Mobile-point-of-sale (mPOS) is disrupting the way payments are accepted and opening up new levels of customer engagement. Initially conceived as a low cost and convenient solution for small businesses (that traditionally weren’t able to process card transactions), larger enterprises from high-street retailers to healthcare businesses are experimenting with mPOS and getting positive results.
Here, Brijesh Arora, AVP, Strategy and New Product Development, Mobile Financial Solutions at MEF member, Mahindra Comviva discusses the growth of mPOS and its crucial role in the mobile payment process.
MEF has also recently published its fourth quarterly Mobile Money Bulletin. Download it for free here.
As early as 2009, when mobile start-up, Square, launched arguably the first mobile-point-of-sale system, the electronic payment industry had its card marked as a sector ripe for mobile disruption. Although still in its infancy, the mPOS space has moved beyond a convenient payment option for small merchants that had previously been unable to process card payments to enabling new levels of not just payments but customer engagement from the market stall to the aisle and beyond.
Today the mPOS space is characterised by a mix of start-ups and incumbent point-of-sale providers alongside other major players such as PayPal whom have made the transition to offering mPOS by captialising on their own substantial user-bases.
It is estimated that mPOS accounts for at least 10 per cent of consumer physical transactions which implies that the incumbent hardware vendors sold some 2.5 million mPOS devices in 2014. But that figure excludes many of the mPOS specialists that pioneered the channel in the first place, such as Square and iZettle. Factoring in these companies and their many peers around the world indicates that total sales of mPOS hardware in 2014 amounted to some 10 million devices.
Crucially mPOS card readers can be attached to any smartphone, tablet or phablet and it is the ubiquity of mobile that has driven the connected hardware side of this growth.
“Mobility allows staff to engage with customers completely differently, not only outside the store, but also around the store, from checking inventory levels and ordering an unavailable item in-situ, to offering context-driven offers, taking payments and delivering an electronic receipt via email – bringing the point of sale to the point of need.”
The way payment is accepted is changing in parallel, from card to cloud-based services. This move is stimulated by the wave of investment in mobile-device-based payment, developments in NFC contactless technology, and the emergence of host card emulation and tokenization technologies. Next generation POS services will be increasingly cloud-enabled, easing the transition from card initiated to smartphone-initiated payments.
The rapid growth of Internet retailing has posed challenges for many traditional stores. Savvy shoppers have become more selective, comparing prices in high street stores with online deals for similar goods. Many retail outlets have become victims of so-called show-rooming and in-store purchase volume has stalled as a result. In response, retailers are embracing omnichannel retailing and taking a holistic view across their entire businesses, and mPOS can be a central plank in this strategy.
Perhaps the most significant benefit is that mPOS allows the point of sale to become free roaming, playing to the strengths and flexibility of the mobile device. And that mobility allows staff to engage with customers completely differently, not only outside the store, but also around the store, from checking inventory levels and ordering an unavailable item in-situ, to offering context-driven offers, taking payments and delivering an electronic receipt via email – bringing the point of sale to the point of need.
Payment becomes just one part of a range of services all capable of being delivered through the same device. mPOS services lie at the heart of these initiatives, integrating the payment facility with an improved shopping experience for the customer, forming a key component amongst a variety of technologies that, in combination, can radically transform the retail outlet and shopping experience.
As the market matures, mPOS providers are seeking additional sources of income through the provision of further services. This might come via a range of software applications that help merchants run their businesses more effectively, whether it helps streamline back office operations, improve front office tasks or engage with customers better in the physical as well as digital space. Tools include product catalogues, inventory management, linked accounting software, customer relationship management and data analysis and reporting all aimed at various legs of the commerce transaction rather than just focussing on payments.
Beyond retailing, mPOS is being enthusiastically adopted by a range of new industry verticals in the mobile ecosystem that had little need for payment terminals in the past. Healthcare business, Insurance, home-servicing companies (e.g., food deliveries, heating engineers, air conditioning service companies) and businesses that use home-sales personnel find these services useful, eliminating the need for agents to carry large amounts of cash or checks and bringing the benefit of immediate electronic payment.
“The companies using mPOS are extremely varied, but the attribute they share is the ability to use mobile payment devices to transform their relationships with their end users or customers.”
Ruggedised mPOS devices are also proving popular in sectors such as transportation, allowing at-seat sales by airlines, trains, and long-distance bus operators. Courier and delivery firms use such terminals to receive payment upon delivery — still an important service in many countries. mPOS devices can even be found in use for payment of on-the-spot speeding fines by police forces.
In all examples and more, security of payment is improved, with cash removed from the equation, and most transactions (such as many of the transportation examples) are made with online rather than offline authorization. This encourages efficiency, opens up new channels, and removes or reduces certain categories of risk.
The companies using mPOS are extremely varied, but the attribute they share is the ability to use mobile payment devices to transform their relationships with their end users or customers.
mPOS as a catalyst for mobile payments growth
Credit and debit cards, which are regarded by some as out-dated by smartphones (and their ability to make mobile payments), are in fact central to the emergence of mPOS, and their importance is in turn reinforced by it. But as mPOS grows it will enable new forms of payment to flourish, including via NFC-enabled mobile wallets and devices. Newer mPOS devices have NFC capability, allowing contactless tap-and-go transactions from card or phone.
Much analysis focuses on the mobile phone’s potential to transform payments and replace the plastic card, but within an mPOS environment, both forms of payment can be accommodated, bringing greater flexibility to the act of payment acceptance.
Mobile commerce developers gain meaningful traction with mobile wallet services or in-app payments while merchants benefit from the ability to capture a variety of payment methods without limiting the options available to their customers.
Looking at the numbers, card transaction volume in established economies has continued to show strong growth from 2009 onward. Forecasts indicate that, in the 22 countries reported by the Bank for International Settlements, cards will account for 273 billion transactions at a combined value of some US$30 trillion by 2018. Cards will remain the most important payment instrument for many years to come, their role supported and enhanced by mPOS.
It will take time for mobile transactions to rival card transactions in volume. Aite Group research indicates that from 2015 to 2018, contactless mobile transactions have the potential to reach 4 to 5 per cent of retail payments, with growth in transaction volume accelerating after 2020.
Whilst much attention is placed on new mobile payment solutions like Apple Pay and Android Pay, the balance is clearly in favour of cards in the short to medium term.
The key business intelligence lies in the mobile application, which not only provides a rich user experience, but also is an effective channel to render the various business applications. Their flexibility allows the mobile app to be reconfigured over time to adapt to changing circumstances, payment methods, form factors and this is another powerful aspect of the new generation of mobile payment acceptance. The flexibility of mPOS mobile applications in an increasingly digital, omni-channel payment environment is a key strength.
From its beginning as a single stand-alone service for small businesses, mPOS has quickly evolved into a transformative set of technologies that will drive change across the entire payments value chain. In the process, it is bringing new players into the market and forcing incumbents to re-evaluate their methods of operation.
The world of payments is at the start of a process of change more fundamental than it has experienced before. New business models, much deeper customer engagement and more flexible solutions with payment acceptance at their heart are the order of the day, but the key ingredient that weaves through the rapidly evolving landscape is mobility; the ability to accept payments at the customer’s convenience and at greater variety of locations than ever before. mPOS is moving from a niche service into the mainstream of modern commerce.