What SoftPOS requires for widespread adoption
The interest around SoftPOS and what it will mean for payments in 2022 continues to grow. Hype is turning into reality with payment companies announcing pilots in flight (excuse the pun) or getting close to the release of a MVP. But, getting the product functionality right, planning for scale and ensuring it is robust enough to stand up to all use cases is only half the challenge. In this article we go under the surface of SoftPOS and explain why payment companies (planning to release a SoftPOS app) will need to think beyond its intended purpose as just another payment instrument (in a world where many already exist). We put forward a roadmap that delivers on the promise of SoftPOS as a powerful enabler for commerce – especially for sellers who continue to trail behind in the digital payment stakes.
Why the hype?
Ever since Apple acquired Mobeewave for $100 million back in 2020, anticipation has been building. Analysts have offered opinions and predictions, and in response technology companies have rushed to build a first-to-market SoftPOS product. Apple has been tight-lipped about their plans for SoftPOS on iOS, and much of the hype for a SoftPOS app on Android, is still hype. It’s too early to tell what adoption and success looks like. SoftPOS solutions that have seen release are mostly in pilot and no meaningful data to support the predictions has been published. However, there’s no denying the advantages SoftPOS has over today’s other in-person payment solutions. Whether you’re arguing the case for why it’s better than mPOS devices or the older bulkier PDQ (process data quickly) machines, payment experts agree SoftPOS has the potential to be a game-changer.
For readers who are new to SoftPOS (and in the interest of context), here’s the what; why & how:
What is SoftPOS?
The next generation of contactless card payment technology. It is a software application that allows a seller to accept card payments on their Android smartphone, and not require a physical point-of-sale machine or a dedicated card reader device. Simply put – it turns a smartphone into a card payment terminal. Note: being an Android only technology, it is not yet available on iOS, but the fact is Android continues to dominate with a global market share of over 72% (mostly outside the US) compared to 27% on iOS. Clearly the opportunity to scale SoftPOS to a large enough number of users is very much wide open.
Why is it a big deal?
It changes the playing field for micro-sellers and small businesses when it comes to card acceptance. Offering unrivalled convenience and access compared to existing solutions. In a nutshell, it means card acceptance is now truly in reach of anyone who has a smartphone – whether you are in a township in Africa or the city of Paris.
Why is now the time?
The technology has caught up in terms of availability of NFC chips in nearly all smartphones on the market, not to mention falling device prices means their application as a card reader in a contactless payment context makes obvious sense. Something else worthy of mention is the post-pandemic effect. SoftPOS is riding the coattails of massive growth in contactless payment behaviour (i.e. higher in-person contactless usage and more cards in circulation). Whether sellers want to promote better hygiene in a sale exchange or a national government policy to move toward a cashless society – it’s definitely helped the cause for SoftPOS and spurred demand from sellers for non-cash based solutions.
Who will benefit?
We expect appeal to be strong amongst micro and small businesses, e.g. the independent local coffee shop, a kiosk-based market trader, taxi driver or the self-employed electrician. These personas are right in the SoftPOS sweet spot. They are ordinary people focussed on growing their business. Every time they sell a product or service – it matters! Their focus is on optimising everything they do to support their goal of making money. In the past they’ve been largely underserved by digital payment solutions but now, with the emergence of SoftPOS, things are about to change. Card acceptance will come into greater reach.
SoftPOS is not just about the payment technology
The complexity involved in getting the technology to stand up, by which we mean building a certified SoftPOS checkout flow that meets the exacting standards of Mastercard and Visa has forced technology companies into a tunnel vision approach when releasing a working prototype. Other product considerations have been forgotten! Those other considerations are fairly crucial. They are the layer of value and experience the SoftPOS payment piece does not solve and is what will generate the level of interest needed for wider adoption. Without this, the fact that SoftPOS facilitates greater convenience is somewhat diminished.
So, what will it take for SoftPOS to take hold and is it really about the technology? (For clarification, in the scope of this article, we talk about SoftPOS in terms of a software based application downloaded by merchants to accept payments). To some extent yes it is about technology, but it’s more to do with the experience and whether (as a solution) it fits effortlessly into the day to day business of sellers who wish to use it, and doesn’t create barriers that didn’t previously exist. We break this down at two levels; the technology and the enablement.
Firstly, we should look at access. By this we mean how easy it is for sellers to get up and running with a SoftPOS app. Specifically whether they are forced to endure a convoluted onboarding process involving partial paper based registration or needing to jump between mobile and desktop web forms. This shouldn’t be the case, and if it is, it means SoftPOS payment companies haven’t been paying attention.
The technology for automating onboarding has evolved hugely thanks to a high bar set by digital banks. They were really the pioneers of the financial services end-to-end mobile-first experience (compliant to the KYC and AML framework) by solving frictionless onboarding – all through an app and without ever needing to speak to a call centre representative to prove your identity. And that’s exactly how the MeaPay team have approached the SoftPOS app. When we talk about SoftPOS we always refer to its convenience (an obvious value prop). But, that convenience has to be more than just the physical act of taking a ‘tap’ based payment. It’s actually the entire experience from the first mile to the last.
Convenience inside our product ideology means sellers should be able to get up and running with the SoftPOS app in as little time as possible. This is why we’ve built a smart onboarding flow that allows the app to capture just enough information from the sellers to verify and prove they are a good ‘actor’ without lengthy interrogation as to their ownership structure, VAT number, corporate jurisdiction etc., all before they’ve even had a chance to touch and feel the product. Retrieving basic information about the type of merchant, the type of activity they are involved in, the use case and other attributes can be done using a form of simplified onboarding that gets sellers into the product quickly so the value of the product can be realised very early.
Secondly, and probably the most important factor for sellers is access to their money i.e. how long before funds hit their bank account. With an EMI license you could give sellers the ability to build a balance, but in the world of SoftPOS we expect the typical seller to need quick access to their funds, probably to replenish stock levels or simply have disposable income for their day to day needs. The point is that access to money will be a deciding factor for which SoftPOS app a seller chooses to use. Getting the settlement period down to as low a number as possible for a solution like SoftPOS will be crucial, particularly so because of the type of seller it is targeted at.
Finally, SoftPOS providers will need to offer broader business value through their solution. We see sellers increasingly relying on one or two key solutions to meet the technology needs that exist in their business. This means payment providers have an opportunity to go beyond payments and bundle other business tools into the mix.
Some of the most successful payment companies today are already doing this (albeit more in the ecommerce domain) by offering sellers access to payments connected to ordering systems, delivery platforms and even accounting software. Filling those gaps through a payment product means the seller has more time to focus on important things like growing their business rather than researching which software is best and how it can be hooked up to payments to work in orchestration. If we think back to the typical SoftPOS user, they would welcome a solution that takes away the pain of accounting, delivery, insurance – all through an interface for payments. This is one way payment companies will win with micro-sellers and small business owners to become an integral part of their business.
The technology and network layer
On the technology front we look at how SoftPOS stacks up against incumbent solutions like mPOS readers and PDQ machines? These are reliable devices that rarely fail, and when we tap our card on them, they just work (because they’re dedicated devices intended to do one thing – read a card)! Is the same true for tapping a card on a personal smartphone device? Well, the first problem here is that not all devices are made equal. Manufacturers have chosen to put their NFC chips (of varying quality) in very different locations in their smartphones. This is a concern given how close the customer’s card needs to come in proximity to the NFC chip for a successful contact to be made. If it doesn’t work on the first attempt it could cause a great deal of friction in the checkout process. We can imagine a scenario where the customer is repeatedly tapping their card hoping to hit the right spot on the seller’s device for successful contact to be made.
MeaPay’s product team looked at all the current devices sold by big brand manufacturers and we discovered there’s a fairly simple and low tech way to solve this. We built dynamic detection in our app that checks for the seller’s brand and model so we can cross reference this to the manufacturer’s NFC chip location. This is translated into instructions in the checkout UI which helps sellers give clear guidance to their customers where to touch their card on the device. Pretty basic, but it works! The takeaway here is that the experience is super important. It can make or break a new product before it’s even had a chance to establish itself.
At a payment network level, pilot SoftPOS apps in the market today run on card schemes from Mastercard and Visa. High fee structures persist as a sore point for sellers (especially for sellers who are margin sensitive) but these are coming under greater scrutiny due to a rise in newer payment instruments like direct bank to bank, wallets and even crypto. ‘POS’ solutions are beginning to innovate with alternative funding flows in an effort to rid the market of high fees and bring about better financial inclusion. The side benefit of this is it cuts the number of players in the network which will offer sellers quicker access to their money. Perhaps it is SoftPOS and the potential it has for scale that might tip the balance to drive greater momentum for new funding instruments like crypto or open banking (the question is whether it can keep true to the spirit of SoftPOS).
Payments will continue to evolve and it’s likely another groundbreaking payment technology will be announced just as soon as SoftPOS becomes popular (which may take up to 2 years with time needed for adoption and some fine tuning of hardware).
The point is that SoftPOS is a vehicle for enabling commerce.
In the current fintech landscape providers need to understand success depends on whether they can offer users a broader set of tools, not just those for payments, but solutions that are linked to payments or sit on the technology periphery of their business. Interoperability between business solutions will be one way to unlock opportunities and the ability to automate workflows starting with a payment has scope to remove a lot of pain for sellers. The race is on to unlock the mammoth scale that SoftPOS offers by tapping into a previously unserved group of micro-sellers and very small businesses. This population makes up the largest proportion of registered businesses, globally. SoftPOS companies need to be more focussed on whether their solution is driving actual value for the seller. Strategies will be required to make the end-to-end process of accessing SoftPOS low touch.
Whilst offering a way for sellers to accept payments at very little cost and giving them access to their money as quickly as possible (the three pillars for success). Understanding what it is that makes those sellers tick and what their segment needs are, will help SoftPOS providers like MeaPay stand above the rest. The possibilities are far reaching for payments product teams and by effect opens up better commerce opportunities for sellers. Once SoftPOS establishes itself in the mainstream, what will follow might be a fully blown digital commerce solution with automated smart onboarding; optionality through multiple payment methods; instant access to funds; integration to business software; working capital for sellers; the ability to create highly engaging marketing campaigns with vouchers and more. It may become the only app that sellers require when it comes to their in-person acceptance needs.
If you are interested in integrating SoftPOS payments into your existing app or as a co-branded seller-facing app please contact the MeaPay team – firstname.lastname@example.org