Jumio: Processing Credit Cards Through Webcams

Anuj Agrawal Aug 4, 2011 Tweet

Whenever I find myself entering credit card details online, I often have that slight fear in the back of my head that I’m going to end up receiving a year of complimentary identity theft protection after the merchant regrets to inform me that they’ve been hacked.

A recently launched startup called Jumio is finding an innovative and potentially more secure way to scan a consumer’s credit card with a webcam and process an online transaction.  By utilizing its proprietary Netswipe scanning software to complete the transaction, Jumio eliminates the need for a user to fill out the usual card details and address fields.  If this does indeed prove to be more secure – as well as a straightforward customer experience – it stands to have strong prospects in a market where payments have become a hot topic.

The basic process is similar to how a QR code is scanned – you line up your credit card to a visual prompt onscreen.  Jumio’s software then checks the validity of the credit card in real-time without storing its information.  To complete the transaction and ensure you have the physical card in hand, you simply input the CVV code.

Jumio works with any webcam and thus is compatible with mobile phones.  This puts them in direct competition with the likes of Square and Intuit, who provide free add-on attachments to physically swipe a card.  Jumio’s solution is more elegant in that it eliminates the need for the add-on attachments.  On the app side of things, Jumio will also allow app developers to integrate Netswipe into their own apps so that they can accept purchases via the phone’s webcam.

In terms of cost, the basic transactions fees charged to merchants is 2.75%, which is similar to the 2.7% Intuit charges and the 2.75% from Square.  At this time, Jumio accepts only Visa and Mastercard, while the others also accept AMEX and Discover.  Thus, from a merchant perspective it appears that these solutions are fairly identical from a functionality standpoint (assuming there are no issues adding AMEX/Discover to Jumio’s solution in the future).

However, Jumio appears to have a much larger addressable market.  Square and Intuit are targeting the offline small business/mobile kiosk market that requires a convenient payment reader that is easily transportable.  However, Netswipe is a strong alternative for that same market, as well as all the websites accepting credit card payments online.

The company recently raised $6.5MM led by Facebook co-founder Eduardo Saverin, and they have an advisory board that includes former executives from Google and Amazon.  Having a former Amazonian (a potentially massive customer) in their court is encouraging for the future prospects of Jumio.