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The continuing shortage of semiconductor chips is creating an opportunity for merchants and consumers to embrace tap-to-mobile payments, according to a study from payments processor NMI.
The survey, which polled merchants and consumers in the United States and the United Kingdom, revealed that 95% of merchants said they would consider tap-to-mobile payment technology to accept payments. NMI defines tap-to-mobile technology as a payment solution that converts a smart phone into a point-of-sale device that allows a consumer to pay for a purchase by tapping her credit or debit card against the phone.
“With the chip shortage that is affecting production of POS terminals not expected to end any time soon, there are a lot of merchants looking at removing [POS] hardware from the [payment acceptance] equation,” says Jeremy Gumbley, chief information security officer for Schaumburg, Ill.-based NMI. “Tap-to-mobile is an alternative to POS terminals because all merchants need to do to enable tap-to-mobile is download an app to their mobile device.”
When asked what factors would influence their decision to adopt tap-to-mobile payments for their business, 63% of merchants cited cost and maintenance of the technology and more than 55% cited consumer demand. Both are significant indicators of tap-to-mobile’s growing appeal. The chip shortage, which has pushed lead times for POS terminal orders out to 26 to 30 weeks, compared to 12 weeks pre-Covid, is causing terminal prices to rise, especially on the spot market, according to payment-industry experts.
“For a lot of small merchants, the cost of a terminal can be a barrier to entry. Eliminating that barrier can spur a lot of entrepreneurs to go this route,” Gumbley says.
Despite growing demand for tap-to-mobile, NMI’s research reveals that 34% of small and medium businesses in the U.S. still don’t offer contactless payment options.
In addition, NMI’s research reveals there is significant consumer demand for the technology. Indeed, 83% of consumers surveyed said they would likely use tap-to-mobile payments if it were offered by a merchant. Key reasons for using the technology are convenience (76%) and speed (73%). Factors influencing merchants’ preference for tap-to-mobile include security (53%), easy set up and installation (46%), user friendliness (38%), and good customer service (33.9%)
The ease of converting existing mobile phones into a POS terminal is expected to keep interest in tap-to-mobile solutions high, says Sam Shawki, chief executive of MagicCube Inc., whose i-Accept software converts off-the-shelf mobile devices into point-of-sale terminals.
“This [the chip shortage] has been an element that encourages some players to look at us more closely…Everyone that stopped talking to us are back as they are looking at alternatives,” Shawki told Digital Transactions in an interview conducted in August as part of the magazine’s research for its September cover story, “Out of the Chips.” “It’s wind in our sails,” he added.
Despite merchants’ growing inclination toward tap-to-mobile technology, there are lingering reservations about the technology. According to NMI, 50% of merchants have concerns about the security of the technology, more than 35% say they don’t have the infrastructure to support the technology, and 21% don’t want to incur the cost of adding a new payment option.
