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Simon Buchwaldt Nissen - Finance Digest │ Financial Literacy │ Financial Planning

By Simon Buchwaldt-Nissen, Head of Strategy & Transformation, Product & Engineering – Nets Merchant Services

There’s no doubt that SoftPOS technology is disrupting the payments space. While change won’t happen overnight, we can be sure it’s certainly coming. It can provide merchants of all sizes with the ability to accept contactless payments without a traditional card reader, solving multiple challenges and creating new opportunities for growth. 

Contactless technology is used in 80% of in-store card payments today and Juniper Research predicts that the number of smartphones used for contactless SoftPOS payments will grow from 3.2 million in 2021 to nearly 24 million by 2026. This practice of turning a smart device into a payment product is fuelled by the app economy, and as big brands introduce, expand and support this technology on their smartphones, we can expect to see it proliferate further. 

So, what is so attractive about turning a smartphone into a payment acceptance device, and what are the risks? Let’s start by looking at the customer experience

Browse everywhere, pay anywhere

Customers can benefit from a streamlined shopping experience with SoftPOS payments. Instead of having to find available cash registers and queue at specific “Points of Sale” (POS), SoftPOS has the potential to change the store setup entirely. 

These new experiences will be based around consumer ‘Points of Interaction’, unbound by tethered payment points. Merchants can take a payment anywhere in the store, removing customer friction and presenting significant potential to boost transaction volumes.

Accepting consumer payments anywhere, via an inexpensive mobile device, presents a valuable chance for retail assistants to upsell to customers. By freeing staff from the traditional POS, they can instead interact more with customers throughout the store, providing a more personal and bespoke experience and boosting conversion rates. The customer can then pay for their products on the shop assistant’s mobile device, reducing churn that can occur with checkout queues. 

Ever-expanding use cases for SoftPOS

The flexibility of smart devices also allows for other functionalities to be embedded. In restaurants, SoftPOS devices not only enable payments to be taken more quickly by the waiting staff (instead of waiting for card payment terminals to be freed up from other paying guests), but the technology can also integrate with other applications such as booking calendars, inventory and staff management, food and drink orders, and more. This integrated approach enables more efficient management and facilitates an enhanced experience for the customer. 

The technology could also be a game-changer for small and micro-businesses. Turning a device that most people already carry with them everywhere into a payment acceptance terminal means, for example, that hairdressers on home visits can accept card payments easily. Healthcare practitioners, taxi drivers, market traders, electricians, plumbers and thousands more trades stand to benefit from access to low-cost card payment acceptance.

For merchants of all sizes, the cost of SoftPOS technology can be much lower than with dedicated payment hardware. A consumer “off the shelf” device is considerably cheaper and setup can be relatively quick, simply requiring an app download and authorisation from the merchant’s bank to get started. 

SoftPOS technology can also boost financial inclusion. In countries where digital payment acceptance is not yet ubiquitous, the ability to turn existing smart devices into payment acceptance devices reduces barriers to payment and enables strong economic growth.

Risks and adoption hurdles

While SoftPOS technology offers great opportunity, it may not be the right choice for everyone. In fact, the ‘traditional’ payment terminal might be the smart choice for high-throughput retailers like supermarkets, where customers are buying in volume and have a very clear journey through the store, ending at the payment point. Existing payment terminals can operate at greater speed and benefit from high levels of consumer familiarity and trust.

The challenge for SoftPOS adoption is that smartphones are not immediately recognised as legitimate payment terminals. Not everyone may feel comfortable about tapping their payment card or smartphone against another person’s smartphone, rather than the trusted payment terminal they are familiar with. 

And in circumstances where a PIN is required, even more people may have concerns and questions about entering this number into a stranger’s smartphone. For example, if you key in your PIN, could lingering fingerprints on the phone screen indicate what your code is? It is an unlikely scenario but potential solutions to alleviate this concern are being explored, such as ‘revolving keypads’, where the numbers randomly change place every time. But this highlights the significant challenge SoftPOS technologies face in achieving widespread adoption. 

The digital readiness of a market is also a key consideration. In digitally-advanced societies like the Nordics – where 80% of payments are now contactless – consumers are primed to use this technology as they are used to making digital payments. However, other regions which are less digitally advanced may be less disposed to this technology and take years to adapt their behaviour. 

Payments are on a never-ending journey to provide a seamless experience for customers, while remaining highly-secure. Surely it is too early for a swan song for payment terminal hardware, but we’re likely to see a world very soon where ‘hard’ and ‘soft’ payment acceptance devices coexist in harmony, delivering for different use cases and enabling more seamless experiences in store.

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