When myPOS launched in 2014, cash was still mostly king among small businesses. In fact, as Andrew Byrne, COO at myPOS, told Karen Webster, in some places it still is.
Camden Market, Byrne noted as an example, is a popular destination in London that bills itself as a place to “eat, drink, shop and dance.” All of which are true, Byrne said, so long as one has pounds in their pocket – because many of the merchants in markets don’t take cards, and will politely direct customers to the nearest ATM when they try to pay with one.
But, Byrne continued, customers have changed tremendously over the last three or four years, as they’ve become increasingly accustomed to smoother and frictionless experiences across the board in commerce, powered by the smartphones they’ve been carrying in their pockets for the last decade.
Today’s consumers are much less tolerant of not being able to access a card or mobile-backed payment when they want one, and the expectation of carrying cash is becoming increasingly foreign.
“Today, in major cities like London, people are usually walking around with less than 20 pounds cash on them, if they have any at all. When they go to their cafe, they expect that cafe is going to take their card, and if they can’t, there’s a problem,” Byrne said.
A problem that, as of 2018, is going to end with a lost sale for that small merchant.
To prevent that loss, myPOS aims to make it easier and cheaper for merchants to access the payment methods their customers most want to interact with.
Minding the Gap
For a long time, the foundational problem for SMB and digital payments in the U.K. and Europe, Byrne noted, was just simple access. Banks can be reluctant to take on small players, generally preferring to work with larger, more stable and secure enterprises. It’s an understandable position, Byrne noted, as small businesses are higher-risk because so many are harder to recruit onto any platform. It’s more time-consuming, “feet on the ground” work, he said.
But that focus on big players also excluded 95 percent of businesses, which is a pretty large segment to leave underserved.
“Which meant that gaps opened up to create solutions for entrepreneurs who need access to products that just weren’t previously being developed,” Byrne noted.
And more than just simple access, small businesses needed that access to be affordable.
Taxi drivers have been a massive vertical for myPOS, because their alternative to taking card payments involves a piece of equipment for which they have to pay a monthly fee. Paying for payments is singularly unappealing for most small businesses, Byrne noted – and in the cases of some independent operators, it doesn’t make economic sense.
“Traditional POS is too expensive for most small businesses, and they are getting charged a lot per month. So we say they can have our device too, and pay as they go. If you have our machine in your cab and you do three or four fares and go home, that’s fine. You aren’t paying every month for the terminal; you aren’t on a fixed contract.”
Payments shouldn’t feel costly to the merchants that take them, Byrne told Webster. And while making the price structure more predictable and affordable is important, it’s not enough. Cash flow matters – and it’s never an issue when one is paid in cash.
Digital payments, on the other hand, can involve just enough waiting to be a small problem for small businesses that always need their funds right away.
The Power — and Perils — of Instant Payment
Cash can be clumsy and difficult to deal with, but it does have the benefit of being immediate. Card payments, on the other hand, need time to settle, usually between 24 and 72 hours – which doesn’t work for a lot of small businesses that need their funds instantly, said Byrne.
So myPOS offers their funds that way – as soon as the card payment is approved, the funds go instantly to an eMoney account for the merchant. If the merchant wishes to transfer those funds to a bank account, they can do so – again, instantly.
This means, in terms of access, the card payments now feel very much like cash, to the extent that a merchant can immediately turn a payment into cash with a trip to an ATM.
As Webster pointed out, that does mean that myPOS has to carry some risk – particularly in the event of a chargeback.
Byrne conceded that there is a risk, but noted that 94 or 95 percent of the transactions they process are card present transactions, which carry very low risk in a chip-and-pin environment.
“It is actually very unlikely that someone will have a chargeback to their local coffee place, and so we are happy to take the risk of bearing the two-day window.”
However, because myPOS also helps their merchant clients take payments online – and hence process the riskier card-not-present (CNP) transactions that fraudsters have come to favor in recent years – they do face some additional risk.
Risk, Byrne noted, that can be managed through the fees merchants are charged for payments and by the reserve they are charged for CNP transactions. Essentially, risk can be priced into their service – and as a management model, they’ve seen no problems so far.
Building Out from Payments
Beyond offering an expanded menu that delivers many of the same benefits as taking cash – while eliminating the many emerging troubles of being cash-locked in the digital age – the question then becomes how to take that power and help merchants do more with it.
That means the offering has to always be flexible, because the question always to be answered is how to build other offerings and services around the payments themselves. That can mean things like making it easy to offer gift cards for merchants, or the ability to offer pre-authorization services so that a business that, say, offers services or rents out rooms can verify that a card is valid without necessarily having to place a full charge upfront. It means making sure the ability to take cards is always paired with the ability to take contactless payments, which are increasingly taking off across Europe.
“Consumers like contactless via a mobile wallet – it’s sleek, it looks good and it is both quick and easy. The world is more automated, and I think everyone is looking for a quicker and easier way to spend their money,” Byrne noted. “Especially if it is a small amount of money, and you are standing there with a phone already in your hand, you want to be able to wave it and go. We know our merchants want to be able to provide that for their customers.”
Moreover, he continued, myPOS is designed to be ready for even more exotic payment situations, by making it possible for merchants to actually send out a fully secured bespoke payment request. This is basically a payment link with a preset amount that the merchant sends to their client via email, SMS or even chat.
Once the client clicks the link, they are redirected to a secured payment page, where they enter their details and complete the payment process. In a recent case study with City Pads London, an accommodations provider for a large and global audience, the ability to customize and send out those bespoke payment requests is particularly important to providing a smooth experience for a very diverse customer base.
“Offering a variety of payment options is crucial for our business, as most customers are technologically-savvy and are looking for the most convenient ways to book and pay,” said Michael O’Brien, director of City Pads London. “myPOS gave us the opportunity to accept distant and in-person payments, without the burden of subscription fees and binding contracts. In addition, we got access to free online banking and lots of additional services.’’
For myPOS, Byrne noted, what comes next is very similar to what has come before: a continued push to build out what their merchant partners want and need when it comes to payment and the attendant services built around it. He believes that the use of contactless payments will continue to climb, as will the limits on how much can go out in those purchases.
More broadly, for the payments industry as a whole, Byrne said he suspects a massive and concerted push toward biometrics – not just as a means to verify consumers’ identities when they want to pay using, say, their phones, but instead as the payment method itself. The day is coming, possibly sooner than many people think, that biometrics – like the fingerprint ID and facial scanning that have become prevalent on all of our phones in the last three or four years – are actually going to be what we use directly for transactions, both at the point of sale and at places like ATMs.
If passwords, PINs and cards are all fairly easy to steal, Byrne noted, a biometric is not, unless one happens to be willing to steal the whole person. And though previous pushes for biometric payments have not been quite roaring successes, he thinks that as of 2018, consumers have become so enamored with speed and so accustomed to automated processes and biometric scans that this will just feel like a natural extension.
Timing, he said, is everything – and the time is right for digital payments. Because to dethrone cash as king for smaller merchants, according to Byrne and myPOS, digital payments need to be able to both deliver the benefits cash brings and then expand upon them.