The key to higher acceptance rates for cards, lower fees for merchants, and better security lies in moving the point of sale from hardware to software, says Sam Shawki.
There is no doubt that the continued progress in moving to digital forms of transactions has made a big impact on the global economy. There is also no doubt that the key to helping push this move further is on the acceptance side.
After all, if your local merchant or mom-and-pop store only accepts cash, there is nothing you can do other than pay in cash. Many small and medium-size businesses and individual contractors only accept cash or checks. In fact, the U.S. remains behind Europe when it comes to moving away from checks, and in many other countries, even larger merchants only accept cash. While there are many reasons why certain segments of merchants do not accept cards, one big reason is the unjustifiable cost the merchant has to endure. Case in point: 55% of small businesses in the U.S. still don’t accept credit cards.
If the payments industry is ever going to achieve its lofty goal of nearly doubling global card acceptance from 47 million to more than 90 million devices by 2020, it’s clear that reducing the cost of acceptance is exactly how we will get there.
Moving away from hardware is crucial to such a transformation. Think of it this way: In an era where everything is virtualized and downloadable, why do we still have to contend with arcane, specialized devices to accept payments? As with my Nikon camera and my Sony CD player, acceptance devices from the likes of Ingenico, VeriFone, and even Square will eventually disappear and be replaced with mobile apps.
As is usually the case in business, the move from hardware to software in payments is gradual. It started with Square, iZettle, PayPal Here, and so on. But one big obstacle to getting to a downloadable point-of-sale acceptance device that you and I can use is the fact that the keypad that’s used to enter your PIN remains a hardware requirement. While PIN usage is still limited in the United States, it’s a requirement in most of the world, and the U.S. is expected to move in this direction.
Three Key Benefits
Enter PIN on Glass technology, which transforms regular mobile devices into full-featured POS systems capable of securely accepting payment card PINs on a touchscreen. PIN on Glass stands to revolutionize retail payments for merchants and financial institutions as it improves transactional security, lowers the cost of card acceptance, and increases card-acceptance rates.
Also, by enabling higher credit card acceptance rates for consumers and lowering costs for merchants, PIN on Glass offers a societal benefit. It broadens the digitization of payments worldwide. Many even think that PIN on Glass could have an impact on gross domestic product in certain countries.
Here are three key benefits that PIN on Glass technology brings to consumers, merchants. and banks alike:
- Better security for consumers.
The reality is, PIN technology is far more secure than relying on a signature. For example: Fraudsters can easily use lost or stolen EMV cards when a signature is used as a verification method, and merchants are unable to decline an untrusted transaction if it’s been approved with signature verification.
- Affordable card acceptance costs for merchants.
Since PIN on Glass doesn’t require merchants to purchase expensive, dedicated payment terminals and instead leverages existing, regular mobile devices, the technology significantly lowers the cost of card acceptance. That’s a critical factor in coaxing more small businesses to accept credit cards rather than continue to rely on cash and checks.
- Greater payment volume for banks.
PIN on Glass offers banks that issue EMV debit and credit cards lower POS fraud costs, higher purchase volumes, and increased merchant demand for EMV PIN at POS. Furthermore, EMV PIN solves for lost and stolen card fraud, addresses merchant demand that EMV be enabled for PIN, and lowers the cost of acceptance for merchants, which in turn boosts payment volume on bank-issued payment cards.
By replacing the need for hardware-secure elements to build, deploy, and remotely provision and manage POS systems and other Internet-of-Things devices, a software-based approach to payments is capable of impacting our entire economy by enabling growing businesses to more easily join the digital age.
Specifically, a software-based approach can offer mobile-screen security and protection of data entry and financial PINs with or without a secure card reader. And where card readers aren’t required, it can enable secure tap-and-pay applications.
A software-based approach can also allow for operating-system security for next-generation POS systems that replace the need for expensive security chips and eliminate the headache of updating entire operating systems for POS device vendors. In addition, it enables remote monitoring and over-the-air upgrades across the board.
Doing away with single-purpose, proprietary POS systems and embracing the unique capabilities of a software-based approach to payments will increase payment networks’ transactional volumes, allowing the entire payments ecosystem to grow unencumbered by the constraints of costly, legacy POS systems.
A pitfall that we are worried about is that when we move to software, there are other, lower-security techniques, like white-box encryption, that can meet some of the new standards. We worry that some may go this route. This can impede the move to software and cause concerns.
PCI Gets on Board
Luckily the PCI Security Standards Council, of which we, and many of you, are members, has embraced a software-based approach to payments. A full draft of relevant PCI requirements will be finalized in the next few months. The specifications put a framework in place that will allow the right technologies to start coming to market and get adopted.
The key to strengthening mobile commerce is improving acceptance at the point of sale. Acceptance rates will only improve if we begin to move beyond the proprietary, legacy, hardware-device model and embrace software capable of downloading fully-featured POS systems into any off-the-shelf mobile device.
—Sam Shawki is chief executive and cofounder of MagicCube, Santa Clara, Calif.