Point of sale terminals five years from now may not look much different from today's devices, but big changes are expected for the software running on them.
The proliferation of payment form factors — including magnetic stripe, EMV Integrated Circuit Card Specifications and near-field communication and other contactless methods — coupled with merchants' desire for more value from their payment systems is prompting a reconsideration of what a payment terminal should do, said David Fish, senior analyst at Mercator Advisory Group Inc.
Payment terminal makers should plan for "application-centric" devices, where the focus is on the software residing inside the terminal instead of on the hardware, Fish said.
Some of this change is already taking place. For example, by the end of the year Sage Payment Solutions, a transaction processor based in McLean, Va., plans to install its Sage Exchange software into Ingenico SA terminals. Sage Exchange lets merchants combine financial and transaction data.
"The movement is away from a great deal of information and intelligence that drives the terminal being resident in the terminal itself to a more hosted model," Fish said.
An example of that today is remote key-injection services that update a terminal's encryption without the need to send the device to a shop for the service.
Retailers reap benefits from this new model, Fish said. "Merchants are hungry for integrated technology that creates a richer user or customer experience at the point of sale," he said, citing as examples improved marketing and loyalty efforts and back-office integration for inventory and loss-prevention processes.
The core physical components of a POS terminal — the screen, PIN pad and mag-stripe reader — will not change, but devices likely will be built from scratch with other acceptance technology, such as smart card and contactless payment readers, Fish said.
Though the U.S. has yet to migrate to EMV payments, merchants already are deploying EMV-capable devices as they replace older terminals, Fish said.
"The future isn't processing; the future is services," he said.
Fish published a report on these trends this month called "The 'World Terminal': Preparing the POS for the Multi-Form Factor Future."
