support of the card brands is likely to help reinforce that strategy.
“Cleaner payment solutions are now essential as the demand for digital and touch-free payments continues to grow," Elizabeth Karl, vice president of payments consulting at American Express, said in a Monday press release announcing i-Accept. "We are pleased to integrate with MagicCube to offer merchants a broader range of contactless payments options, including SoftPOS, which is simple to deploy and quick and seamless for customers to use.”
Shawki doesn't expect retailers to abandon their current POS hardware overnight, so he's positioning i-Accept as an inexpensive way to transition to contactless. For new businesses, it would be a natural introduction to high-tech payments.
"Just add these mobile devices in the beginning, and keep your hardware for when someone presents a regular chip card," Shawki added. "Even in markets where 99% of transactions are contactless, that merchant might get a visitor from another country, so you should have something for tourists."
Visa supports the concept as something that micro and small businesses can start out with to automatically be at the top of the payments technology rung.
“MagicCube’s i-Accept technology makes accepting digital payments even easier for sellers and alleviates barriers such as equipment-related costs and being tethered to a traditional point of sale," Mary Kay Bowman, global head of buyer and seller solutions at Visa, said in the press release. "These ‘Tap to Phone’ solutions allow micro and small businesses to have access to the digital economy by just downloading a mobile app."
It's been a fairly quick path for MagicCube to advance mobile technology as it relates to the use of PIN on glass. Three years ago, the company was pushing for a more secure authentication method when accepting PIN on a glass surface, be it a computer screen or mobile device.
Software PIN pads could be compromised by man-in-the-middle attacks that intercept the PIN after it's typed, so MagicCube developed MC-Screen Shield technology that basically positions itself "in the middle" to block hacking attempts. The software cryptographically secures a screen, in part, through use of the virtual chip and cloud-based server it has used for its MC-Token Shield.
If contactless technology is on a fast track now, Shawki is glad MagicCube is potentially leading the way.
"The whole market is moving very quickly on this," he said. "It's security and virtualization on a mobile device, and the hardware aspect is in the cloud."