Ten payment companies putting the point of sale into smartphones

April 7, 2023 10:03 AM

The payments industry's maturation from static point-of-sale terminals is giving merchants a greater ability to diversify how they use space and engage with customers.

While firms like Block have long offered hardware attachments to phones to accept credit cards, new options allow the phones to act as point-of-sale devices without an attachment. Called tap to pay or softPOS, this technology minimizes the work required for merchants and, along with other innovations such as checkout-free store design, can push in-store terminals deeper into the past.

"SoftPOS is the next step in the evolution of payment acceptance in the physical world," said Thad Peterson, a strategic advisor at Aite-Novarica. "With no hardware cost, full portability and no need for an extensive POS back end, SoftPOS is ideal for micro merchants who have previously had to use a dongle to enable card payments."

But it's not limited to small merchants, since softPOS can also put checkout into the hands of sales personnel at a larger store.

Enterprise-level retailers see an opportunity to use SoftPOS to provide queue-busting capabilities as well as enable payments anywhere in the retail space, according to Peterson. "And, since a smartphone can access mobile networks in addition to Wi-Fi, SoftPOS can also be used as a backup to installed POS in the event of a system or network failure," Peterson said.

Here's a look at firms that have advanced softPOS over the past year.

Simon Dawson/Bloomberg

Ingenico

Last week, French payment company Ingenico acquired Phos, which develops technology that underpins softPOS. Ingenico, which has its roots in point-of-sale hardware, has been diversifying its technology for years to accommodate merchants' and consumers' appetite for digital payments. For example, Ingenico earlier this year added support for buy now/pay later and biometrics at the point of sale. Increasing its ability to enable payments without hardware is a way to attract merchants that have lots of other options from fintechs that serve retailers, such as Block, Stripe and PayPal.

"SoftPOS is one of the key latest innovations in payments acceptance," said Zil Bareisis, an analyst who head's Celent's retail banking practice.

For a company like Ingenico, it's an important tool to have as part of a broader arsenal of merchant offerings, and the technology further strengthens the value proposition of Ingenico's new device-agnostic Payments Platform as a Service (PPaaS), Bareisis said.

"For a smaller vendor like Phos, Ingenico brings distribution reach and financial strength to support growth," Bareisis said. "I wouldn't be surprised to see more similar deals in the market in the coming months."

Worldline's Niklaus Santschi says Tap on Mobile will help further the move to pair payments with other merchant services.

Worldline

Worldline, another French payment company (and the parent company of Ingenico from 2020 to 2022), late last year acquired a 55% stake in Softpos.eu, a Warsaw-based company that enables Android devices to act as payment terminals. Worldline also acquired Italy-based Banco-Desio's merchant acquiring business at around the same time. The two deals help Worldline broaden its product base, including mobile payments without hardware.

The technology underpins Worldline's Tap on Mobile product, which allows any web-connected device to accept payments.

In an earlier interview, Niklaus Santschi, head of merchant services at Worldline, said the new payment technology would be the stepping stone to offer myriad merchant services accessible through smartphone apps.

Apple

The technology giant played a large role in bringing softPOS to the payments industry when it issued an update that allows transactions between consumers' contactless cards or mobile wallets by tapping an iPhone.

Since Apple is not a payment processor, its version of softPOS, called Tap to Pay, requires a partner to connect the technology company to merchants. So while softPOS would in theory threaten point-of-sale hardware's relevance, Apple's softPOS leaves room for more traditional payment companies to play a role in enabling the innovation for merchants. Apple's partnership with Goldman Sachs to issue Apple Card could in theory allow Apple to provide payment processing in the future.

"By removing the need for a dedicated device, softPOS frees payment acceptance to become incorporated in a wide range of devices, from standalone kiosks to in-car payments," Peterson said.

Stripe

Stripe added support for Android's softPOS technology early this year, following its launch of iOS Tap to Pay in 2022.

The move allows the payment company to address merchants in both online and physical stores, a necessity for Stipe, which traditionally earned most of its business in e-commerce.

"Merchants want a unified experience and to meet consumers wherever they are, digital or in-store," said John Affaki, terminal business lead at Stripe, in an earlier interview. "The word 'omnichannel' may be buzzy, but the use case is real."

By supporting both Apple and Android, Stripe can cover almost the entire global mobile market. Android has 72% share of the world's mobile market, with Apple having a nearly 28% share. Since more than 54% of Stripe terminal's transactions in 2022 were contactless, the company has an existing market for softPOS and room to grow.

Adyen

The Amsterdam-based Adyen added Apple's Tap to Pay late last year as part of a strategy to broaden payment options as traditional store models fade.

Tap to Pay accompanies several additions at Adyen, such as merchant lending to compete with Block and Square, and a pair of point-of-sale payment features to expand its reach into physical retail.

Its NYC1 product is designed for small businesses, which can offer payments in their own app; and AMS1 is designed for larger retailers.

The full stack covers softPOS, credit and non-payment tasks such as inventory and cash management, enabling Adyen to pitch itself as a one-stop for merchants looking to cut costs in a slower economy.

Visa

Visa started rolling out softPOS technology to Black-owned small businesses in Washington, D.C., as part of a strategy at the card brand to accommodate the growth of transactions beyond traditional point of sale systems.

More than 10% of Visa's in-store transactions are contactless, and the company is trying to extend the payment method to small businesses that may not have an IT department or a budget for larger technology upgrades.

Visa's network additionally enables banks to offer softPOS to merchants, either by building their own feature with Visa specifications or working with Visa's fintech partners.

Mastercard

Mastercard's softPOS deployments enabling Tap on Phone in more than 60 markets. The card brand enables a range of options relating to softPOS, including Tap on Phone, to PIN on Glass, mobile point of sale and cloud commerce, which blends Tap on Phone, Pay by Link, Click to Pay and other options to to enable simple physical and digital merchant acceptance for partners to create their own cloud-based products.

The card brand reported adoption in emerging markets in villages that did not have robust usage of point of sale hardware, as well as larger cities with more developed merchant technology.

Part of the reason stems from the pandemic, which led to merchants to enable more in-person transactions outside of stores. Some of these merchants were looking for faster checkout options, which fit well with softPOS, according to Mastercard.

Zettle

Zettle, which recently launched its Tap to Pay branded service in Europe, has found early demand from a mix of micro merchants and small businesses, which use the technology to break up lines in stores.

One of Zettle's customers, Anton Lundqvist, who runs the Fyra Vindars Bigårdar (Four Winds Bee Farms) in Lund, Sweden, told American Banker there is often a slight delay for smartphone payments that use hardware.

"The advantage of Tap to Pay is it's always turned on, and there's very little delay," Lundquvist said.

PayPal

The payment company added softPOS in anticipation of a slower economy, during which merchants may not want to pay for payment hardware. Merchants with a Venmo or PayPal account can accept payments via iPhones for 2.29% plus 9 cents per transaction.

SoftPOS joins over moves at PayPal (which is also the parent company of Zettle) to reverse a slump over the past year, including using its e-commerce platform Honey to enable consumers to manage discounts and incentive marketing, and managing redemption at PayPal checkout. Amazon has also added Venmo as a payment option.

Block

Block, which owns Square, launched Tap to Pay on iPhone in late 2022. The feature is available through the Square Point of Sale iOS app.

Over the years, Block has added services such as banking for medium-sized businesses, and focused on crypto trading and other consumer-facing services through its Cash App. Many of the Tap to Pay service's early users are similar to those from the company's early days, such as contractors and caterers. Additionally, hairstylists have used the technology to accept payments directly from their chairs in salons.

Another key category for SoftPOS is "merchants on the go", companies or individuals who offer on-demand services such as plumbing and home repair, craft fair vendors, pop-up retail and food trucks, Peterson said. "For larger merchants who most likely already have traditional POS terminals or mobile POS devices, SoftPOS is seen as an addition to their existing POS systems."