SoftPOS Offers Many Advantages, But a Few Drawbacks, Too

The recently developed ability to accept card payments on an ordinary smart phone, with no additional hardware, has electrified the payments industry. But the technology, known as SoftPOS, comes with complications that could slow progress, a panel of experts warned Thursday.

SoftPOS, which as the name implies relies on specialized software to enable contactless card transactions, offers a seemingly endless list of possible applications for sellers of all sizes. “You can use it for line busting or popup stores. Everyday I’m surprised by a new use case,” said Bohdan Myroniw, sales director for the Americas at Preludd Payment Services, a France-based terminal company.

That advantage comes with a transaction-pricing advantage for merchants, too, and without the cost of card swipes or other hardware. “SoftPOS drives transactions [down] to a card-present rate, more like 2% [per transaction] than 3%,” noted panelist David Leppek, president of Pace Software LLC. The panel discussion took place at MPC23, a payments conference in Atlanta.

“A SoftPOS transaction is a card-present transaction, allowing a whole new channel of card-present value,” added Thad Peterson, a senior analyst at Datos Insights who moderated the panel discussion.

Apple Inc. last year brought direct tap-to-pay capability to its iPhones, and soon processors like Stripe, Square, and Adyen had signed up for it. Earlier, a Santa Clara, Calif.-based developer called MagicCube Inc. had launched the capability for Android devices.

But it’s not just smaller merchants and the independent sales organizations that serve them that see advantages in SoftPOS technology. Larger companies, too, are interested in adopting it for their stores, panelists said. “There’s a good opportunity at the enterprise level,” said Owen Newport, chief executive at Canada-based Felix Payment Systems Ltd.

“Legacy terminals will be replaced by softPOS devices because it just makes sense,” added Myroniw, who predicts an explosive market as older devices face replacement. “Merchants have to refresh their devices every three to four years. This time next year, you’ll be seeing more of this demand, and it will just skyrocket.” Some of that demand has developed already, he indicated. For now, “what we’re seeing is a mass scurrying to get deployments done,” he said.

The top two merchant categories adopting the technology so far are restaurants and hospitality, noted panelist Kris Wells, a digital-acceptance executive at Discover Financial Inc. But while SoftPOS may cut acceptance costs for merchants while spawning new opportunities for ISOs, its emergence is creating some complications, as well. Much of this lies in its complexity, some of the panelists said. “There’s no magic—it’s just as complex” as installing traditional terminals, said Myroniw. Indeed, “complex” was a term that occurred several times during the discussion with respect to the adoption of mobile payment on commercial off-the-shelf devices (MPOC, for short), offsetting some of the virtues of the move. “MPOC is card-present and fully secure, but complex,” acknowledged Peterson.