The phrase ‘mobile payments’ means different things to different people. In many cases, this topic brings to mind internet payments made using a mobile device, or perhaps mobile money schemes used in emerging markets, such as Kenya’s M-Pesa. However, this is a broad and diverse topic covering many different types of payment – one of which is mobile point-of-sale (MPOS) technology.
MPOS solutions allow consumers to pay for goods or services at point of sale using a mobile device. One breed of MPOS solution is near field communication (NFC) technology, which allows consumers to make contactless low-value payments using an NFC-enabled card or mobile device.
However, while this technology has been used successfully for initiatives such as Transport for London’s Oyster card scheme, it has yet to take off in the context of retail.
Meanwhile, a new wave of MPOS solutions is helping merchants both large and small to take payments from customers using a mobile device. There are a number of different models in the market.
In some cases, retailers are using tablet devices at point of sale to accept payments from customers in a more flexible way. Other types of solution include the use of scannable QR codes, either remotely or at point of sale, to support transactions.
Also growing is the use of mobile apps, such as the Square Wallet app, which allows Starbucks customers in the US to pay for coffee using their smartphones.
This type of technology is not limited to large retailers. Other MPOS providers, such as payleven, have focused on allowing micro-merchants, such as hairdressers and taxi drivers, to use their mobile devices in conjunction with a chip-and-pin device.
As a result, small businesses are able to accept card payments from their customers in a more cost-effective way.
“While integrated POS systems – electronic store management and checkout/cash register systems that include payment acceptance capabilities – have traditionally been reserved for the largest merchants, MPOS and cloud technologies make these systems available for even the smallest of merchants,” says Rick Oglesby, senior analyst at Aite Group.
As well as offering customers a wider range of payment methods, MPOS technology also enables merchants to collect more detailed information about their customers’ purchasing behaviour, which can then be used to send targeted marketing to customers using their mobile devices.
Transaction bankers: wake up
With this type of technology set to transform consumers’ purchasing experiences, there are also implications for the world of transaction banking.
Oglesby argues that the new POS technology will mean banks need to make sure they have competitive product offerings. “As tablet-based integrated POS solutions become more mainstream, banks that are still out there pushing stand-alone payment terminals could start losing a lot of merchant relationships,” he says.
MPOS technology might also have a substantial impact on the dynamics of those relationships.
Ather Williams, head of global payments at Bank of America Merrill Lynch, says one of the impacts of MPOS technology is that banks will collaborate much more closely with merchants – particularly small and medium-sized enterprises (SMEs).
He says such relationships have tended to be conducted at arm’s length, with the bank at one end of the spectrum, the card association and merchant acquirer in the middle, and the merchant at the other end. MPOS technology could bring all of these parties together.
“For example, we could put our CashPro mobile app at the point-of-sale device, so merchants could look at all of their stores and settlement accounts, and could be able to transfer funds more seamlessly into their disbursement accounts,” says Williams. “There is an opportunity for us to get a little closer to the client and become more a part of their daily cash-flow forecasting process.”
Banks will also need to focus more closely on software as they look to compete in this evolving market.
Oglesby says: “This means either having their own in-house products and software servicing capabilities, or developing partnerships with software providers that enable the banks to compete in the software arena.”
He adds that the cloud-based nature of MPOS solutions mean many of the merchant relationships will be won by the software provider, rather than by the bank itself. “Banks need to be thinking about software providers as sales channels,” he says.
Meanwhile, many of the opportunities around MPOS technology are focused on the information that the technology can provide, for example about customers’ buying behaviour. By improving visibility in these topics, banks might be able to help their customers manage their working capital more effectively.
With so many different approaches to MPOS technology in the pipeline, Williams says the biggest challenge for banks will be keeping up with the pace of innovation, as well as identifying which standards to focus on from a systems point of view.
“It will require banks to rethink our infrastructure and how we provide access to our payment systems to the acquirer and the merchant,” he says. “It will basically require a new way of thinking about banking.”