What’s Holding up the Mobile Point of Sale?

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What’s Holding up the Mobile Point of Sale?

As powerful as the technology is, mobile-payment acceptance won’t go very far until solution providers start giving businesses the choices they’re looking for in hardware and processing platforms, says Bill Clark.

One likely cause for this slow growth rate is merchants’ fear that the potential disruption to their business will be too difficult to overcome. These merchants may indeed have a point.

Bill Clark is executive vice president and general manager at Apriva, Scottsdale, Ariz.

There are many elements to selling technology. Certainly, getting the customer to understand and accept the technology’s benefits is paramount. Then two other key factors come into play. Pricing is one, and this is usually the juncture where deals are won or lost.
But the other element in the technology-sales process is equally important, and it’s one that relatively few organizations adequately address. This is the disruption that technology poses to the enterprise or the user. Businesses may love a new product or application, but if it means a wholesale change of either institutional or user behavior, the barrier to adoption of that new technology will be very high.
This is certainly the case today in the mobile-payments space. As a technology, these solutions offer tremendous value to mobile merchants looking to accept card-based payments in the field. The benefits are very compelling: expanding sales and improving customer service by offering consumers convenient options to pay for goods and services. Merchants can also leverage these applications to lower their own operating costs by improving cash flow, potentially decreasing interchange costs (card-present rates), and eliminating the expense and security risks associated with cash.
And yet, adoption rates for mobile-payments services may take a while to reach critical mass.
According to a recent report from Mercator Advisory Group, there are some 16 million merchants in the United States that use smart phones. Yet the report estimates that the projected adoption rate among these users is only expected to reach about 1.4 million merchants in 2014—fewer than 10% of the estimated users. One likely cause for this slow growth rate is a fear among merchants that the potential disruption to their business will be too difficult to overcome. And, when looking at the way certain providers structure their solutions, these merchants may indeed have a point. 
Closed-Solution Approach
It is a fact that that many vendors tailor their offerings to work only with specific endpoints, processors, banks, or networks. In reality, this model scares off prospective customers, who may be fearful of being locked in to a single solution, and stifles adoption rates.
Integrating any new technology into a business offers the potential to disrupt daily business operations. We often see customer pushback when a new provider requests that organizations purchase specific equipment or software to leverage new technology. The customer’s angst is even more profound when a provider mandates that customers forgo their preferred tools that they’ve come to rely on simply because the provider’s own solutions do not support them. It seems odd to force businesses to replace products, applications, and services that continue to meet their needs. Yet, this is the situation that many customers find themselves in with regard to mobile payments.
Most merchants looking for these applications are small businesses. In all likelihood, these businesses rely on smart phones and browser-based devices to handle voice communications, e-mail, and a variety of other tasks. Many of these same devices can very easily be used to process card-based payments in the field, and as Mercator’s research bears out, there is a healthy universe of merchants that would benefit from using their phones as mobile credit card terminals.
But while the business results from mobile-payment processing are readily acknowledged, one of the biggest inhibitors of adoption is this closed-solution approach espoused by numerous providers. These solutions require merchants to use only specific phones, merchant-acquiring banks, and credit card processors that are compatible with the provider’s services. It doesn’t make sense to force change on a merchant, yet that’s exactly what happens in the closed-solution environment.
An even more fundamental division occurs when it comes to managing the relationships between merchant and card acquirer. Very few mobile-payments providers are certified on multiple processing platforms, leaving merchants with a limited ability to negotiate rates and fees for facilitating card-based payments. In addition, many merchants have existing relationships with card-acquiring organizations to manage their on-premises credit card transactions. Asking these businesses to migrate to a different processing platform just to use a specific mobile-payment platform is operationally disruptive and counterproductive.
Yet, many cashless-payment providers structure their services to work with only selected card acquirers and processors, forcing merchants to weigh the economic efficiencies of cashless vending against the pain of supplanting existing relationships with other providers.
Status Quo
It is clear to all who follow the payments industry that there is a definite desire on the part of the small business to accept and process payments in the field. Instead of limiting options, mobile-payment processing providers should broaden their solutions so that as many merchants as possible can easily leverage these tools. Mobile-payment applications should work across multiple devices seamlessly and transparently.
There are scores of businesses that send out technicians and service-repair professionals who use personal devices for communicating. Developing applications that work across the iPhone, BlackBerry, Android, and browser-based platforms as well as traditional made-for-purpose terminals will certainly keep these mobile-payment solutions accessible.
The same is true with card acquirers. Closed applications that are not certified with multiple mobile platforms limit the appeal of these solutions. Merchants want the flexibility to choose the mobile platform that satisfies their requirements. It only makes sense that providers accommodate this need by supporting multiple platforms that offer the merchant choice, flexibility, and simplicity of use.
Most small businesses understand the profound benefits of mobile-payment processing. But unless providers can offer the flexibility and choice that merchants demand, many businesses will continue to settle for the status quo.