Will software overpower payments?

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By Matthew Kingsley Rowsell, Chief Product Officer, Merchant Solutions in Nexi.

‘Software will eat the world’ was a statement made by Marc Andreessen of Andreessen Horowitz over a decade ago. We are starting to see that take shape in many aspects of our lives, especially within the payment industry.

Thirty years ago, you could still see paper vouchers being used in some countries for credit card transactions - then along came terminals, which have improved security and the speed of transactions. We are now at another turning point in the fast-paced evolution of payments: change is being driven by the coming together of new software development and the rapid growth of contactless payments.

Contactless payments account for 80% of in-store payments

The payment ecosystem has evolved rapidly in the last twenty years and customers now have the freedom to choose from many payment methods. It’s no surprise that Juniper Research predicts contactless card payment transactions will reach $10 trillion globally by 2027.

But why is such strong growth forecast? There are several drivers:

  1. Contactless offers a faster checkout experience for both the consumer and the retailer, and  in post-Covid times, limits the exchange of items between the assistant and the customer.
  2. Contactless enables cards to be “virtualised” into phone apps – ApplePay, AndroidPay and SamsungPay, enabling the consumer to leave their wallet behind, as well as driving down the “minimum” spending limit we all felt we needed before the shift from cash to contactless.
  3. A new generation of software-only terminals will enable mobile phones to be turned into card acceptance devices (effectively terminals) under the generic umbrella of “SoftPOS”.  This will enable a whole range of new customer / business interactions to become more efficient. 

Furthermore, SoftPOS technology enables retailers to quickly begin accepting payments on mobile devices, at minimum cost, and with minimum technical know-how. 

Increased acceptance and conversion

This new flexibility presents a valuable chance for retail assistants to sell and upsell to customers at the point of display rather than at checkouts, boosting conversion rates while providing a more convenient shopping experience for consumers. It also enables retailers to temporarily increase their number of card acceptance points by renting and then releasing SoftPOS licenses. For example, a restaurant with a terminal in-store may choose to rent two extra licenses for selling outdoors during the summer when it has tables on the pavement or when it sells food at a festival.

SoftPOS technology offers a high value proposition across different segments for customers of all sizes, making it accessible to everyone. It also gives us a clear picture of what the future of payments will look like: more accessible, more secure and more hygienic, enhancing the consumer experience and improving the lives of sellers and buyers everywhere.

Functionality that caters for the cost-conscious

The sophistication of SoftPOS technology also allows for other functionalities to be embedded on a common device, tailored for specific industries such as transport, restaurants/hospitality and independent retail stores. 

Let’s explore one example from the transport industry. Public transport staff need to accept payments for tickets in transport hubs but also onboard different modes of transport. They also need to check tickets from travelling passengers are valid for the journey. Using a SoftPOS device, which can handle not just payments but a host of related essential functions, enables them to perform these processes with a far more efficient and user-friendly set-up.

One company already making use of this technology is Danish State Railways (DSB), the largest train operating company in Denmark. Over the last three years, DSB has retired five different hardware devices, opting to replace all of these with just one type of device: an Android smartphone enabled with SoftPOS functionality. 

With one smartphone each, conductors can now access all necessary ticketing functionalities and accept payments, both on trains and in transport hubs, enabling a straightforward payment process. 

This can be extremely cost-effective, as all that’s required is a smartphone device, an approved app is downloaded onto the device, and the company is onboarded with the bank. They can then accept payments securely and flexibly.

This is particularly attractive for many emerging business, as small and micro businesses account for 40% of gross domestic product (GDP) but fewer than 10% currently accept cards or other non-cash or digital payments. The growth potential for these markets is tremendous and SoftPOS can help them grow while also improving consumer choice.

Enabling business continuity 

SoftPOS can also provide critical business resilience. Its ability to work on off-the-shelf smart devices means it can be deployed at short notice across a single store or multiple outlets. Its simplicity enables staff to use it easily, while customers can pay in a way that is familiar and convenient for them. 

Just one example of this was the swift action that retail convenience chain 7-Eleven took when its payment and checkout systems were targeted by hackers and temporarily taken out of operation, creating an urgent need for a new card payment solution across 176 stores in Denmark. A SoftPOS solution was quickly implemented using existing hardware, and therefore incurred minimal costs, which meant it could be rolled out at record speed. 

Setting this up efficiently meant that clerks in all the affected 7-Eleven stores could accept all forms of card payments including via ApplePay, GooglePay, and Dankort, in less than 24 hours. This minimised revenue losses, as the business was able to take payments again quickly and continue serving paying customers. 

Facilitating trust to encourage user adoption

Of course, none of this would be effective if customers did not have trust in the payment methods merchants offer. Security is critical for consumers when it comes to their payment data; any breaches can have serious ramifications and customers expect high-level security standards. All new technologies have a transition period and SoftPOS is no exception: some consumers may be wary of tapping their payment device against what essentially looks just like any other smartphone. 

To ease the minds of wary consumers, the PCI Security Standards Council (PCI SSC) has recently developed a new standard designed to support the evolution of mobile payment acceptance solutions, aiming to provide increased flexibility not only in how payments are accepted, but in how SoftPOS payment acceptance solutions can be developed, deployed, and maintained.

These standards allow for innovation, and at the same time, support a sufficient level of security that allows for merchants and consumers to have the confidence in these solutions that is required for their broad adoption. 

SoftPOS is one of several technologies that are improving the payments ecosystem. It will drive growth for businesses in the coming years. Uniquely, SoftPOS enables a business to be freed from traditional payment ‘locations’, in turn enabling more investment in the shopping experience, driving greater consumer expenditure and improved loyalty. SoftPOS technology is bringing a valuable payment solution to merchants and consumers alike, enabling a fast, secure and streamlined payment experience for all, for the foreseeable future.

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