Product Code: IT003-000604
The mPOS market seems to have exploded from out of nowhere in the last five years to become one of the hottest and most dynamic areas of payments innovation. From start-ups to established banking giants, the market is now being flooded with a host of me-too products and services. However, many of the strategies underpinning these developments misunderstand the drivers behind the initial success of mPOS and the requirements of long-term success in this space. mPOS is rapidly moving beyond the micro-merchant space and its impact will be widely felt throughout the payments value chain.
- The growth of mPOS is primarily a result of its merchant enrollment strategies rather than its technology. The technology behind mPOS helps to underpin these new business models, but on its own it is not enough to drive long-term success. The keys to success are simplified merchant enrollment, no lock-in contracts, shorter payment settlement times, and clearer pricing models.
- The use of point to point encryption (P2PE) with mPOS will improve the security of the technology while helping to alleviate merchant PCI DSS requirements. With the fallout of security breaches at major retailers now denting consumer confidence, P2PE will be a major boon to mPOS platforms that move up the value chain to higher-tier merchants.
- mPOS platforms can greatly enhance payments innovation and enable omnichannel strategies even among the smallest merchants. With a clearer route to upgrades and a significantly more open development environment, vendors have a major opportunity to develop new functionality at the POS. This includes the development of single source payment providers capable of handling both online and physical transactions.
- Understand the real potential of mPOS technology and platforms by assessing the key drivers of its initial growth and what these models mean to payment providers.
- Form your strategy effectively using Ovum's assessment of how mPOS is shifting the POS market from hardware-focused to software-focused.
- Identify how P2PE technologies can strengthen the security of mPOS while providing merchants with more agile and flexible POS infrastructure.
- What are the key drivers of the mPOS market so far? Can these be emulated in other areas of payments?
- How are omnichannel strategies likely to affect merchant demand for added POS functionality? How can mPOS help?
- Is mPOS a threat to existing merchant acquirers?
Table of Contents
- Ovum view
- Key messages
- THE SUCCESS OF MPOS IS DOWN TO ITS BUSINESS MODEL
- Micro-merchant dongles are a first step for mPOS
- The four-corner model remains intact, and is strengthened by mPOS
- Focusing on the dongle risks missing the potential of a "smart" POS
- Mobile payments innovation is boosted by mPOS
- The initial success of mPOS is down to the ease of merchant enrollment
and simplified pricing
- mPOS providers need to develop their platforms beyond micro-merchants
- Price competition on mPOS is unsustainable
- Risk modeling and security are critical for mPOS success
- P2PE technologies are a potential major driver of mPOS uptake among
- The Target breach highlights the potential appetite for reducing
retailers PCI DSS liabilities
- MPOS PUTS PAYMENTS AT THE CENTER OF MERCHANT OMNICHANNEL STRATEGIES
- MPOS offers greater agility and flexibility than traditional POS
- MPOS can deepen customer engagement by improving the user experience
- The functionality of mPOS is expanding due to a more common development
- MPOS builds on an existing trends toward POS virtualisation
- mPOS shifts the focus from hardware to software, removing the barriers
between online and offline payment acquiring
- Shopify brings omnichannel capabilities to SMEs
- The distinction between POS and mPOS will eventually disappear
- Recommendations for enterprises
- Enterprises must move beyond the micro-merchant market
- The blurring distinction between the online and physical worlds means
banks must engage with the new mPOS ecosystem
- Traditional POS merchant sign-up needs to be quicker, easier, and more
- Recommendations for vendors
- Forget the dongle, mPOS is about the payments platform
- P2PE will increase security and provide a major boost to merchant
uptake of mPOS
- Alternative views
- Further reading
- Ovum Consulting
- Figure 1: A plug-in "dongle" card reader
- Figure 2: The four-corner payment model of card-based payments
- Figure 3: Non-dongle based mPOS systems
- Figure 4: P2PE with mPOS compared to traditional POS