The current landscape.
Consumers are now used to tapping their card to make payments. The problem is, not all merchants can afford the onboarding and maintenance fees of legacy point of sale (POS) systems. This is a notable obstacle, especially as the COVID-19 pandemic has accelerated digitalization, leading to a surge in contactless payments. The volume of these transactions is expected to expand rapidly from 195 billion in 2022 to 408 billion by 2027. Merchants across a host of verticals, including traditional retailers, public transport operators, the hospitality industry and more, must find a reliable, secure, yet affordable solution.
SoftPOS (Software Point of Sale) solutions transform a regular smartphone – also referred to as Commercial Off-The-Shelf (COTS) device – into a contactless payment terminal. This makes it easy and affordable for merchants to accept digital payments, opening up new markets and new customers. As a result, the number of merchants deploying SoftPOS solutions is predicted to grow by nearly 500% between 2022 and 2027. As merchants prepare to embrace the technology, what does the future of SoftPOS look like?
Embracing the opportunity.
There are already 5.3 billion mobile phone users worldwide. These devices are now an essential part of daily life. Merchants can easily obtain a COTS device, or expand the use of the one they already own, and transform it into one that is able to accept digital payments. This allows them to bypass some of the costs that come with traditional POS systems.
It isn’t just small and medium merchants that can use SoftPOS to enhance their digital payment networks. SoftPOS can also be used as an accompanying solution, for example, if a standard POS terminal fails, the SoftPOS solution can be used while waiting for a replacement.
Additionally, the flexibility of SoftPOS can greatly enhance the checkout experience. As COTS devices are relatively inexpensive, they can be issued to more staff, giving customers more options for where to pay. In retail, assistants can carry SoftPOS devices with them, allowing customers to pay for products on the shop floor. In hospitality, restaurant staff can use the devices already issued to digitally send orders to the central POS system to take payments. Likewise, in transport, ticket collectors can collect fares on-board, eliminating the need for consumers to queue at ticket machines. By giving more options for where customers can pay, merchants can significantly reduce congestion around traditional checkouts by removing the need for all customers to pass through them.
In the future, SoftPOS could potentially also simplify the online and in-app payment experience. In this use case, it is planned that the consumer would be able to simply tap their card on the back of their smartphone when they reach the checkout in their online payment journey. This could mean no more entering card details or storing them with retailers.
However, as more and more use cases for SoftPOS emerge, stakeholders must be mindful of some of the risks that still must be addressed.
Implications of certification.
SoftPOS environments can make it difficult to secure payments as they frequently lack the hardware security features found in conventional POS devices. And with a new PCI SSC certification released in November 2022, compliance is more important than ever.
Mobile Payments on COTS (MPoC) is a new mobile standard relying on existing PCI standards to support the future evolution of mobile payments. This update means that COTS terminals will be able to support both PIN and PINless transactions, offline transactions and manual card data entry. It also helps SoftPOS devices accept both contactless NFC transactions and transactions that utilize an external chip or magnetic stripe card reader.
This will also allow the components of SoftPOS solutions to be tested individually, before being tested together as the full solution. By standardizing approaches to security evaluation, this is making the certification process clearer and easier to manage, helping solution providers reduce both development costs and time-to-market while prioritizing security.
The number of merchants deploying SoftPOS solutions is expected to skyrocket, and use cases are expected to continue to develop, as more major global tech companies prepare to enter the SoftPOS industry. To meet demand, compliance and certification should continue to be at the center of the conversation around this innovative approach to digital payments. Compliance with functional and security certification requirements is mandated by both international and domestic payment schemes. Meeting these needs is crucial to success, however if these are accounted for in the initial design and development phase, manufacturers can ensure that they are not impacting time-to-market.
Meanwhile, cloud-based kernels are being developed specifically to meet the needs of the SoftPOS ecosystem. These can simplify payment device management, as the ability to make automatic updates removes the need to push new kernels to each device individually after every scheme update.
Taking the next step.
The momentum behind SoftPOS continues to grow. As more and more stakeholders look to harness its benefits across diverse use cases, developers cannot be expected to keep up with all the intricacies of the market and the requirements of the constantly evolving specifications.
Thankfully, experts are on hand to provide extensive technical expertise and offer wide-ranging, global support for the development, delivery and security evaluation of successful SoftPOS solutions.
Learn more about how Fime can help acquirers and merchants unlock the benefits of new acceptance channels such as SoftPOS.
Read our blog series of SoftPOS.
Chapter 1 │ Chapter 2 │ Chapter 3│Chapter 4