Coin: Stepping stone or the next wave of mobile commerce?

SAN FRANCISCO---Anyone with time to spare on reading news this Thanksgiving weekend will inevitably stumble upon plenty of statistics about how millions upon millions of eager-beavers will be descending upon brick-and-mortar stores nationwide over the next few days.

Regardless if the turnout ends up being down from previous years, everyone from mom-and-pop shops to big box retailers will be tapping into the latest e-commerce trends and tools to accommodate them better in the hopes of squeezing out extra bucks at the same time.

But what about tools that could consumers could pick up on their own to simplify the shopping experience anywhere all year round? Sure, the obvious immediate answers would be smartphone and tablet apps, inevitably resulting in the new pattern known as "showrooming."

But we know all about those.

Rather, there is a new method not even on the market yet, already grabbing the attention of tech savvy: Coin, a credit card-sized device boasted to be able to sit in place of up to eight credit and debit cards.

An all-in-one device for credit and debit cards sounds both antiquated and too good to be true all at the same time.

"If you hand over a plastic card right now, you’re never really sure if there is fraud going on,”  suggested Coin's CEO.

In regards to the former sentiment, it might appear as a step backward for mobile commerce given how much buzz and effort there has been around turning smartphones themselves into mobile wallets via apps from Isis and Google (among numerous others) not to mention continued (albeit whittling) talk about NFC technology.

In terms of hardware, arguably Square has had the most success (or at least attention), but there is competition in the mobile device attachment/companion app space from PayPal and Intuit too.

This discussion has gone on for a few years now, and not a single solution has proven to be the runaway hit. Thus, the door is still wide open for more mobile payment options to be presented.

A simple space saver like Coin could fit the bill -- at least for a time.

Naturally with anything technology, there are plenty of questions -- namely in regards to security -- that need to be answered first.

Sitting at Coin's San Francisco office and development space on Tuesday, founder and CEO Kanishk Parashar reassured that security is the "number one priority," while also quipping he didn't realize he would be inundated with so many specific questions within the first few days of publicly unveiling a prototype.

A software engineer by trade, Parashar previously worked for eBay before moving into the PayPal unit. He also spent a lot of time working for startups, which is where Coin was born.

In response to anyone who would argue that having to carry a smartphone doesn’t simplify things, Parashar doesn’t seem dissuaded, arguing, “You always carry those things in concert as a user these days.”

What could be considered the predecessor to Coin was SmartMarket, a now-folded startup that developed a mobile payments solution based on geo-fencing. The concept was that merchants equipped with iPad tablets could identify customers based on their photos and then simply charge a customer by tapping on his or her picture. Customers would then receive a push notification alerting when they had been charged.

“That was the futuristic, where-the-world-was-going experience for smartphones,” Parashar recalled. 

Unfortunately, a chicken-and-egg-type scenario emerged. Parashar lamented that despite the fact that “tens of thousands” of people had downloaded the app, hardly anyone was using the platform.

“A merchant never saw a consumer use it, so they weren’t willing to adopt. The consumers didn’t see the merchants using it so they weren’t willing to switch,” Parashar explained.

Out of this emerged Coin, which was founded in June 2012. After an initial six months spent on prototyping, Parashar outlined the last year has been spent on building the product, team and investments as well as gaining initial traction. After outgrowing Parashar’s home and two subsequent office spaces, Coin’s team now consists of seven full-time employees working out of the same office complex that houses Dropbox.

But the real fueling factor appears to have been a new strategy: Rather than try to satisfy everyone at once, focus on the customer and everything else will fall into place.

“There’s one statement I always say, ‘If you build a product consumers love, everybody wins,’” posited Parashar, explaining it occurred to him to build just for the consumer so they don’t have to change habits to accept a new form of payment.

He also asserted that there is no learning curve required on the part of merchants being that Coin can be swiped just like a credit card and will also be ready for ATM machines.

Yet perhaps it is that ease of use that has many critics and even naysayers already up in arms over security.

Parashar stressed that Coin is designed to do one main thing for the merchant: Assure merchants that the card being handed over is 100 percent authentic and that the consumer holding over Coin actually owns the financial data. 

"If you hand over a plastic card right now, you’re never really sure if there is fraud going on,” Parashar suggested. On the flip side, he continued, consumers have “absolutely no information” when their debit cards and credit cards are initially stolen.

Parashar reiterated, "Coin is focused on the consumer. We’re trying to create a win-win scenario for all players: merchants, card issuers — solve the problem all the way through."

Coin “alleviates that problem,” Parashar boasted, listing off a number of security precautions either already configured or on the agenda before Coin is released to initial applications in mid-2014. 

For starters, Parashar promised users can only add their own cards and there is no room for “duplicate information.” Furthermore, Coin won’t be storing passwords, and all the data will be fully encrypted.

There are also still hints of that geo-fencing foundation being that Coin must be tethered to the customer’s smartphone. If the two are separated, then Coin will be locked from use. In the case that the smartphone’s battery dies,  Parashar clarified that there is a button on the device that will accept a Morse code-style password, but he noted that the specifics are still being worked out.

In response to anyone who would argue that having to carry a smartphone doesn’t simplify things, Parashar doesn’t seem dissuaded, arguing, “You always carry those things in concert as a user these days.”

Parashar also asserted that Coin will protect users from skimmers, simple machines that can be bought online for a mere few hundred dollars and then used to illegally obtain credit card numbers for fraudulent purposes at seemingly random. While it won’t stop criminals from swiping the cards, Coin will record the swipes, alerting owners immediately when fraud is suspected.

He added that when these features are ready, Coin will be the safer payments option for both consumers and merchants, further touting that it will "bring what EMV does to the United States without a massive need for infrastructure changes."

As for the mobile commerce market at-large, Parashar acknowledged he doesn’t know all of the strategies of large commerce and hardware players, admitting that eventually consumers will be paying with devices more than plastic, largely in part due to where the wearable tech space is going.

For now, Parashar pinpointed that Coin is being targeted toward “early adopters” and the “front end of the technology world.” He also stipulated that Coin is only focused on the U.S. market for the foreseeable future, hinting that 200 million cardholders is enough to start. 

Parashar reiterated, "Coin is focused on the consumer. We’re trying to create a win-win scenario for all players: merchants, card issuers — solve the problem all the way through."

Coin is on track to release its first model out by the summer of 2014. The device will retail for $100, but those tech savvy early adopters can reserve one for half price if they apply in the next two weeks.

For a closer look at how Coin operates, check out the promo video below:

Headshot via Coin