Bigger merchants are breaking free of the confines of the cash register with mobile technology originally designed for mom-and-pop stores.
For larger retailers, the payments benefits to portable card readers go beyond a simple increase in smartphone accessibility for customers. Apple Inc., for example, shortens waiting lines by giving employees handheld devices to let them sell products from anywhere on the sales floor, particularly during times the retailer anticipates high sales volume, such as during the holidays or when it launches a new gadget.
"It's a very logical extension … to go from small-business-owner environment into a true retail environment," Zilvinas Bareisis, a senior analyst for Celent, said by e-mail. "The much richer retailing environment presents … opportunities to develop new mobile-based services."
VeriFone Systems Inc. announced Monday that it has updated its PayWare Mobile smartphone payment sleeve to appeal to larger merchants. The original version allowed merchants to swipe cards along its side, whereas the new version adds acceptance for contactless cards and chip cards. The new version also has a built-in scanner.
Erik Vlugt, VeriFone's vice president of product marketing, said that the enterprise version of the San Jose company's reader is designed to work with a retailer's existing payment infrastructure, allowing stores to mix and match VeriFone's mobile payment device with others' terminals.
VeriFone is not the only company with an eye on larger merchants. Square Inc. said retailing's bigger players are inquiring about using its square-shaped plug-in reader to handle payments.
"All the larger retailers and medium-sized retailers want to replicate what they see in the Apple store, where they can actually bring the point of sale to the decision, instead of making people queue up behind the cash register," Jack Dorsey, Square's chief executive, said in an interview in December.
These retailers pair Square's device with Apple's iPad tablet instead of a smartphone, since within the store there is less need for the portable terminal to be pocket-size. "The people who have the mobile phones are usually individual service [providers] like tax [accountants] or electricians or plumbers or instructors of some sort," Dorsey said.
Square has not tried to segment the market as VeriFone has, instead opting for a one-size-fits-all approach, Dorsey said.
Bareisis said there is value in making smartphone payment devices for large retailers. "I think the key benefit of the enterprise version is … in all the other applications that the device would enable," he said.
VeriFone rolled out the small-merchant version of PayWare Mobile in February as a method for small-business owners to accept payments. With that version, merchants could accept transactions only through VeriFone's gateway.
Add-on readers for smartphones were also pitched to customers through new sales channels. Square allowed consumers and merchants alike to order its device by mail after downloading the reader's software through Apple's mobile app store. VeriFone sold the original PayWare Mobile sleeve in Apple's retail stores.
The devices also handle security issues that consumers and small merchants may not be widely aware of, such as encrypting card data so that it can be processed securely without storing sensitive information on the phone itself.
Mobile phones are gaining more attention as potential payment devices, as major banks have been increasingly testing options for linking phones to contactless payments. For example, Bank of America Corp. has been testing a system that allows users to install a contactless chip into some smartphone models, and it plans to issue stickers with built-in payment chips this year for customers to adhere to their phones.
Vlught said that although PayWare Mobile is meant to help receive payments, not make them, its contactless acceptance feature would work with those approaches to mobile payments.
VeriFone's device is the first of its kind that can marry smartphones to the complicated in-store software that retailers use to keep track of transactions, analysts said.
However, some caution that the effectiveness of a mobile terminal has less to do with the design of the device and more to do with the design of the retail store where it is deployed.
Howard Polack, a senior analyst at Aite Group LLC, said, "I'm not sure that every retailer will be ready" except those "retailers and merchants with a little bit more vision."
Education is important, because the devices help merchants only if their sales staff are properly trained.
"Apple's internal in-store solution makes their employees very efficient," Polack said, referring to of a mobile device that Apple employees use to process transactions. "I'm not sure that every retailer will be able to do that."
Retail stores might not be the best fit for this hardware, Polack said. PayWare Mobile's built-in ability to handle chip card payments holds appeal for airlines, where there is a higher likelihood of encountering travelers from countries where cards use the EMV Integrated Circuit Card Specifications.
Brian Riley, a research director in the bank cards practice at TowerGroup, said there may not be many merchants who could benefit from this technology.
"It's clear that everybody wants to get into mobile payments right now," Riley said. "If you are a Level 1 merchant" — the category handling the most card payments — "why would you want to step back and use a handheld device like that?"
Riley said that VeriFone would have to provide merchants with some sort of profit incentive to use the device.
"I'm thinking flea market" is still the best fit, he said.
Vlught said that although VeriFone could not say which retailers would use its device, "we are in talks with most major retailers."