Instead of Taking Payments Mobile, How About Making Cards Smarter?

Mobile payments introduce many opportunities for innovation: better accessibility for customers, better integration with web services, flexibility and social features. One new mobile payments startup is trying to do all that without phones or phone numbers.

Dynamics, a startup out of Carnegie Mellon, is coming out of stealth at the DEMO conference this week. The company, which designs chips to fit the form factor of a credit card, is starting in the U.S. market, enabling card issuers to offer credit and debit cards that can be programmed with security codes and to access multiple accounts with the press of a small button on the card. The benefit of using cards instead of phones is that they’re compatible with the 60 million-odd magnetic stripe card readers used for point-of-sale transactions at stores all over the country.

In many ways, what Dynamics does isn’t really mobile payments at all, but the company aims to compete with mobile-payment companies to be the first technology startup to take a sizable chunk of the existing payments market.

Where many mobile payments companies rely on emerging technology like near-field communications, integrate with mobile phone bills and their usurious convenience fees, or require store owners to install new reader devices, Dynamics is simpler. The company just needs to sign up card issuers, who will then roll out Dynamics’ cards to their customers.

Dynamics already has friends in the credit-card industry, with multiple stealth trials underway. It also recruited Philip Yen, former EVP of e-commerce for Visa. Dynamics CEO Jeff Mullen, an inventor-type who said he has 150 pending and awarded patents, told us he can’t talk about those ongoing deals yet, but he’s targeting the $2 trillion global payments market. “There aren’t many startups that can talk about their markets in terms of trillions,” he pointed out. He said card issuers are excited to offer Dynamics’ programmable cards as a way to attract new customers and accounts without having to “innovate” around payment contract terms, usually their only outlet.

In a way, adapting to old infrastructure seems like a safe move that could ultimately hinder Dynamics from truly shaking up the market. Bringing new merchants online (which Square and Intuit are trying to do) or helping the “unbanked” make payments using their phone bills (like many startups and carriers are trying to do) seems a bit gutsier. Mullen said that cards are just a starting form factor for Dynamics, and the company will be independent of any one infrastructure. Headquartered in Pittsburgh, Penn., Dynamics has raised $5.7 million in a Series A round led by Adams Capital Management.

If you’re interested in a broader view of mobile payments, I summed up the various parts of the emerging market in a longer piece for our premium research service, GigaOM Pro: A Mobile Payments Glossary.