Point of Sale (POS) payment acceptance was once a relatively sleepy, almost commodity-like extension of the merchant acquiring business, with a handful of standard terminals manufactured by Verifone, Hypercom and Ingenico that were sold and deployed via merchant acquirers and ISOs. These POS systems were joined by the large, integrated software solutions provided by IBM, Microsoft and others that integrated directly into the electronic cash registers at larger retailers.
Today, however, the POS landscape has become a major front in the war for control over customers and merchants in the overall payments value chain. In addition to major innovations from terminal manufacturers, systems integrators and POS specialty solution providers like Aloha (Radiant) and Micros, surprising new players like Apple and Square are entering the market with potentially game-changing innovations. Merchant acquirers and retailers worldwide are also spurring changes, promoting the adoption of proprietary loyalty solutions, mobile payment options and other POS changes. (Related Briefing Room: Innovation at the Point of Transaction)
Although the specific changes vary by region, some common trends are driving these changes: 1) Internet ubiquity at the point of transaction; 2) wireless proliferation and 3) emergence of more sophisticated loyalty solutions.
The shift from dial-up telecommunications to Internet Protocol (IP) POS access enables more services and value to be delivered to customers at a physical POS without the need for major hardware changes at the physical POS. Once relatively rare, now nearly all retailers have access to IP in their retail stores, making it possible to deliver new payments solutions to merchants via IP-based terminals. The result will be an explosion of new capabilities that integrate traditional terminal functions with new loyalty, marketing, and information services. Many of these new solutions will take advantage of SaaS innovations that are delivered via “the cloud”. (PYMNTS University: Cloud Payments 210 (required): Building Value in the Network)
Expansion of wireless service delivery and widespread broadband access has helped create an explosion in wireless payment devices. In addition to specialized NFC-oriented peripherals like the Vivotech NFC reader, all major terminal manufacturers offer wireless POS terminal options that have gained significant adoption over recent years. Popular wireless terminals like the Nurit 8020 (Verifone), Verifone VX610, First Data FD400, Ingenico’s i7910 or Hypercom’s Optimum line offer merchants the security and printing benefits of traditional terminals, with the flexibility of a wireless form factor. In addition, more service delivery companies have begun to equip their personnel with wireless devices that do everything from capture signatures for package delivery to handling complex service transactions. It is easy to see how these type of devices will be modified to incorporate payments as well, either via traditional card methods, or via web-based alternatives like PayPal.
With the extension of significant processing capabilities to mobile phone handsets, particularly web-enabled smartphones like the iPhone, Blackberry or Android phones, POS payment options have been evolving further to allow consumers or small businesses to adapt standard mobile phones to accept payments as well. Many players have recognized the powerful influence the iPhone is having in the device market, by creating “plug in” card acceptance products that work with the iPhone. VeriFone has partnered with both First Data and Elavon to distribute a secure card reader and payment application that creates a secure payment solution for the iPhone. At the same time, upstart payment company Square has created a small card swipe peripheral for the iPhone that works with a new payment acceptance solution that enables small merchants to accept card payments via an iPhone or iPad without a traditional merchant account.
As if to highlight its role as a leader and iconoclast, Apple too has introduced a new POS payment innovation. Familiar to anyone who has shopped in an Apple store, the Apple EasyPay solution uses a modified version of an iPhone with a built-in infrared bar code scanner and card swipe to handle card payments from anywhere in an Apple store. Earlier this month Apple began piloting this device and its accompanying payment application at select Old Navy stores under the name ZipCheck. This solution demonstrates how mobile devices can be used to transform how payment is made, even in physical stores, shifting the point of transaction from the back counter to wherever the customer is interacting with the merchandise.
At the same time as mobility is becoming more prevalent, many merchants are looking to find ways to modify the POS to accommodate new loyalty capabilities, many of which take advantage of mobile innovations. In a world where many loyalty programs still leverage paper “punch cards” many retailers and solution providers are looking for new POS options. Moe’s Southwest Grill created a customized mobile/text-based loyalty program that reduces customer fraud, electronifies redemption of rewards, and provides Moe’s with a database of loyal customers for text-based marketing offers. Another major quick service restaurant player, Starbucks has been juggling multiple POS solutions, building not only on their successful loyalty card program, but also piloting a bar-code scanning POS payment solution that links to their prepaid program. Still others opt for straightforward mag-stripe loyalty programs that integrate easily with POS systems like Micros and Aloha.
Ultimately, all these changes have significantly changed the landscape of the once stodgy POS industry, driving a host of innovation from service providers, technology players and merchants themselves. These trends, fueled by technology change, regulatory intervention and changing customer expectations will have significant impacts on the cost of payments at the point of sale as well as the range of places and ways payments will take place, in the physical and virtual worlds.
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