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Innovation is thriving in the payments industry. Fuelled by digital transformation, many technological developments have been implemented in the past few years, resulting in a greatly enhanced customer journey. Contactless payments, digital wallets, self-service checkout, omnichannel, BNPL, are examples of tools and methods which are becoming parts of our daily life.
This cycle of innovative changes is not about to stop. There are some exciting technologies which are in early stages of development and which we believe will become prominent in the ecosystem as well. I include Software Point Of Sales (SoftPOS) as one of these.
How SoftPOS works
The purpose of SoftPOS is to transform an NFC-enabled smartphone or tablet into a certified payment terminal just by adding specific software, but no additional hardware. Typically, it applies to a commonly available, Commercial Off-The-Shelf (COTS) device. Some companies however develop specific Android OS devices for their customer’s business, and later add further features, such as Zebra Technologies, Toshiba, Diebold Nixdorf, amongst many others. These are known as “enterprise devices”.
Because SoftPOS relies upon a device into which you can plug software for payments, the mobile, tablet or enterprise device can also embed additional core and/or business applications.
Android is not the only OS provider that has been adapting this technology. Apple has its own capabilities with a closed working environment. The company has announced the introduction of a solution capable of transforming an IOS device into a payment terminal which is already live in the US. On top of this, the biggest card providers in the market – Visa & Mastercard – have already built their own certification / authorisation solution.
These adopters are clear indicators that SoftPOS technology represents a key milestone for the payment industry.
SoftPOS technology allows smart devices to become secure payment terminals. Furthermore, this terminal will be compliant with all relevant PCI standards required for payment processing. These include the PCI Contactless Payments on COTS (CPoC) Standard, which was adopted in 2019 and which prevents a device from paying beyond the contactless limit (with the exception of dedicated certification programs such as Visa and/or Mastercard) that can be used in conjunction.
Very recently, on 16th November, PCI introduced its latest standard - Mobile Payments on COTS (MPoC) which integrates the latest requirements for developing SoftPOS technology allowing merchants to accept contactless payments on COTS devices, with PIN (Personal Identification Number) and PAN (Primary Account Number) on glass for amounts above the contactless limit.
Benefits for customers
Innovation ideally matches the changing needs and requirements of customers. In the retail, and other industries, SoftPOS has many use-cases and benefits: endless-aisles, assisted sales, pop-up stores, queue-busting, payments on delivery, ticketing etc. For instance, customers already have the ability to pick and order goods and services online as well as pay on their mobile. This is quick and convenient. However, we believe SoftPOS will also enable a simple process while paying in and/or out store. Customers want to avoid the queue; order an item online if not available in store, but pay for it simply and directly from the sales staff equipped with a SoftPOS payment terminal
Another sector in play is hospitality; principally restaurants. Once guests have finished their meal, they need to inform staff that they want to pay and wait to receive the payment terminal. Not to mention that said POS may be already in use causing further delay. However, with SoftPOS the restaurant staff may use the same device to order and get paid for the meal simultaneously.
Benefits for merchants
The most obvious advantage for merchants is the capacity to use only one device for their core business application and payment processing. Of course, linked to that is sustainability and cost reduction, because merchants will no longer have to purchase a specific payment terminal, or handle maintenance concerns as the Android OS enables upgrades to be installed smoothly.
Merchants are always looking for new ways to simplify and improve their customer journey whilst cutting down on costs. We see SoftPOS as a perfect fit and that is what makes this technology so appealing.
Obviously, there are some elements that make us think the ideal business strategy for merchants entails a combination of SoftPOS with traditional payment terminals. The technology as of today, still has some limitations. Having said that, the technology provides huge benefits already – with all the development of specific terminals with specific requirements and (depending on the environment) additional features, all the card scheme possibilities everywhere. So again, it’s in the early stages, for sure there will be some interesting developments soon.
Looking froward, how will this technology find its place in the existing ecosystem? I believe that SoftPOS will become a complementary solution existing alongside traditional payment terminals. I have been discussing with large merchants at some main industry events, such as the Paris Retail Week this past September, and my feeling is that they are extremely interested in this technology but want to have it work alongside traditional payment terminals.
It’s hard to say what will happen in the long run. In my opinion, SoftPOS may entirely replace traditional payments, but most certainly not tomorrow or the day after. The whole ecosystem will need to change, and this is a protracted process that will take several years.
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