Don’t Write off POS Terminals Just Yet

The Gimlet Eye

The rapid emergence of mobile devices and mobile apps in retail settings has led some observers of the payments business to predict the near-term demise of the humble point-of-sale payments terminal. We demur, for reasons we lay out in our story “POS Terminals Have a Future, And It’s Looking Good,” (this issue) but this is a serious argument that requires careful consideration.

The main point of the “terminals are dead” argument is that consumers and merchants want devices that can interact with the apps they have on their mobile devices. Merchants in particular also want to take advantage of more advanced tablets with bigger screens to run transactions and Bluetooth low-energy beacons to identify customers in the store and send them offers.

All of that is true. Tablet systems, in particular, are becoming increasingly popular, while independent sales organizations are getting better at working with integrated software vendors to incorporate payment acceptance into wider business-management programming.

But there are several other considerations, as well. For starters, terminal makers are enjoying a huge lift from the U.S. conversion to EMV (Europay-MasterCard-Visa) cards, which require new devices capable of reading the chips embedded in those cards. True, this may be a temporary lift, but merchants’ amortization cycles on equipment like this are years long. Once invested in these terminals, they aren’t likely to uproot them for mobile substitutes any time soon.

At the same time, many of these devices incorporate the ability to read contactless transactions from, for example, mobile phones. True, not all of these terminals will be installed with this capability turned on, but once retail managers see sufficient demand from customers, they’ll light these devices up pretty quickly.

Yes, developments like Apple Pay will help popularize mobile wallets loaded with virtual cards and waiting to be tapped for payments and coupon redemption. But many later terminal models are prepared for that, as we noted. Nor are physical cards likely to dematerialize any time soon. Not even magnetic stripes are expected to disappear immediately as EMV chips come on the scene. Both technologies will coexist on plastic for some time to come after the Great Liability Shift of 2015.

Now, as for tablets. As our story notes this month, there’s likely to be complementary markets for these devices and terminals. Retailers may well equip some personnel with tablets so they can roam the store serving customers, but most multilane stores will remain multilane for checkout, albeit possibly with one or two fewer lanes.

Just as terminals evolved from paper drafts to draft capture—the last great POS revolution—they will incorporate the technology they need to remain relevant in the age of iOS and Android.

John Stewart, Editor  |  john@digitaltransactions.net