By Eddie Johnson
The future of payments lies outside of traditional fixed payment terminals that sit atop so many merchant countertops. Those classic terminals that jump-started the electronic payments revolution have in recent years limited the ability of merchants to innovate in the face of changing consumer behavior and competition from ecommerce.
There's broad recognition today that today's smart POS must embrace a wide portfolio of software apps that provide merchants new capabilities both in terms of consumer-facing features and back-office functionality. Increased consumer satisfaction and improved productivity and profitability are essential for success in physical commerce and in embracing the potential of omni commerce.
Merchants, service providers and hardware vendors can no longer afford to restrain the capabilities of in-store commerce. While we're seeing movement toward a more open payments environment, many newer smart POS providers are eager to lock in merchants to highly restricted solutions that limit flexibility and adaptability.
Much of the industry is still device-focused when what acquirers and merchants really need is a flexible platform. Even while embracing the concept of app marketplaces, many new-generation device vendors want to wall off their marketplaces so that only their devices can access those apps. In essence, they want to replicate the closed environments that classic terminal vendors enjoyed.
Even if they utilize Android-based devices, those types of solution providers are seeking to replicate the "walled garden" approach that Apple created: it has enough market share to keep app developers engaged, but can charge high prices for its own devices because its customers are locked in.
There's only one Apple with sufficient clout to maintain this type of exclusivity and its adverse consequences on competition, cost and choice. Apple provides its customers with a limited selection of current smartphones and tablets at premium prices. Meanwhile, the global market share of Apple's iOS operating system is just over 22 percent, compared to more than 76 percent for the thousands of devices running the Android operating system, according to Statcounter GlobalStats' Mobile Operating System Market Share Worldwide study.
Apple has also been accused of co-opting the value-add of its partners. As Reed Albergotti wrote in "How Apple uses its App Store to copy the best ideas," published Sept. 5, 2019 in the Washington Post, "Developers have come to accept that, without warning, Apple can make their work obsolete by announcing a new app or feature that uses or incorporates their ideas. Some apps have simply buckled under the pressure, in some cases shutting down."
Acquirers, processors, ISOs and merchant level salespeople can't afford to be boxed in by constraints imposed by device vendors who aspire to become the Apple of the POS world. If you're tied to one device or family of devices, you're limited in your flexibility to create value-added solutions for merchants. More choice and more flexibility will more fully engage merchants and consumers, leaving them less inclined to opt for alternative providers.
There's an obvious difference between the POS device market and that of consumer mobile devices in general. When it comes to payment systems, there's a critical layer of added security that must be employed to ensure that rogue apps don't compromise transactions. Adopting a standardized approach helps unify security between devices from different vendors.
A device-agnostic application platform that provides security and the flexibility to work with existing and future hardware vendors can ensure that acquirers and ISOs are able to quickly adapt to changes in the market and to the needs of merchants.
All professionals on the acquiring side must be able to speed up the onboarding process, offer flexibility to mix and match hardware devices – including classic terminals – and accommodate new payment methods when merchants and consumers demand them. Classic terminals and walled-garden smart POS solutions alone cannot meet those needs in a timely, cost-effective manner.
POS terminal certifications have long been the major constraint on innovation in the payments industry. Payment schemes and processors have stringent requirements that result in lengthy waits to get terminals certified and recertified when changes are made to the key payment app, or when value-added apps impact the payment app. Not only is that time consuming, but it also imposes burdens on acquirers to build staffs and skills to manage compliance with these processes. All of which limits enthusiasm and willingness to embrace a multivendor device estate.
A device-agnostic platform approach can simplify the payments infrastructure for both classic payment terminals and next-generation smart POS solutions. With device-independent payment app connectivity and enhanced payment gateway functionality, the platform can consolidate an organization's different payment solutions to one manageable solution.
More importantly, the platform approach makes it easier to adopt and manage new payment methods. For example, suppose a national acquirer begins receiving many requests from West Coast merchants to offer Alipay to accommodate large numbers of visitors from Asia; previously, such a regional option would have been hard to justify, but with a platform approach it's much easier to roll out new capabilities only to merchants who need them, rather than across an entire estate of devices.
Over the past five years more innovation has occurred in payments than in the previous 40 years. The pace of innovation continues to accelerate, and acquiring professionals need to position themselves to stay abreast of it or risk floundering as competitors and interlopers race ahead. In the future, acquirers and ISOs may need to incorporate terminal-less payment solutions into their portfolios, such as consumers initiating payments by presenting their personal QR code or a token that utilizes their Amazon Pay account.
In the near future, payment methods will likely emerge that we can't even fathom today. When consumers demand them, merchants must be able to respond or risk losing business; when merchants lose business, they'll be more likely to turn to service providers who are more responsive to their needs. To position yourself for next-generation acquiring services, don't let yourself get boxed in by artificial barriers erected by device vendors.
Eddie Johnson is product manager with AEVI, where he works with the product team to bring to life the promise of choice and flexibility in an open ecosystem. He has an instrumental role in fulfilling the potential of Android payment devices to deliver the next generation of acquiring services. Contact him at firstname.lastname@example.org.
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