Keith Koenig of PayPal’s merchant services team has added a revealing post to the PayPal official blog today.

Announcing the introduction of the PayPal MagneSafe Secure Card Reader, which looks like, and operates like, the portable card reader ProPay introduced recently.

OK, I could be critical and cynical about ulterior motives etc. however I’d prefer to be positive about this.  So let us begin … oh dear … Keith makes no reference to the technology coming from the ProPay partnership – tut, tut, tut.  You’ll get a VeRO slap for trying to sell us that one mate – oh that’s right, you smooched ProPay didn’t you, so now you have access those rights.  Hohum – onwards … the rest of this article is live-blogged as I research – be prepared for some disjointedness.

Acquiring your card reader

The PayPal.com info page for the reader states the reader itself costs US $86.99, which is $12.96 cheaper than the current offer on the ProPay version at $99.95, but PayPal swipers have to buy their hardware from Dell, whose MagneSafe Reader sales page says it costs $79.99 – be prepared to see Dell listing it on eBay, possibly at further discounts on those prices, especially as sold volume increases.

Dell’s sales page states they are currently out of stock – how convenient when PayPal want a higher price? – but also carries a teeny weeny useful data snippet in the description – “This card reader includes 25,000 encryption cycles and for each card swipe it uses single encryption cycle.” – therefore the readers are not everlasting, they have built-in obsolescence, which works out at roughly 300 swipes per dollar, or 3 for 1-cent.

Any regular-sized online-auction channel vendor will have to go some to get through 25,000 swipes quickly, and if they do, they should be using a regular merchant services card reader and account, as they’ll save a fortune in fees.  But for the smaller to regular sized transactors, this is a great solution – it was in the original ProPay offer, and is even better in the PayPal one.

Operational fees

The PayPal page says that only standard Virtual Terminal fees apply ($30.00 per month, plus $0.30 and 2.4%-3.1% per transaction).

The ProPay page (ignoring the offer that expires 31 December) charges $4.95 per month for the card reader service, plus ProPay’s complex tiered subscription and per transaction table.

If you already have PayPal Virtual Terminal Services, there will be no increase in operational costs for you beyond the initial purchase of the hardware.  If you’re not using it, then the account operating costs need to be carefully balanced between PayPal and ProPay, but remember ProPay is only available to US “lower-48″ vendors and customers, whereas the PayPal offering seems to be global – I’ll return to check that in a moment (I’m live-blogging as I find the data) – Virtual Terminal service is certainly global in availability if you meet the merchant criteria.

Software and connectivity

The ProPay reader is sold as a complete kit – all accessories and software included in the single price.

The PayPal reader (via Dell) needs users to acquire the software seperately from MagTek, which refused connection via FireFox v3.0 and insisted on Internet Explorer 6.0 or above before they would show the details page.  The PayPal-supplied link points at a download and install Active-Server Executable file = naughty, VERY naughty – I like to inspect and authorise who is getting access to install software on my computers before they do so (NOTE – in the MagTek software link above, I’ve stripped the install code and switched it to their home page).  Even more so when it’s going to involve financial transaction software, and just who are MagTek anyway?  I’ve never heard of them before.

Magtek appears to be a trading name, or brand name, for Magensa.  Magensa seem to be the original developer and producer of these mini card-swipe readers.  Ah-Ha Keith, so you’re not the VeRO owner, nor is ProPay – I’ll let you off then.  Magensa are based in Seal Beach, California, and the only staff name mentioned on their site is Larry Meyers – a name that rings a bell for some completely unknown reason right now.  It’ll come to me.

Magensa also offer Internet Banking, Internet e-Commerce (sic), and SecureID applications – search the BuildaSkill blog and forums for what a creation from the lowest level of hell is that concept called SecureID.  The SecureID connection could also explain why the MagTek install page doesn’t work from FireFox, given that SecureID is Microsoft’s “Chinese curse” on the email-server world.

Conclusions

eBay didn’t really need to get into bed with ProPay to obtain the mini card reader system, they didn’t even need to talk to them to get commercial contact information – Google could have helped with that (not forgetting eBay and Google aren’t exactly friends right now) – so I guess eBay had other motivations in bringing ProPay on board, and this offering seems to show they’re willing to undercut friendly business partners that are also competitors, just as Dell seem to be doing to PayPal?  Or is that “out of stock” notice to allow the new stock to have a price jump?

Getting your reader hardware is best done by shopping around – I really like the look of those postage stamp sized reader versions on the Magensa website, and they come in “so many pretty colours” too (yes Dear – I spotted that too!).  Imagine at a craft fayre or similar, you could have a different colour one for each staff member on your stall and add an unintended level of internal transaction auditing, to see who’s mucking up, or selling highest values, the most.  Cool!

I must admit though, none of the sites said if you could use multiple readers with a single account.  As there’s a software layer between the readers and the payment processor, I’m guessing it’s possible, but there may be identity encryption tying each reader to each software install.

Currently Dell are offering the best raw price publicly, but their page doesn’t state if it includes shipping or not – maybe that would explain the $7.00 difference between their page and PayPal’s?  The Dell page says it is supported by FireFox, even though MagTek’s page (linked from the PayPal one) refused to speak to our installation – this could be firewall related (ours is exceptionally strong and not run-of-the-mill).

Last Gasp

PayPal Virtual Terminal is also already included in Websites Payment Pro (allowing telephone, email, and in-person card acceptance – thus more functional than the card reader, which depends on physical presence of the card) but there are stringent website security requirements if you want to go down that route, which may place it beyond the budget or skills of small businesses self-building their own website.

I cannot yet find anything from the PayPal card reader offer that states implicitly it is not available worldwide if your PayPal account is on PayPal.com … no doubt that position will become clearer in the very near future.  If you have any hard information or links about this, please post a comment.

My current business operating methods are geared to work around not needing a card reader, and therefore I cannot personally justify getting one “just because it’s available”, however, this launch does spur me to investigate how it could improve business operations, or expand them, and I’ll certainly be doing that over coming months.  I recommend all of you perform similar cost/benefit analyses of your own businesses before rushing into getting one.

Ed

Update - there was a couple of “oopses” when the first draft was published, so this version may be different from any version you got by RSS – sorry about that.