iZettle forced to stop processing Visa payments in three European markets

Swedish mobile payment firm iZettle has been forced to stop processing Visa card transactions in three European markets; Denmark, Finland and Norway. Visa Europe said Monday that the iZettle mobile payment service does not meet its policy requirements in these markets.

The Swedish firm provides apps and hardware that enable iOS and Android devices to function as payment card readers, similar to the Square model created by Twitter founder Jack Dorsey.

iZettle customers will no longer be able to process person-to-person or business-to-consumer Visa card payments in Denmark, Finland and Norway from August 1, 2012.

The news is expected to be welcomed by Square, which provides a similar solution in the US, and has benefitted from investment from Visa Inc. Although Visa Inc. and Visa Europe are independently operating companies, Visa Europe is a minority stockholder in Visa Inc and the two firms work together to ensure the interoperability and security of Visa products and systems.

Another rival to iZettle, mPowa, publicised Visa Europe’s decision in a recent press release.

IZettle CEO Jacob de Geer recently told Telecoms.com that the firm’s competitive advantage is that it provides an end-to-end solution in a fragmented market.

“We take care of hardware and interface for customer. We handle payments to your bank account and we handle support,” he said. “The rest of the value chain is extremely fragmented. There’s a terminal supplier, and a bank, and the merchant, but with us, we provide everything.”

He added that the firm is uninterested in the classic enterprise and mid-tier model, which generates the bulk of transactions.

“There are no margins there whatsoever; there are so many players there. The problem with the existing value chain is that the way it’s created makes it unprofitable to target the prosumer.”

De Geer admitted in a recent blog post that he was disappointed with the situation with Visa Europe, but added: “We hope we can bring Visa card acceptance back to Denmark, Finland and Norway shortly and will of course keep you posted on the development.”

iZettle has recently benefitted from invesment of its own from a number of financial firms, most notably Visa’s competitor MasterCard. iZettle will continue to accept MasterCard and American Express cards in Finland, and Diners Club cards in Denmark and Norway. It also continues to process mobile payments in Sweden and the UK.