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Todd Ablowitz, a mobile-payments consultant in Centennial, Colo., says in an e-mail message that “anyone can offer a ‘check-in’ style offer—and Foursquare, Yelp, and others are doing so—[but Zumogo] is actually solving a big payment problem for these merchants.” Still, he says, merchants must be convinced the ability to communicate with customers, along with the app’s other features, is worth the added cost of card-not-present transactions, to which the card networks attach an interchange premium. NFC transactions, by contrast, process at lower card-present rates.

ProPay says Zumogo’s pricing hasn’t been an issue so far. Merchants see the app bringing them incremental business rather than cannibalizing existing business, Chris Mark says. “Not a single merchant has raised an issue about card-not-present rates,” he notes.

Other issues may emerge now that the company is widening Zumogo’s market. “It seems very compelling, but like all new schemes that require merchant and consumer adoption, it will take time, talent, and plenty of treasure to roll out,” says Ablowitz.

Digital Transactions, February 3, 2011