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Payments start-ups continue to raise big money despite challenging market conditionsJan 20, 2012 (Datamonitor via COMTEX) -- Jumio, a US start-up backed by Facebook co-founder Eduardo Saverin, has raised $25.5m according to a Securities and Exchange Commission filing. This follows the $6.5m it raised in March. Despite this success, questions remain over Jumio and other tech start-ups in the payments sphere. Jumio's success in raising capital comes during difficult market conditions in which investors have typically looked towards safe heavens such as gold or US treasury bills rather than tech start-ups. Jumio owns Netswipe, which allows webcams to operate as credit card readers. The customer waves their card in front of a webcam or a mobile phone camera, then enters the Card Verification Value (CVV) security code to complete the transaction. Jumio currently employs 35 people between its California headquarters and its Austrian development center. Jumio's fundraising follows rival Square's success in raising $100m in June 2011. This saw Square valued at $1bn, a considerable sum in a depressed financial market. Like Jumio, Square has also taken a high profile approach to backers, counting entrepreneur Sir Richard Branson as an investor and having former US treasury secretary Larry Summers on its board of directors. The companies also have similar propositions. Square provides a smartphone attachment that allows the phone to work as a credit card reader. The company charges a set fee of 2.65% per transaction to the retailer, and now offers next-day payouts directly to the bank account of the retailer. Manual entries are charged at a higher rate, at 3.5% plus $0.15 per transaction. Both companies attempt to circumvent traditional point-of-sale readers and allow smaller retailers to more easily accept card payments. Square's product has greater market penetration, with an estimated 800,000 devices already in circulation, although it is uncertain how many of these are active and how many are mothballed once the merchant has taken up Square's offer of a free reader. Jumio and Square have shown impressive market awareness and fundraising skills in raising substantial funds and attracting big-name backers, despite the current challenging market conditions. However, doubts remain as to whether a webcam scanner or an attachment to a smartphone is the future of payments, or whether at least one of these companies will instead follow infamous dot com failure pets.com into the digital grave. http://www.datamonitor.com Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon |