Back in the day, the face of the point of sale was literally that — a face. The face of your friendly neighborhood store clerk, who recorded transactions in a ledger. The ledger gave way to a cash register, which itself eventually evolved into a modern, computerized POS system.
The evolution is still happening, and the face is still changing. What will it look like? MPD CEO Karen Webster recently hosted a webinar — joined by Hitesh Anand, from Verifone; Brent Owens, from Digital River; and Will Graylin, CEO of LoopPay and GM of Samsung Pay — to find out.
LET’S GET INVISIBLE
Webster began the discussion by pointing out that the rise of mobile technology has created a situation where POS is no longer just about payments. In fact, the goal for many merchants is to make payments invisible at the point of sale, push it into the background in favor of aspects like loyalty and personalization – things that, while not as obviously immediately as valuable as a payment, can create a lot more worth in the long term.
Anand drew the analogy between the point of sale transformation in this regard and what happened with mobile phones. The latter once was exactly as advertised: a device used to make phone calls while mobile, and nothing more. But then came SMS, MMS, and eventually smartphones – mobile phones that today can be used to perform a wider variety of tasks than a PC could just five years ago. From the Verifone perspective, Anand sees that paradigm shift – a single-purpose device becoming a multipurpose, daily use device – applying nicely to point of sale.
THE BATTLE FOR THE LAST INCH
Speaking of mobile integration at the point of sale, Graylin described LoopPay technology as breaking past the “last inch” barrier between mobile devices and POS. This applies not only to smartphones, but any connected device: an Internet of Things device, a smartwatch – anything that’s not a traditional plastic card.
Limiting point of sale devices to interacting with a plastic card – be it inserted, swiped, or tapped – inherently excludes an echelon of payment methods. Graylin asserted that LoopPay has overcome this “last inch” by opening up contactless capability across the board, fostering a behavioral change in consumers that may wean them off plastic-card dependency.
CHECKING OFF CHECKOUT
Whether it’s contactless payment or not, Webster brought up a remaining obstacle: in-store checkout, in large part, still requires a customer to interact with a secondary, tangible POS. One has to wonder what it will take to put the entirety of the checkout process onto a mobile device and make it as simple in stores as it is online.
Owens offered that SelfPay, a Digital River/Beanstream product, is an app that does exactly that: it lets a customer scan product barcodes, tally the total and –when he or she exits the store – it automatically deducts the amount from his or her credit card and pays the merchant.
Of course, for something like SelfPay to catch on, consumers will have to get used to that new model of shopping – and so will merchants. According to Owens, the adjustment levels on either side of the POS are moving at essentially the same pace. As he put it, discussing Beanstream’s Sprout POS (a mobile point of sale product), if something new is easy for the customers, it’s easy for the merchants.
Anand added that a deciding factor in making certain types of new POS technology such as SelfPay ubiquitous will be finding the balance between convenience and security. He regards things like order-ahead processes as something a little more trustworthy, at this stage of the game.
THE MERCHANT POV OF POS
Graylin has been talking to merchants, as well, and he told Webster that the most important thing for them is to be able to find and keep customers. And those are two very different things.
“As we move more and more into the digital world from the physical,” said Graylin, “we’ll see that different kinds of merchants engage their customers in different ways. And because of that, they’re going to use different channels to engage those customers.”
Any tool that can engage a customer is one that is going to be attractive to a merchant. In that regard, Graylin sees the digital wallet as potentially a big mover in the space.
For his part, Owens reported that he is hearing from merchants that they don’t want to invest in different systems to collect payments in different ways.
“The age of going from scanning in the items in one terminal…to…[entering] in the dollar amounts in the actual payment terminal – that’s going to be going away soon,” he remarked. “And I think merchants…really want that. They want the more seamless interaction [in an omnichannel environment].”
THE REALITY OF OMNICHANNEL
Webster agreed with Owens that omnichannel is the direction in which things are headed. The question that lingers, however, is how difficult it will be to make omnichannel efficient.
Owens believes that it depends upon the technology. He referred again to Sprout POS – which provides a payment terminal that allows third-party app developers to integrate their apps into it – as an example of a technology that makes things easy.
Anand told Webster that he hears three key concerns from merchants regarding omnichannel implementation: security, relevance, and establishing future growth with customers.
While Graylin believes that omnichannel is “already here,” he acknowledged that it is not as easy as it could be, still experiencing some amount of friction. He suggested that this friction could be reduced by putting omnichannel into a digital wallet that a consumer can easily use.
Fielding listener questions during the live webcast, Webster noticed that many dealt with two major themes:
- How will digital environment change the delivery of offers, coupons and inducements to sale?
- Will it change the business model around payments?
In addressing these questions, Anand provided the example of bill payments via a financial institution: at first, it was a service that the consumer paid for. But today, it’s provided free by the bank. Speaking as a consumer, Anand remarked that “that makes me sticky to my bank.”
He believes that a similar process will happen around payment business models. Payments will no longer be the core revenue generator; rather, that role will be fulfilled by the data that consumer payments provide.
Graylin shared his belief that the next generation of POS terminals is going to be systems that are more open, easier to develop apps for without certification constraints, and add more value.
Regarding that notion, Owens observed that it is already a reality, to some degree, as there are in the marketplace several apps that provide value-added service for merchants at the terminal.
What’s not quite working yet, said Owens, is the matter of communication between those apps. Once they do begin integrating more seamlessly, according to him, it “might change the business model.”
Anand offered that Verifone is currently in the process of allowing apps to talk to one another.
INNOVATION(S) AFTER NEXT
Webster posed the question of whether the new face of point of sale is where innovation needs to happen, or if there is something further down the line to look to in that regard.
While POS devices are getting more sophisticated, Graylin attested that combining security with freedom for app development can open up more services that POS makers can share in and merchants have more options to deliver value.
“But none of us,” he added, “are going to see the end of cash soon, nor the end of plastic. Digital will not be ubiquitously accepted.”
Owens agreed with this point, saying that “jumping to a tablet [entirely] will limit customers who like cash” and/or don’t have a smartphone or a digital wallet.
Additionally, Owens reiterated the concern among merchants regarding security in new POS terminals.
IS IT SAFE?
Speaking of security, Webster shared her own observation that – knock on wood – there hasn’t been much news lately about POS breaches. She wondered what her guests made of that.
Anand listed three factors that are making the POS more secure: EMV, tokenization, and Verifone’s Secure Commerce Architecture (SCA). SCA he explained thusly:
“In the current paradigm, the POS or the register has a full package of payment data, or PAN number – [which is] hackable. Verifone launched SCA, which takes POS outside the purview of the payment data. All the merchant holds is the cash value of the [transaction],” so even if it is hacked, there’s no data that is useful to the fraudulent actors.
Of course, Anand noted that fraud is not going away completely; it will simply migrate to areas other than payment.
Graylin agreed that as fraud evolves, so does security. What will aid in that fight is tokenization, a security aspect that LoopPay addresses broadly.
THE MANY FACES OF TOKENIZATION
Owens described tokenization as “wonderful,” because it creates less to worry about regarding PCI compliance and absolves apps from having to store PAN data.
“What’s missing,” he observed, “is education on the merchant level. Some of them maybe aren’t quite aware of where they can have security breaches. We need to reach out and help.”
Anand stated that all three types of tokenization – network, merchant, and point of sale (where Verifone is focused) – have a role to play, and that all of them solve different problems.
As for the notion that tokenizing the PAN will remove a merchant’s access to valuable things like loyalty offers and CRM applications, Anand responded that that is a myth.
He explained that “current implementations were based on getting the real PAN number stored at merchant databases. Once that is changed, CRM issues can be solved very easily.”
To listen to the full digital discussion, view the video below.