SoftPOS from Innovation to Reality

24 - 11 - 2022

Use cases and Market news By Pavel Vasilyev

Having been laser-focused on the evolution of Software POS solutions over the past two and a half years allowed us to have countless discussions on this subject, learn from real-life feedback with our customers and prospects, and, most importantly, gain first-hand experience from working on over a dozen of SoftPOS projects with our customers in Europe and Latin America. As a result – we are completely convinced that the technology is about to reach its critical mass of adoption.

If you’re not sold on these types of solutions – here’s some food for thought.

The payment networks are embracing and pushing the technology forward. Visa, Mastercard, American Express, Discover and some of the domestic payment schemes (e.g. Cartes Bancaires in France) have all published their specifications and are actively encouraging solution providers to adopt them.

In the meantime, PSC SSC has just released PCI MPoC (Mobile Payments on COTS) standard which was highly anticipated by the industry and will undoubtedly facilitate further growth and scalability of software-based payment acceptance solutions. If you know anything about PCI SSC – you’ll know they weren’t always keen on the idea of allowing Android-based and touchscreen devices, especially so-called COTS (Commercially available Off The Shelf) devices, to handle cardholder data, especially PIN. The mere fact they are not only “on board” with this technology, but have released 2 dedicated standards (CPoC initially, and now MPoC) for SoftPOS solutions is huge.

Dozens of card acquirers and merchant services providers have already launched their MVPs, and it’s common to read about new commercial launches of SoftPOS solutions everywhere in the world. Sure, your local convenience store may not be using these types of solutions yet. However, it is a fact that many Merchant Service Providers are experimenting with the technology, and it’s only a matter of time before they will start scaling.

Even some traditional players seem to be getting on board. The likes of Ingenico, SumUp and Zettle by PayPal also offer their own flavours of SoftPOS solutions these days. Not to mention Apple, with their Tap to Pay on iPhone, which not only means that software-based payment acceptance is accessible on both Android and iOS platforms but also solidifies the legitimacy of the technology in the eyes of most experts and, more importantly, everyday consumers.

Finally, Juniper Research has recently conducted a study and found that the total number of merchants deploying SoftPOS will grow by 475% within the next 5 years. 

BYOD and Hybrid model: payment use cases enabled by SoftPOS solutions

So, now that we’ve discussed some of the factors why SoftPOS solutions are here to stay long-term, it’s a good moment to explore some of the deployment models. Generally speaking, when we talk about SoftPOS solutions, more often than not, we imagine a merchant using their smartphone to accept payments. This is, obviously, a powerful use case that makes a lot of sense for many merchant verticals. However, we would not be tapping into the full potential of SoftPOS solutions if we didn’t consider a broader range of software and hardware combinations.

When SoftPOS came to the surface, its main idea was to enable underequipped micro-merchants to accept card payments directly on their mobile devices, eliminating the need for additional hardware.
While BYOD (Bring Your Own Device) model is still highly relevant, a so-called Hybrid model is gaining traction as, in many cases, it can better address the needs of larger merchants, i.e., high-end department stores, hotels, restaurants, etc.

So, what is a Hybrid model anyway? A Hybrid model is when a SoftPOS app is deployed on a professional device adapted for a payment use case. Here are some examples:

  • Tablets with stronger NFC antennas that are conveniently positioned to accommodate payment acceptance use cases. An example of such devices would be tablets with extra-strong NFC readers either at the front of the device or hidden behind and in the middle of the screen.  
  • Professional business devices from innovative vendors like Famoco that boast powerful, EMV Level1-grade NFC antennas, and a broad range of business applications available from a private store. 

Since these devices are designed with a contactless payment use case in mind, the user Experience is improved compared to the BYOD model, which relies on standard smartphones and tablets available off the shelf.

What about the cost of SoftPOS solutions?

Since the beginning, one of the major benefits of SoftPOS solutions compared to traditional POS terminals was their significantly lower cost. As such, it is important that we discuss the costs, especially now that we’ve explored various form factors, including solutions that combine software and hardware.  

The good news is, even if the Hybrid model does rely on dedicated hardware, the cost advantage remains to be present with not only the BYOD model but also the Hybrid model. 

If, in the case of BYOD deployments, we’re eliminating the cost element of hardware entirely, in a Hybrid deployment model – the cost advantage is preserved due to the significantly lower hardware costs. This is because, unlike with the traditional POS terminal – the hardware used in a Hybrid model no longer needs PCI PTS certification because SoftPOS solutions rely on software-based security measures to protect cardholder data and PIN.

The Hybrid approach is, of course, going to come at a higher price point than the BYOD model. However, we could argue that the two do not compete against one another. If BYOD is set to replace the low-cost mPOS hardware of the past, the Hybrid model directly competes against popular (and higher cost) Android/Smart POS terminals and, in many cases, goes beyond what Smart POS terminals, creating an entirely new category of devices that combine the utility of contactless payment acceptance with professional business devices, dedicated to addressing the needs of a specific merchant vertical and brand-new use cases. An example of such a device would be a specialist tablet used as a self-checkout system in a retail store.

In conclusion…

Undoubtedly, SoftPOS solutions are growing in popularity, and we could easily imagine them becoming de-facto payment acceptance solutions across most merchant verticals in time. Smaller merchants may rely on BYOD-based solutions, while larger retailers would probably benefit more from all-in-one Hybrid solutions. 

Ultimately, both BYOD and Hybrid models are viable and will co-exist in the future. Just like mPOS devices co-existed with Android/Smart POS terminals. After all, merchants will have different needs depending on the size of their business, market segment, and a myriad of other factors. Our goal in the payments industry is to address their needs most efficiently. SoftPOS solutions, due to their flexibility and adaptability to a broad range of use cases, enable us to do precisely that.  

These articles may also interest you