If Adolfo Babatz has his way, his startup company, Clip, might just single-handedly revolutionised how Mexicans pay for goods and services.
The idea is a simple one: transform smartphones into card reading terminals. But if successful, thousands if not millions of small mom-and-pop shops or even professionals in Mexico could soon be able to take payments from credit or debit cards for their products or services.
Given the high rate of mobile phone penetration in Mexico – there are nearly 100m mobiles in this country of about 115m (of which 23.1m are smartphones) – a large number of store owners and professionals already have, in theory, a credit or debit card terminal in their hands.
Like Square in the US, Clip has created a payment and credit card reader that plugs into the headphone jack of a smartphone. To use the device, the owners only need to register at Clip’s web page, download the company’s application and wait for the arrival in the mail of their card reader. Once plugged in, they can start accepting credit or debit cards in their establishments or offices, or even in the home or office of a client they are visiting.
“We hope our system will revolutionise the day-to-day use of credit and debit cards”, said Babatz, who previously worked at PayPal, the online payment services company, during the launch of the device this week.
Anyone who has been to Mexico would know that the country’s payment culture revolves around cash or check. Nearly 90 per cent of all business transactions in Mexico are carried with money or by writing a check, said Babatz.
The low level of credit or debit transactions is due to the complexity of obtaining a reading terminal and the cost of using it in Mexico, he added. In fact, there are only 400,000 establishments in Mexico that have a reading terminal, out of about five million outlets.
Unlike major credit card operators, Clip is offering its reading terminal free of charge and the only commission it takes is the 3.5 per cent fee on every transaction a client makes on his or her smartphone with the Clip application.
“Clip only wins if its clients win”, said Babatz, who teamed up with Vilash Poovala, a former Visa executive, to create Clip, which is based in both Mexico City and San Francisco.
One additional advantage of Clip, according to its executives, is that it does not discriminate against any cardholder in the country: credit and debit cards issued by Visa, Mastercard, American Express, and even Discovery, which does not operate in Mexico, will be accepted.
Clip did not give out any revenue projections. The only estimate the company gave was that it hopes to have 10,000 readers by the end of 2013.
That seems to be good enough for investors. Clip has raised $1.2m so far and counts among its investors 500 Starups, Alta Ventures, Accion and technology entrepenuer, Karl Metha.