Visa pushes 'smartphone pay' to bridge small-business gaps

• Key insights: Visa has expanded technology that enables smartphones to accept payments with no additional hardware. 
• What's at stake: Small businesses, particularly in emerging markets, are a potential market for the technology.
• Forward look: Visa plans to sell the service to micromerchants and other small businesses. 

The global push to digital commerce threatens to leave small businesses behind, creating an opportunity for payment firms to sell quick-deploying technology that turns smartphones into payment terminals.

Visa recently launched a new service that embeds smartphone payments in three of its products — Visa Pay, Visa Accept and Visa Direct. Visa Pay is a digital wallet, Visa Accept supports small-business payments and Visa Direct enables real-time transfers. While large merchants usually can support contactless payments with enterprise-grade mobile point of sale terminals, the card brand is addressing a segment that is often elusive for payment technology by pushing smartphone payments out to more products. 

"Fast payment systems are now widely available, even in many low- and middle-income countries. In many emerging markets, most adults own a debit card, a wallet or transaction account. On paper, the digital rails are in place" in paper on small-business payments, said The World Bank. But step into a small neighborhood shop and the story often changes. Cash still dominates. Digital accounts are used mainly to withdraw money, not to pay. The missing link is not access — it's merchant acceptance."

Less hardware

Visa is betting on simple technology to address the problem. Called Tap to Pay or softPOS (a term that encompasses non-Apple and Apple technology), it can be useful for small merchants. These merchants traditionally accepted cash and moved to cards after firms such as Block sold payment-accepting hardware attachments for mobile devices. More recently, Apple developed Tap to Pay, pushing a wave of products from payment companies to support the low-cost software-heavy option. Visa rival Mastercard offers a similar softPOS service.

Visa's small-business unit already supported softPOS, and the updates pair the technology with additional transaction rails in an effort to make it easier to access. 

"Many microbusinesses, sole proprietors and mobile merchants still rely on cash because traditional terminals require a formal relationship with a vendor which can make accepting cards  costly or complex, especially in emerging markets," Rubail Birwadker, global head of growth at Visa, told American Banker. 

In its new rollout, Visa paired the softPOS release with internal research that argues small merchants are clamoring for digital technology. Visa's Global SMB Macro Trends Report found that 99% of surveyed SMBs use at least one digital finance tool, and 85% say at least one has helped their business. 

"In emerging markets, [softPOS] can accelerate the shift from cash to digital payments and support financial inclusion alongside digital wallets," Birwadker said. "In developed markets, it helps smaller merchants meet demand for contactless payments and grow with changing customer preferences with simplified ways to activate or onboard as a merchant."

The combination helps Visa reach underserved sellers across the small-business spectrum, including sole proprietors, microbusinesses, market vendors, food sellers, service providers and other first-time digital merchants, according to Birwadker.

"It is especially relevant for sellers that need a simple, low-cost way to accept card and wallet payments without investing in traditional point-of-sale hardware … by turning a mobile device into an acceptance tool, Visa Accept helps reduce those barriers and gives banks a way to serve more informal and entry-level businesses," Birwadker said.

The mobile wallet connection

Visa's softPOS expansion goes beyond enabling acceptance via the smartphone, according to Zil Bareisis, banking and payments director at Celent. By combining Visa Accept with Visa Pay and Visa Direct, the card network is enabling wallet interoperability and enabling small merchants to execute payouts through the same phone, he said.

"There has been a proliferation of wallets in recent years, especially in the emerging markets, and while that gives choice for consumers, for merchants maintaining multiple connections and acceptance badges can be costly and time-consuming," Celent's Bareisis told American Banker. "Furthermore, many of those wallets only operate domestically, and are not available for customers traveling abroad. Solutions that can connect those wallets and offer interoperability can be attractive to both merchants and consumers."

Contactless payments totaled $10.4 trillion in 2024, according to Datos' latest data, including  42% of all card payments worldwide and 23% of total card. Seventy-one percent of transactions in Europe and 36% in the Americas are contactless, and about 89% of terminals accept contactless payments on pace for near-universal acceptance by 2030, according to Datos. 

"For payment firms, adding software-based acceptance is no longer just an innovative feature, it is essential," Ron van Wezel, strategic advisor for Datos Insights, told American Banker. 

SoftPOS or Tap to Pay can lower hardware costs, enable seamless merchant onboarding and position merchants to capture the massive shift toward contactless payments, according to van Wezel. The technology allows micro-merchants, gig workers and pop-up vendors to start accepting payments with a simple software download, according to van Wezel. "Firms can distribute their acquiring services without the traditional costs of shipping, maintaining, or replacing physical card readers," he said.