The ability to accept payments through a handheld device has not been the key driver of the success of mPOS. The true innovation has been in its underlying business model: significantly easier merchant enrollment, clearer pricing structures, no lock-in contracts, and more rapid payment settlement. The easier merchant enrollment model has helped to grow the base for payments acquiring, but the model also means providers' risk levels are high, and with the lack of contract means the low-frequency, low-value transactions are having a strong impact on mPOS provider margins. As competition in mPOS heats up, achieving the economies of scale required to make mPOS a success is becoming more difficult, as the basic dongle-type service rapidly becomes commoditized. To remain competitive, mPOS providers are increasingly developing wider payments platforms. By adding front- and back-office functionality and targeting merchants higher up the value chain, mPoS is becoming more attractive to merchants of any scale. This functionality includes a range of additional peripherals and new software features such as inventory management, loyalty programs, and even online payment services. The introduction of new services and functionality at the traditional PoS has been restricted in particular by payment card industry data security standards (PCI DSS) requirements, which rightfully impose limits on merchants.
Any system that has contact with sensitive payment information such as personal account numbers (PAN) or other credentials is heavily restricted in what it can do. With point-to-point encryption (P2PE) technologies in their platforms, mPoS providers can capitalise on the renewed focus on merchant payment security. Using P2PE, the handling of sensitive transaction data is taken away from the merchant, which, in theory, reduces their PCI DSS responsibilities. The reduction of PCI DSS restrictions at the PoS broadens the potential to connect a wider variety of systems and services to the PoS experience. Achieving P2PE accreditation remains a complex process, however, and questions remain about how easily mPoS providers can ensure their platforms are accredited.
The author is Gilles Ubaghs, senior analyst, financial services technology, Ovum. Re-printed with permission. Link: http://ovum.com/2014/ 02/13/mpos-will-drive-omnichannel-merchant-innovation/