Digital Payments Tracker® Series Report

How SoftPOS Is Poised to Revolutionize Payments

December 2023

Still in their infancy, SoftPOS solutions have been considered a niche payment method thus far, but signs indicate they are on the brink of taking the payments world by storm. These anywhere, anytime merchant payment offerings are helping to realize the dream of payments democratization — and setting the stage for the next phase in the digital payments revolution.

PYMNTS
01

The freedom to offer convenient, contactless payments without being limited to a wired device is likely to make SoftPOS a game-changer for small merchants and big players alike.

02

SoftPOS has obvious benefits for merchants that deliver services outside of a fixed location, but its benefits for brick-and-mortar businesses are becoming just as clear.

03

Contactless payments’ growing popularity with consumers is expected to drive explosive growth in SoftPOS over the next four years and beyond.

Register for Unlimited Access
Fill in the form below for free unlimited access to all our Trackers and Studies.

Thank you for registering. Please confirm your email to view all our Trackers.

    yesSubscribe to our daily newsletter, PYMNTS Today
    By completing this form, I have read and acknowledged the terms and conditions.


    Software point-of-sale (SoftPOS) solutions — known by various brand names, including Tap on Mobile and Tap to Pay — are a relatively recent development, but signs of their up-and-coming status are already on the horizon. The technology offers a wireless alternative to traditional POS systems that allows merchants to accept contactless payments using only a smartphone or tablet and a SoftPOS app.

    By untethering merchants from a fixed location or device, SoftPOS lowers barriers to entry for small businesses, liberating them to leverage the power of contactless payments nearly anywhere, whether at outdoor seating, food trucks, farmers’ markets or pop-up venues. However, SoftPOS systems promise to be a game-changer not just for micromerchants. With Big Tech and other payments heavyweights worldwide putting their money on the technology, industry players predict that direct-to-phone contactless retail payments could balloon everywhere — and fairly soon.

    What Is SoftPOS?

    The freedom to offer convenient, contactless payments without being limited to a wired device is likely to make SoftPOS a game-changer for small merchants and big players alike.

    71%

    of merchants in a recent survey think that SoftPOS will replace traditional POS payment terminals in the future.

    SoftPOS frees merchants from traditional retail settings.

    Traditional POS systems for electronic payment transactions consist of a combination of software and hardware for use in a traditional brick-and-mortar retail setting. They typically include a computer or tablet, a cash register, a barcode scanner and a printer. The system not only processes payments but also tracks inventory, generates sales reports and offers other features such as customer relationship management (CRM) and employee scheduling.

    SoftPOS, by contrast, is a software-based POS that runs on a smartphone or tablet without the need for additional hardware or systems. Contactless payments work via a type of wireless data transfer called near-field communication (NFC), which permits the sharing of information independent of an internet connection. This is what allows card terminals to read the chip on a debit or credit card, for example, or to accept mobile wallet payments. SoftPOS works by virtue of the fact that smartphones’ NFC capabilities are a two-way street: The devices can both send and receive signals. Merchants simply download a smartphone app that enables contactless payment acceptance, and customers tap their contactless payment cards to the retailer’s device to initiate payments.

    SoftPOS payments are a boon for on-the-go businesses.

    The benefits of SoftPOS for on-the-go businesses are self-evident. Merchants with venues such as food trucks, pop-up shops and restaurants as well as service providers like plumbers, electricians, contractors and technicians, cleaning service providers, locksmiths and vendors at farmers’ markets need portable POS solutions that free them to take their businesses on the road. These merchants also tend to have lower transaction volumes compared to brick-and-mortar shops, which may make the upfront investment in a traditional POS device less desirable.

    However, SoftPOS stands to benefit more than just a small segment of micromerchants. The technology holds several advantages over traditional POS systems that have merchants and consumers alike forecasting it to be the POS of tomorrow. A recent survey found that 71% of merchants believe SoftPOS will replace traditional payment terminals in the future, as do a similar share of consumers.

    Solving Traditional POS Pain Points

    SoftPOS has obvious benefits for merchants that deliver services outside of a fixed location, but its benefits for brick-and-mortar businesses are becoming just as clear.

    Traditional POS systems

    are linked to a number of payments pain points that are impeding businesses’ growth.

    SoftPOS solutions are a niche payment method, but are on the brink of taking the payments world by storm and may be the next phase of digital payments.

    Source: Beresford, M. It is time to re-look at SoftPOS to overcome traditional POS pain points. Edgar, Dunn & Company. 2023. https://www.edgardunn.com/articles/it-is-time-to-re-look-at-softpos-to-overcome-traditional-pos-pain-points. Accessed December 2023.

    SoftPOS can solve many traditional POS pain points.

    Traditional POS systems present a number of pain points that are hindering retailers’ growth — for which SoftPOS offers solutions. Among the most important are the following:

    1. Long wait times
      A store that has insufficient staff to operate checkouts may be subject to long wait times and lines, resulting in customer frustration and potential sales loss. SoftPOS systems can offer much faster service and checkout than traditional POS systems, reducing lines and customer wait times in stores. For example, checkout staff redeployed to shop floors and equipped with the technology can accept payments directly from customers while providing assistance throughout the store. This delivers a flexible shopping journey that frees staff to redirect their focus from checkout toward creating a customer-centric experience.
    2. Cost disadvantages of traditional POS
      Traditional POS systems demand not only a steep initial investment but also high maintenance costs, which can range anywhere from $3,000 to upward of $10,000 per year, depending on factors such as business size, industry, revenue and hardware needs. Such costs typically make fixed POS systems unaffordable to smaller merchants, but even large merchants suffer, with reports of retailers spending $200 million annually on POS-related maintenance. SoftPOS systems present cost advantages and require minimal training time and cost compared to traditional POS systems.
    3. Limited payment options
      While traditional POS devices can accommodate the typical range of card and other electronic payment methods, they may have a limited capacity to add popular newer or alternative options such as QR codes, PayPal or buy now, pay later (BNPL) methods, as these will require a change of software and, potentially, hardware. Upgrading software can run as high as $500 to $1,500 per POS device for traditional systems. SoftPOS, on the other hand, offers a wide range of contactless, mobile and alternative payment methods, along with security features such as encryption, tokenization and fraud prevention to ensure confidence in transactions’ safety and integrity.
    4. Poor analytical capabilities
      A retailer’s success depends on its ability to evaluate sales data for strategic decision-making, but this poses a daunting task for many retailers — including some leading players. This is because traditional POS systems often collect and store vast quantities of data in different silos and formats that make it a challenge to compare and identify sales patterns and trends. Large retailers, for example, may operate different POS components — such as inventory management, CRM and enterprise resource planning (ERP) — from different vendors. SoftPOS, however, provides a single source of real-time data through commercially available, off-the-shelf software, offering a one-stop solution for data-driven decision-making — essentially converting a retailer into a FinTech.

    SoftPOS Stands on the Shoulders of Contactless

    Contactless payments’ growing popularity with consumers is expected to drive explosive growth in SoftPOS over the next four years and beyond.

    475%

    Projected growth in global SoftPOS user base by 2027

    The rise of contactless payments is fueling a boom in deployment of software POS technology.

    A Juniper Research study last year predicted that the number of merchants deploying SoftPOS will skyrocket from 6 million in 2022 to 34.5 million globally by 2027 — an approximate fivefold increase. The research attributes this unprecedented rise to the growth in contactless payments, which themselves rose to prominence during the pandemic. The study noted that contactless payment volumes will more than double from 195 billion in 2022 to 408 billion by 2027, driving a consumer expectation of contactless availability everywhere, including from the smallest merchants.

    Major players are betting on acceptance of the technology.

    Big Tech is putting its weight behind SoftPOS as well. Payment giants PayPal and Venmo’s incorporation of the technology through apps is expected to bring SoftPOS further into the mainstream in the next 12 months.

    With upward of 130 million small to mid-sized businesses (SMBs) worldwide unable to accept electronic payments and looking for low-cost ways to do so, the SMB market for SoftPOS solutions is considerable. However, larger merchants are also gravitating toward the technology for its potential to create a more personalized and mobile checkout experience. Sephora, for example, has adopted a SoftPOS solution for its store associates to accept contactless payments on mobile phones.

    SoftPOS marks a major milestone on the way to financial democratization.

    Throughout history, technology’s greatest power has been its ability to democratize wealth by creating more inclusive opportunities and lifting the standard of living for all. SoftPOS represents a major step in this revolutionary progression by helping to level the economic playing field for smaller enterprises. Today, software solutions are eliminating the need for expensive physical equipment and the dependency on a fixed financial source — which will prompt more and more payments players to bring SoftPOS solutions to market to meet the growing needs of an enterprising, creative economy.

    Merchants Cannot Afford to Ignore SoftPOS

    Payment industry watchers see software as the future of payment acceptance, making the technology a potential major disruptor in the market. Merchants should take note of the following:

    • Nearly three-quarters of merchants predict SoftPOS will replace traditional POS systems at some point in the future.
    • SoftPOS can solve traditional POS pain points, making it attractive to all merchants, not just SMBs.
    • On the coattails of contactless, SoftPOS is set to see explosive growth in adoption over the next four years.
    • Payment industry leaders’ investments in SoftPOS solutions are expected to drive the technology further into the mainstream over the next 12 months.

    The retail experience continues to evolve, and as a result, a register affixed to a counter at the front of the store may not be the only way to check out. New technology like Tap on Mobile allows new use cases and ultimately the terminal to travel with us. I am excited to watch the evolution of Tap on Mobile use cases play out over the next few years.”

    Emily Foshee
    Vice president, Core Network Products

    SoftPOS is seen as an adaptable and innovative technology poised to support significant incremental revenue growth. … In the next five to 10 years, we anticipate a significant transformation in the tap-to-mobile landscape. The market is trending toward customization, aiming to tailor the payment experience to diverse retail environments. … We anticipate a shift toward a mobile-first and user-centric approach, replacing the default hardware-centric model.”

    Hervé Alfieri
    Chief revenue officer

    About

    Discover® Global Network, the global payments brand of Discover Financial Services, processes millions of cardholder transactions each day. With industry expertise, innovative technology and a closed-loop infrastructure, Discover Global Network provides effective, customized solutions that evolve as needs change. Discover Global Network has alliances with more than 25 payment networks around the world and is led by three Discover businesses: Discover Network, with millions of retail and cash access locations; PULSE®, one of the leading ATM debit networks; and Diners Club International®, a global payments network with acceptance in more than 200 countries and territories. For more information, visit DiscoverGlobalNetwork.com.

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writers: Alexandra Redmond and Inci Kaya


    We are interested in your feedback on this report. If you have questions or comments, or if you would like to subscribe to this report, please email us at feedback@pymnts.com.

    Disclaimer

    The Digital Payments Tracker® Series may be updated periodically. While reasonable efforts are made to keep the content accurate and up to date, PYMNTS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THE CORRECTNESS, ACCURACY, COMPLETENESS, ADEQUACY, OR RELIABILITY OF OR THE USE OF OR RESULTS THAT MAY BE GENERATED FROM THE USE OF THE INFORMATION OR THAT THE CONTENT WILL SATISFY YOUR REQUIREMENTS OR EXPECTATIONS. THE CONTENT IS PROVIDED “AS IS” AND ON AN “AS AVAILABLE” BASIS. YOU EXPRESSLY AGREE THAT YOUR USE OF THE CONTENT IS AT YOUR SOLE RISK. PYMNTS SHALL HAVE NO LIABILITY FOR ANY INTERRUPTIONS IN THE CONTENT THAT IS PROVIDED AND DISCLAIMS ALL WARRANTIES WITH REGARD TO THE CONTENT, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT AND TITLE. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF CERTAIN WARRANTIES, AND, IN SUCH CASES, THE STATED EXCLUSIONS DO NOT APPLY. PYMNTS RESERVES THE RIGHT AND SHOULD NOT BE LIABLE SHOULD IT EXERCISE ITS RIGHT TO MODIFY, INTERRUPT, OR DISCONTINUE THE AVAILABILITY OF THE CONTENT OR ANY COMPONENT OF IT WITH OR WITHOUT NOTICE.
    PYMNTS SHALL NOT BE LIABLE FOR ANY DAMAGES WHATSOEVER, AND, IN PARTICULAR, SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, OR DAMAGES FOR LOST PROFITS, LOSS OF REVENUE, OR LOSS OF USE, ARISING OUT OF OR RELATED TO THE CONTENT, WHETHER SUCH DAMAGES ARISE IN CONTRACT, NEGLIGENCE, TORT, UNDER STATUTE, IN EQUITY, AT LAW, OR OTHERWISE, EVEN IF PYMNTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
    SOME JURISDICTIONS DO NOT ALLOW FOR THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND IN SUCH CASES SOME OF THE ABOVE LIMITATIONS DO NOT APPLY. THE ABOVE DISCLAIMERS AND LIMITATIONS ARE PROVIDED BY PYMNTS AND ITS PARENTS, AFFILIATED AND RELATED COMPANIES, CONTRACTORS, AND SPONSORS, AND EACH OF ITS RESPECTIVE DIRECTORS, OFFICERS, MEMBERS, EMPLOYEES, AGENTS, CONTENT COMPONENT PROVIDERS, LICENSORS, AND ADVISERS.
    Components of the content original to and the compilation produced by PYMNTS is the property of PYMNTS and cannot be reproduced without its prior written permission.
    The Digital Payments Tracker® Series is a registered trademark of What’s Next Media & Analytics, LLC (“PYMNTS”).