It has often been advocated that mobile POS system is more suitable to small retailers and shops that were till now only accepting cash and are averse to making high investment in accepting card payments using traditional POS machines. While it is an important factor that mPOS costs only a fraction of traditional POS, this is certainly not the sufficient incentive for adoption on any significant scale.
The primary characteristic of a typical small merchant is thin margin and low ticket size per transaction. Once mPOS enabled, charges (merchant discount rate) related to accepting cards would eat into the margins with little promised increase in sales. Insignificant commission revenue and yet to evolve business model disincentivize the acquirers as they would have to cover the cost of merchant acquisition, running the operations, chargebacks, sharing revenue with issuers and payment networks.
Starting approach with small merchants
Addressable market for mPOS will remain any entity, big or small, who accepts cash for providing Goods and Services. The key differentiator would the entire approach and tailored service design for a large merchant and a small one. With huge volumes of transactions and often multiple stores, large retailers need robust, customizable mPOS platforms that are fully integrated with their existing payment systems and other value added applications. On the other side, other small retailers or individuals (e.g. taxi drivers) only need a simple, no-frills mechanism for accepting cards. Before pushing for fancy integrated apps for loyalty, marketing, inventory management etc, the acquirers and the PSPs have to understand the small retailer’s need to appreciate the benefits of accepting card transactions through mPOS viz. affordability, friction-less transactions, increased foot falls and sales. Once this initial phase is over, one can focus at providing value-added services such as those mentioned above by integrating front- and backend processes and results in an efficient, streamlined reporting system, loyalty programs, branding etc. Going even a step further, an mPOS solution can enable a retailer to remotely keep track on overall sales, faster selling items and the inventory position which will help him in taking decisions on inventory management. mPOS has its applicability not only in small retails shops and kirana stores but also the road side fashion street markets, trade shows which have significant profit margins and can have increased sales by accepting card payments.
Another aspect which begs different approach is the distribution strategy. Targeted advertising, specially trained sales force, quick and hassle free on-boarding of small retailers are critical factors in quickly scaling up.
Consolidating approach with big merchants
When mPOS for small retailers did not pick up as much as acquirers wanted to, they turned towards servicing big retailers. mPOS remains valuable to big retail stores, restaurants as mPOS not only act as queue buster but also presents a highly customizable and flexible payment acceptance mechanism. By big retailers, mPOS can result into effecting sales when a customer is browsing through shelves by enabling in-store geo-location through beacons. Targeted notifications can be pushed to consumers visiting the store depending on their location (proximity) and their shopping behavior.
An interesting way to relate to this is how people deal with their mobile phones. A majority of people started their mobile journey with basic features phones. They, I must add after a considerable period of time, then upgraded to basic smartphones and now are switching to high-end smartphones more faster than ever because it not just about the basic requirement of voice or messaging but goes way beyond in controlling many aspects of your life. Same way mobile phones have now become more of a life-assisting and entertainment device, an mPOS can and will be a more than just a payment acceptance device. It has endless opportunities in customer relationship management through loyalty programs, targeted offers and even acquiring new customers. Not only bringing new customers to his shop, an mPOS enables a merchant to take his shop to the consumers. This is especially relevant in this era of e-commerce and popularity of ‘payment on delivery’ payments.
There is no denying that the needs of big retailers and small merchants for mPOS are different. Acquirers and payment service providers must not limit the applicability of mPOS to either of the two; rather it is advantageous to offer a suite of mPOS offerings that meets the need of each type of retailer. As the industry continues to mature, it is inevitable that mPOS, equipped with targeted features and value proposition, will find its place in a wide range of merchants.