Creditel makes Arizona inroads with cell phone credit card reader

by Adam Kress
The Business Journal

With the capability to handle e-mail, Web browsing, advanced video games and more, there's no doubt cellular phones are becoming less and less about making calls.

One of the newest capabilities for cellular phones could change the way a lot of companies do business, and maybe more specifically, where they do business. Creditel Corp., a Los Angeles firm, is among companies developing technology that combines a cellular phone and credit card swiper called the PowerSwipe. The device on the side of a cell phone allows for credit card purchases to be made simply by swiping the card.

A number of Arizona small businesses have begun using the device, and the reviews are positive. Since product sales began six months ago, close to 100 have sold in Arizona and more than 2,500 have sold across the country, Creditel officials said. Estimates are that 8,000 PowerSwipes will be on the market by March.

Analysts say this sort of technology is changing the way businesses operate and more cell phone add-ons are around the corner.

Creditel's PowerSwipe is being targeted to anyone who does on-site work, particularly contractors, truck drivers, couriers and taxi drivers. Creditel claims there were nearly 57 million mobile workers employed in 2004. Fifteen million of them used a wireless device and 23 million required a point-of-sale function, the company said.

Daryl Jernigan Sr., president of Glendale-based Thunderbird Electric Co. Inc., has used the PowerSwipe for about six months and gives it rave reviews. "There's really no training involved," he said "You just turn it on and run it."

Creditel's technology currently works only when coupled with Nextel's phone service, but that soon could change. Sprint's recent purchase of Nextel means the service likely will be offered on Sprint phones in the near future, said Creditel Chief Executive George Elias. The company is talking with other carriers as well.

Elias said getting set up with the service can cost about $1 per day and is billed directly on normal Nextel statements.

There is an initial set-up fee of $79 for a vendor with five phones or less, and then there is the $12.99 monthly fee and $9.99 for data service," he said "The total is close to $25 per month."

There are additional fees for use of a small, wireless printer, and a global positioning system function to track where purchases have taken place. Jernigan said the device is helping him do more business than before. "People are more willing to pay for the whole job on the spot when the cash isn't coming out of their pocket," he said. "Some people have their checkbooks out, then ask me how the device works, and end up paying with their credit card."

Jernigan used to key in credit card transactions at the office through a secure online merchant account, but said many of his customers would not use the method because of online security fears. It wasn't cost-effective for him either, he said.

"I didn't do enough business that way to make paying for the online merchant service worth it," he said.

Lee Hopper, owner of Live Event Video Productions in Chandler, also uses the PowerSwipe as a way to process transactions on the spot.

"It has worked flawlessly," he said. "People see it and can't believe it. It gets great response from customers."

Because the product still is new to most consumers, security is a concern, but one that's also been addressed, Elias said.

"The PowerSwipe uses Creditel's patent pending Secure at the Swipe technology to protect sensitive credit card data at the swipe before it enters the handset, making the device more secure than the ATM machine in your bank wall," Elias said.

Creditel, Elias said, also has partnered with SafeNet Inc., a leading provider of private and public network security solutions to secure the PowerSwipe.

Allen Nogee, principal analyst for wireless technology with market research firm Instat/MDR, said these kind of devices have been in existence for a few years, but the number in use is rapidly escalating.

"This sort of thing is becoming a necessity when you are at fairs or craft shows," he said. "Other than cash, this is the only way to perform a transaction and get a confirmation of it back."

Nogee said better digital cameras, radio frequency identification devices and other innovations are on their way to a cell phone near you.

"In Korea, there is a capability on phones where if you are near a soda machine, you can purchase a soda through the phone wirelessly and it shows up on your bill," he said.