Taking a swipe at cash and even plastic cards

Mobile-point-of-sale (mPOS) technology is more than just a new method of payment. As well as enabling micro-businesses, such as plumbers or taxis, to accept card payments for the first time, the new solutions coming on to the market are giving merchants the ability to gather more meaningful data about their customers.

And this advanced technology is set to develop closer relationships between retailers and consumers through the use of targeted marketing and vouchers.

Mobile devices are increasingly being used for point-of-sale transactions; in other words, transactions which are made in person, whether the consumer pays at a supermarket checkout or hands a cheque to a plumber. For low-value payments, smartphones enabled with near-field communication (NFC) and cards continue to play a part in this conversation. Meanwhile, other types of mPOS solutions are being delivered on very different lines.

One relative newcomer is payleven, which has begun selling a chip-and-PIN device via Apple stores. The device allows any individual to begin accepting card payments within a matter of hours. “A mobile hairdresser can walk into an Apple store and purchase a device, register online, download the app – and can then start taking payment,” says Ian Marsh, business managing director at UK payleven. As well as the short set-up time, Mr Marsh says that the chip-and-PIN device is significantly cheaper than more traditional devices.

Not all mPOS solutions use physical payment cards. In 2011, PayPal launched an app allowing customers in Pizza Express to pay their bills from the table without having to call a waiter over. Among other things, the company is now working on enabling customers to “check in” with a restaurant or retailer’s system and make a payment in that way.

The interest in this area is not just as another payment method, but all the other things that you can do with it

Other payments companies are focusing on QR codes. MPayMe’s application ZNAP, for example, enables consumers to ‘znap and pay’ by scanning a QR code at point of sale, or remotely from a magazine page or billboard advertisement, and then entering a PIN to complete the transaction.

These new solutions have the potential to transform the way in which consumers pay for goods and services in a variety of contexts. “New POS [point-of-sale] technology doesn’t have to be limited to in-store experiences,” says Otto Benz, managing director, technology, financial services, at Accenture UK & Ireland. “For example, at a concert or festival, wrist bands can be pre-loaded with cash so all you need to do when buying a drink, for instance, is wave it at the contactless payment sign.”

While mPOS technology has tended to focus on smartphones on the consumer side, tablet devices are also playing a role in some of the new solutions. Tablets can be used for applications such as “queue busting”, whereby retail staff can walk around with a tablet device in order to take payments from customers during peak periods – a cheaper option than investing in additional checkouts which might only be required for two hours each day. The same devices can be used for other applications within the store, such as checking stock levels.

mPOS technology goes beyond the payment itself and can be applied to other aspects of the purchasing experience. John Milliken, chief product officer of Monitise, explains that consumers can use their smartphones as a shopping list which can identify which store customers are in, direct them to the products they need and also make recommendations for other related products.

But the real attraction of mPOS technology is the data that can be sourced during this type of transaction. Rather than simply having a list of transactions made at a particular time, mPOS can allow merchants to access more detailed information about their customers and track what a particular person has bought, when they bought it and how often they buy the same item.

“This is valuable data that merchants have been seeking for years,” says Hooman Mazaheri, European chief executive at MPayMe. “Really the interest in this area is not just as another payment method, but all the other things that you can do with it.”

If mPOS solutions are to be widely adopted, they have to be accepted by consumers as well as retailers. In reality, these new payment methods do not typically provide a purchasing experience that is dramatically faster than putting a card in a normal chip-and-PIN machine. mPOS solutions are focusing on offering consumers incentives via couponing and other reward programmes.

“The ultimate vision is of a future where a consumer can be sent an offer over the air or messaged in a location – for example, a free muffin with their morning coffee,” says Tony Moretta, marketing director at Weve. “They can pop it into their wallet, go into the coffee shop and with a single tap can, firstly redeem the coupon, secondly pay for the coffee and thirdly receive their loyalty points for the purchase updated to their card.” The caveat is that consumers are only likely to respond well to such offers if they are highly relevant, which is why merchants are excited about gathering customer data.

From the merchant’s point of view there are other obstacles to overcome. “Historically the uptake of mobile POS technology has not been as high as some may have predicted,” says Accenture’s Mr Benz. He attributes this to a number of reasons, including the difficulties associated with integrating e-commerce systems with physical point of sale.

Another possible barrier is the fact that Visa and MasterCard have been slow to address mPOS-based payments in their scheme rules, says Mark Carter, vice president mobile at Skrill. He explains that the card schemes have different rules for transactions where the payment card is not present, which result in higher costs and increased liability for merchants.

This will need to be addressed as mPOS-based payments become more common and where the card holder is indeed present, but not physically using their payment card for the transaction. “Some card schemes are considering bringing in a ‘mobile card present’ category in order to address this,” says Mr Carter.

Numerous mPOS solutions are appearing and it is likely that the current surge of interest will lead to consolidation within the market in the next couple of years. While it is unclear which of the existing mPOS technologies will prove to be the most successful or where future innovation will be focused, the new solutions have the potential to revolutionise point-of-sale purchases.

When it comes to NFC payments, there are two schools of thought: either the technology is finally about to take off or it is never going to become a mainstream payment method.

NFC has certainly had some major pushes in Britain recently. The technology was given a boost during last year’s London Olympics, when as many as a quarter of Visa transactions below £20 were made using NFC-enabled devices in some locations. Shortly afterwards, London buses began accepting payments from NFC cards and smartphones, and it was recently reported that 1.5 million transactions have been made since December.

“After a very slow start since 2008, contactless card adoption is finally taking off,” says Jeremy Light, managing director, Accenture payment services, Europe, Africa and Latin America. He argues that, once there is mass adoption of contactless cards, it will be simple for consumers to migrate to NFC, prompting a new wave of innovation that will “go beyond simply dematerialising cards and placing them in a digital wallet on the mobile phone”.

For example, Mr Light suggests that, while NFC is usually associated with applications on a phone’s SIM card, a simpler use of the technology is for the purchase data to be passed from the point of sale to the mobile via NFC, allowing the consumer to initiate the payment. “This is very different to the opposite flow, where the consumer passes card details via NFC to the POS,” he says.

Lysa Coombs, head of field marketing at Gemalto UK, says that adoption of NFC technology beyond city centres is a key factor for the success of the technology. She adds that there are clear signs that this is starting to happen, citing the use of NFC by the Post Office and the M6 Toll.

The technology does, however, have some limitations – it can only be used for transactions worth up to £20. It also carries a small risk that the wrong card will be charged for goods if more than one NFC-enabled card comes within the range of the terminal. For example, the BBC reported last month that some customers of Marks & Spencer had found that payment terminals had debited money from cards other than the cards they intended to pay with.

While NFC continues to feature among mPOS technologies, the flexibility offered by other nascent solutions could mean that they overtake NFC in this area in the coming years.