“The biggest challenge we face as a commerce ecosystem is to drive value on both sides — that’s where you need both hands clapping in sync. That increasingly means enabling smaller players in the system that are reticent to becoming digitized at the point of sale.”
That was James Hicks, EVP Global Acceptance and Solutions at Mastercard, explaining why Mastercard has invested so much time and energy into rethinking how to get these smaller players on board — and moving from cash to digital payments. Particularly when the smallest of the smallest merchants are concentrated in developing markets.
The potential value is there for any merchant, Hicks noted, since digital payments are a tool that can “drive success” — and for the obvious reasons.
What’s different, he said, are the obstacles that must be overcome to get the smaller merchants fully engaged.
“What every small business we talk to says is their biggest concerns are cost and complexity,” he said, regardless of whether they operate in developed or developing markets, he added.
Easy, Safe and Ubiquitous
The problem seems to start and end at the point of sale — and the costs associated with becoming a merchant and buying POS devices. If they get past that, small and micro merchants worry that they will have to master learning an expensive new hardware system.
“We asked ourselves, ‘What will really solve the problem?’” said Hicks. “And that’s when it clicked. What if we could enable merchants to accept payments without having to buy peripherals — really turning the mobile phone itself into the mobile point of sale?”
This mobile phone as point-of-sale solution is being exploring through a variety of pilots around the world. In the U.K. and Poland, for example, Mastercard is working with Worldpay and local partners so that consumers can make contactless payments (via a mobile device or NFC-powered contactless card) by tapping their contactless card or smartphone (using a digital wallet, e.g. Masterpass) on the merchant’s device, which is able to accept payments that way once they download the Worldpay app, which sets up their merchant accounts and enables acceptance on their smartphone.
“It can’t get easier than this,” Hicks noted.
But the solution, he said, can’t just be easy for consumers — it also has to be secure.
Hicks said that one of the objectives of the various pilots around the world is testing how easy and secure these solutions are to use — for both consumers and merchants.
“The pilots are seeing what we can do to check off easy, safe and then we get into can it be ubiquitous. If we can solve for the first two things, can we believe in a market where this could be ubiquitous? Can we commercialize it or monetize it — and are there industry standards that need to be created around it?”
It’s three very big hurdles, Hicks noted — and nothing that can be cleared in a single bound. But the race is engaging nonetheless, because the potential rewards can’t be ignored.
The “Huge Prize”
All small businesses are in some sense large businesses that haven’t grown all the way up yet, Hicks said. The ability to switch on payments with nothing but a phone creates a world of rewards for all parts of the commerce ecosystem.
“The prize is huge. Today we are focused on the payment component — but … going forward, a whole world of capabilities can reside besides that,” Hicks emphasized.
For merchants in emerging economies, he said, it’s also the beginning of being included in a mature financial services and payments market. For those in mature markets, it’s an important first step in getting the benefits of accepting digital payments.
Devices aren’t going away, Hicks emphasized, and Mastercard’s solution is one that helps those small businesses waiting to grow up and grow into more sophisticated POS solutions that come with dedicated hardware. But, Hicks said, software can be that bridge helping small merchants make big inroads in a world that is become more digital every day.
“When you look at all of these programs around the world, we are continually expanding our market and brand to match a commerce environment where the channels are merging. We want to [help] merchants — especially the small merchants — to meet their customers any place they want to do business.