Mobile POS Picks up Steam As Costs Fall and Capabilities Rise

Falling technology costs and the increasing availability of more sophisticated cellular networks are driving a growing trend toward wireless point-of-sale devices, according to research from TowerGroup, a consulting and research firm in Needham, Mass. The firm's research indicates that while mobile terminals are still a small fraction of the installed based of 12 million card-acceptance devices in the U.S., “the number of m-POS systems will continue to grow” as merchant segments that are highly dependent on mobility?such as door-to-door merchants, street vendors, and taxi companies?look to replace cash and check acceptance with card acceptance. Even sit-down restaurants are starting to adopt the technology to enable card acceptance tableside and in outdoor settings. Whereas wireless devices accounted for less than 5% of all POS terminal shipments last year, they will make up about 15% by 2007 and more than 20% by 2009, TowerGroup says. This accelerating growth trend comes after several years of anemic growth in the wireless POS market. The gradual shift among cellular carriers to more advanced, higher-speed networks is one factor lending impetus to the trend toward mobile payments, the report says. At the same time, wireless card terminals and connectivity are becoming more sophisticated and less costly. “Technology becomes the enabler” for mobile-payments adoption, says Edward Kountz, senior analyst for emerging technology solutions at TowerGroup and author of the report, “Mobile Merchant POS Terminals: Revisiting Untethered Card Acceptance.” For one thing, Kountz says, cellular carriers are moving beyond cellular digital packet data (CDPD) networks, which operate at speeds under 9,600 baud, to faster packet-based networks capable of speeds of at least 30 kilobytes per second. These newer networks, referred to as newer generation or 2.5G and 3G systems, also offer increased reliability and the ability to capture a wide array of customer data. Meanwhile, mobile card-acceptance devices, Kountz says, now run about $250 apiece, down from more than $400 a few years ago. At this price, merchants can more quickly earn back their investment on mobile accounts costing as little as $15 to $20 per month, versus the $50-plus per month that wireline connectivity costs. The taxi market, which Kountz identifies as having high potential for mobile POS adoption, has shown resistance to wireless card acceptance in big cities, with drivers complaining that card-processing takes too long on busy streets. Drivers also may resist the replacement of cash by electronic transactions. “If it's a cash-based business, your ability to report that transaction more creatively is somewhat higher,” Kountz admits. Still, he argues, the greater customer convenience of electronic processing will ultimately trump such concerns. “Adding convenience in a highly regulated environment [such as taxis] is something we'll see more of over time,” he notes. In most mobile POS systems, only the first and last leg of the transaction's pathway, that connecting the terminal to a cellular base station, is actually wireless. All other connections, from gateways or front-end processors to the card networks, for example, are typically wireline as in conventional card transactions. As Kountz's report notes, however: “…the multimile range of the average cellular base station enables significantly broadened coverage for transaction acceptance for mobile merchants versus wireline alternatives.”