As the mPOS Revolution Spreads to More Merchants, Players Must Build Scale Fast

The mobile point-of-sale revolution started in North America with smart-phone readers from startups like Square Inc. and established software houses like Intuit Inc., but it’s now a global phenomenon with broad implications for entrenched players and newcomers alike, according to research released Monday.

Indeed, mobile POS gear—chiefly phones or tablets with built-in transactional capability—will account for about one-third of all installed POS terminals worldwide by 2021, forecasts Juniper Research, a U.K.-based research firm. The research predicts these devices will control more than 45% of POS transaction value, or about $5.6 trillion—five years from now, up from 12% expected in 2016. Much of this volume will come from North America as well China and the Far East region, Juniper says.

Separately, the Boston-based Aite Group forecast last year that shipments of mPOS card readers in North America alone would more than double by 2020, from 7 million last year to 15 million.

Two critical factors are fueling this growth in both sheer volume and in geographic spread, according to Juniper. One is relative ease with which businesses can adopt mPOS. Unlike the established POS-gear business, many vendors can have merchants up and running on mPOS devices within 24 hours, compared to weeks required to negotiate contracts and then install equipment for traditional POS, Juniper says in a white paper summarizing its research.

At the same time, a wider variety of merchants is starting to deploy mPOS. Originally adopted by mobile businesses, mPOS is now finding uses in stores that are using the technology for so-called line-busting at peak times and in restaurants to ease order entry and communication with kitchen staff.

But with growth has come fierce competition. Even potent companies like Amazon.com Inc. have faltered, with the online commerce giant withdrawing its mPOS product last year. Juniper says it now tracks more than 200 providers, with few exercising dominance in more than one geographic market. With most players levying fees between 2.5% and 2.75%, transaction margins are very thin, requiring expansive transaction volumes to make money. And that scale must be achieved relatively fast.

“[W]ith Amazon’s mPOS offering being withdrawn in 2015 and several smaller vendors pulling out of product development before reaching market, it is clear that the industry does not offer risk-free prospects for growth,” the white paper says. “This is because lower per transaction margins are becoming the norm, meaning large transaction volumes are required to achieve a profit.”