Merchants paid an estimated $600 billion last year to let their customers use plastic to shop. Now, some stores are turning to a Swedish company that says it can slash those credit and debit card fees in half.

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Merchants paid an estimated $600 billion last year to let their customers use plastic to shop. Now, some stores are turning to a Swedish company that says it can slash those credit and debit card fees in half.

Those hidden fees to banks and card companies such as Visa Inc. (V) and Mastercard Inc. (MA) eat into profits that could have gone to lower prices for customers, said Seamless Distribution AB (SEAM) Chief Executive Officer Peter Fredell. While other apps let smartphone users pay without wallets, Seamless’s SEQR is the only one that saves merchants money with no investment, he said.

“This is huge, especially when many of these merchants have an operating margin of 1 percent,” Fredell said over lunch from his office overlooking a construction site on the outskirts of Stockholm.

Seamless cut its teeth on the streets of cities such as Accra, Riga and Mumbai, where its software lets mobile users top up their pre-paid cards without a modern banking infrastructure. After 12 years, the company is harnessing the booming use of smartphones to promise savings to merchants because it can route payments directly to and from bank accounts, dodging traditional card-handling fees.

Seamless struck a deal with McDonald Corp.’s restaurants in Sweden on March 5 and one with grocer Axfood AB (AXFO), with annual sales of 36.3 billion kronor ($5.6 billion), in October. Fredell, a former derivatives trader, said he’s signing a handful of new contracts each day and plans to expand to other European markets soon. His business idea is to split the global average of 1.89 percent in card fees 50-50 with shopkeepers.

Personal PIN

Say a shopper wants to buy groceries. A cashier scans the items, rings up the total and beams the information to Seamless through a switch already built into many registers. The customer snaps a picture of the unique QR code on the machine, beams up and Seamless software matches the seller to the buyer in the cloud. The shopper gets a message to approve the purchase, completes the deal with a personal PIN and then gets a receipt, all within seconds.

“People have been so focused on the exchange of info happening at the store,” Fredell said. “We took it the other way, running the transaction backwards.”

Google Inc. (GOOG)’s mobile-wallet solution lets consumers pay for goods in stores by tapping a smartphone on a device. People talking about mobile payments dwell on the use of near-field communications, or NFC, as the best way to transfer money from the buyer to seller, Fredell said, adding he initially passed on NFC after considering the security risk of having bank data “floating through the air.”

Steep Fees

Seamless’s technology is already integrated into more than half a million points of sales globally thanks to the company’s roots in mobile top-ups, where it conducted more than 3 billion transactions last year. The big problem with Google Inc.’s mobile payments app is that it’s still a card transaction where merchants face the steep fees, Fredell said.

“There’s no business case to install NFC readers, to make investments if there’s no profit,” Fredell said. “Why connect through the Visa or Mastercard switch, why not just connect directly to the banking system.”

The company made a loss of 24.8 million kronor last year while sales more than doubled to 134 million kronor as it sunk income from its traditional top-up business into development of SEQR. So far, the response from retailers has been strong, Fredell said. Seamless hands out unique QR identifiers, the shops flip a switch on their cash register and the system is up and running.

Low-Margin Business

“We’re doing this because it should save us money and customers want this for the future,” said Anders Quist, head of business development at Axfood in Stockholm. “This gives us lower transaction costs, allowing us to be more efficient, which is important in a low-margin business like ours.”

Seamless, which is traded on Stockholm’s OMX Nasdaq exchange, raised 102.4 million kronor after selling new shares earlier this year to use for expansion. Investment AB Kinnevik (KINVA), which owns 24.2 percent of Germany’s Rocket Internet, is the second-biggest owner with 11.8 percent after Fredell, who has 16.1 percent. The share sale gives Seamless the funding it needs to continue with its expansion plans, Fredell said.

Seamless is already looking beyond physical shopping, the CEO said. The system works just as well for online purchases where a website generates a SEQR code for each purchase and could be used in direct advertising, in magazines or even in television commercials, which would help retailers better focus ad spending.

“Because we can save merchants money, they can let that trickle down in the form of offers to consumers,” Fredell said. “It becomes a symbiosis.”

To contact the reporter on this story: Adam Ewing in Stockholm at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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