The growing popularity of mobile POS (mPOS) solutions started with the success of Square in the US. Square basically created a new market overnight when they launched the Square device. They realised that there was a significant number of merchants who were underserved or not suitable for the traditional point-of-sale environment and this is true in the UK too. In the UK today there are about 1.3 million point-of-sale devices. It is estimated that there are about one million merchants or micro merchants as people call them for whom the traditional POS devices don’t make sense, from an economical point of view they just may not be what they need for the volume of transactions required or the costs associated with those devices don’t tie in with the business needs.
Take for example a market trader, for them to take a traditional point-of-sale device it would have to be GPRS connected device with a good battery charge. These traditional GPRS payment terminals are by their nature expensive. So asking someone to pay GBP 25-30 a month is quite a barrier, you need to be certain of the returns before signing up to that type of contract. With the advance in smartphones, if you put the application associated, with a Bluetooth POS card reader, you can bring the cost of the device down significantly, which brings these merchants into the payment space whereas up until now they were restricted to cash or cheque as their options for payment. So by reducing the cost of entry, you enable these merchants in the card payments space.
It remains to be seen if the market is big enough to allow all these companies to crowd into this ecosystem. It is quite encouraging that there are a number of options in the market space and they don’t all come with the same offer.
Some are just looking at offering an entry payments acceptance system, other companies are looking at offering different payment services and experiences. (PayPal has announced a Chip & PIN device in the UK for PayPal Here and iZettle has also launched a chip & PIN device). There are many companies launching these devices and I’m sure there will be more to come. Then there is interest in seeing what happens with the traditional acquirers, and how they will join the mobile POS space. The traditional acquiring market is a very different space, in the micro merchant environment, the transaction volumes are expected to be very low so there is a need to have a simple, cost-effective infrastructure to enable you to actually generate profit from lower volume transactions. In mobile POS you need a high number of merchants taking a low volume of transactions so that this can work.
One of the challenge for these new companies face will be onboarding the merchants. It doesn’t make sense to have a person on the street signing people up, this is not cost-effective. The mobile POS companies need a cost effective way of engaging, on-boarding and delivering POS devices and services to their micro merchant customers.
About Gary Munro:
Gary Munro is a Senior Consultant with Consult Hyperion. He has over 25 years experience in the payments industry, specialising in Smart Cards & Point Of Sale. Prior to joining Consult Hyperion, Gary led Gemalto’s UK Point Of Sale division up to and during its acquisition by VeriFone.
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