3 Reasons Why Loop is Awesome (and 3 Reasons it’s Not)

December 20, 2013         By: David Mindich

Mobile payment provider Loop recently raised $10,000,000 dollars through angel investors. This, coupled with its successful Kickstarter campaign, has people convinced that Loop will bring some very interesting things to the table for the mobile payments industry. Having talked about Loop a few times already, Payment Week looked a little closer at the mobile payment innovators to see what all the fuss was about and came up with some interesting facts. Here are 3 reasons to get excited about Loop, and 3 things to think about.

Wallet Slimming Technology

Credit cards went mainstream in the 80’s. Since then, it seems companies of all shapes and sizes have been throwing their own branded credit or loyalty card into the ring, and wallets have been taking a beating because of it. In fact, overstuffed wallets have been linked to causing back pain issues in many, often diagnosed as the less than flattering fat wallet syndrome.

 

Is that a hard candy in there?

 

Loop was created with this in mind, allowing users to load all (if someone has more than the one hundred it can hold—they may need more than Loop) of their cards onto their cell phones. From credit, to debit, to that card from that sandwich place that isn’t very good but only needs one more purchase to earn a free sub, Loop lets users carry all of them and quickly select which one they’d like to pay with.

They might even relieve their back pain while they’re at it.

It’s ready when you are

This is what makes Loop a big deal. One of the main obstacles of mobile payment adoption is convincing merchants to buy the hardware/software required to work with their products. And while other mobile payment systems like NFC or even Apple’s iBeacon are scrambling to build an infrastructure around their devices, Loop managed to find a way to merge their product with the currently universal (in the US at least) mag stripe POS systems. Using Loop requires absolutely no work on the merchant end. If they accept debit or credit cards, they now accept Loop.

The ChargeCase

Having the merchants is nice, but that’s only half of the equation to mobile payment ubiquity. And, as many a failed mobile wallet has shown, simply being available isn’t enough to make most consumers make the big switch.

That’s where the Loop’s ChargeCase comes in. Currently, Loop has only rolled out its keychain fobs for their early supporters to try out. But the real selling point behind Loop is the fact that its case will also double as a second battery for your phone. Though the prospect of paying via your phone may not be enough to persuade most consumers to switch to mobile payments, being able to charge both your phone and your next meal at the same time might just be enough to get the ball rolling.

If only Loop could make the case out of bacon…

Now, while Loop certainly has a lot going for it, it’s by no means the perfect mobile payment solution. Here are a few issues that could lead to problems to the mobile payment provider.

Fat Fobs

While eager users are waiting for their ChargeCases, Loop has begun shipping out their fobs to anyone who donated $34 dollars on Kickstarter. But, to be honest, based on the pictures and videos that feature the fob, seeing the draw behind these chunky little payment squares is no small task.

For a product that wants to make your wallet thinner, adding girth to your keychain instead just really doesn’t seem like the best way to go about it. And while it’s likely that they’ll redesign the product (they have to) to make it sleeker, the fob just doesn’t really solve any problems. In fact, unless the user has it set to the current card they need, they would still have to pull out their phone to switch it over to the necessary card—which seems like a step sideways at best.

Uncharted Territory

Loop is actually a pretty ingenious piece of technology. By emulating the magnetic signals that a card gives off when swiped through a reader, Loop is able to fool the POS into thinking whatever card you have set to use has been swiped. While this is impressive, it could also lead to some issues.

Normally, using a credit card without having it on hand would fall under the “card not present” jurisdiction, which comes with higher rates for the merchant due to obvious security issues, but because the mag stripe reader is fooled into thinking the card was actually swiped, Loop will work just as a normal card does, including having the same, lower rate. While this is great for both merchants and for Loop, credit cards companies will be losing out on money because of this—which isn’t something credit card companies tend to be “chill” about.

Above: Not the credit card industry.

 

So, unless this is sorted out, which is actually possible (according to Techcrunch, Loop’s founder is talking with some major card issuers), Loop could be in for some speed bumps down the line.

New Trick for an Old Dog

So Loop figured out how to get mag stripe technology to roll over on mobile payments. But other than the US, not too many countries are still using mag stripe, and the US plans to switch over to newer and more secure EMV technology by 2015.

So what’s going to happen to Loop once the US gives mag stripe the “Old Yeller treatment?”

They’re going to bring it to a farm upstate where it can play with all the other old dogs?

Well, nothing good, at least as it stands now. But Loop’s founders don’t have their heads in the sand either; they’re very much aware of what’s happening to mag stripe, and are already working on updating their device to work with EMV. And, either way, it seems very unlikely that mag stripe technology will be coming to a screeching halt for (at least) a few years. So anyone interested in trying Loop out will certainly get their money’s worth. And, should Loop fail to update, they’ll still have a sweet battery case…

Over all, Loop seems like an extremely interesting idea. And, at least until NFC or the Beacon twins figure out a better solution, Loop seems like the best option to get mobile payment adoption on the move.