Since point-of-sale (POS) card terminals were first introduced by Visa in 1979, the payment system has hardly seen much advancement. Despite this, as fewer people stick to using cash, POS terminals are increasing in importance for large and small businesses alike.
Here, Steven Stewart, UK country manager at myPOS, a European point-of-sale (POS) system developer, explains his view on why now is the time to significantly disrupt the POS sector.
It is estimated more than three million POS card machines are used by small businesses, independent merchants, retailers and restaurants across the UK today, enabling merchants to effectively process payments in an increasingly digitised, cash-free society.
With cash usage now less than half of that of a decade ago, and with cash usage predicted to continue to decline as debit card and contactless payments become consumers’ default form of payment, the UK mobile POS market is set to nearly double (+93 per cent) by 2027.
This surge in usage of POS systems follows a decade of phenomenal technological innovation across the broader retail and financial services sectors – innovation that has seen both card readers and many other areas of retail payments digitally transform to better serve shifting consumer demands. From ‘just walk out’ stores to biometric checkout technology, as well as new Android-based payment card machines, it has become easier for customers to purchase goods more quickly and securely than ever before.
Yet despite this innovation, and the surging growth of the POS market, many card payment solutions – both legacy and new – are failing merchants, primarily through their inefficiency and cost. Mobile POS systems in particular is one area of retail payments that remains ripe for further transformation.
Card machine providers are failing their users
One of the main frustrations independent retailers face around POS systems is that, when it comes to the provision of these systems, independent retailers and small businesses have tended to turn towards traditional Independent Sales Organisations (ISOs). Yet it is these traditional ISOs that often impose not just the highest costs of renting and operating a card machine (often in the form of both a fee for the physical POS device, as well as expensive monthly retail fees), but also an inflexible contract on the retailer that could be as long as 18 months.
This combination of high costs and ‘locked-in’ contracts is especially damaging to small businesses and independent retailers in the current UK economic climate, in which job vacancies are at a historic high, inflation remains stubbornly persistent, and growing numbers of SMEs are filing for insolvency. It is during these circumstances particularly that independent retailers don’t need the headache and burden of another extortionate, locked-in operating cost.
Another way in which many current card machine providers are failing their users is through access to funds. Typically, many payment providers are only able to process and provide access to funds hours, or sometimes even days, after a transaction. In other cases, some providers are able to provide instant payouts, but for a fee. For larger organisations, this delay may not pose a problem, but for smaller or independent retailers, this delay can lead to considerable cash flow issues.
Legacy limitations
Despite advancements in POS technology in recent years, many small businesses and independent retailers also remain hindered by the limitations of legacy POS systems and traditional card readers. This is especially true for those retailers using bank-provided payment card machines and POS solutions, which may not be cloud-based, lack digital features, can’t handle cross-border commerce, and can’t integrate with other payment platforms or software, making them increasingly incompatible in today’s operating environment.
Fortunately, new fintech-based POS solutions that are entering the market are designed precisely to overcome these challenges. Specifically, new payment ecosystems have been designed not just as a form of processing payments, but rather as a partner that can better help businesses overcome the challenges they regularly face in relation to payments more broadly – such as loyalty and reward programmes, the payment of suppliers, handling company expenses, payment tracking and reconciling different payment types.
To help reduce businesses’ POS system costs, one recent innovation is an app such as myPOS Glass – the application enabling any retailer to take payments on their phone (either iPhone or Android). This means the ability for micro-entrepreneurs and side-hustlers to accept digital wallet, credit and debit card payments anywhere. No additional hardware needed.
Another way in which fintech-driven payment platforms are working to reduce the costs of card machines and modern payment tools is by providing POS services without any long-term contracts or monthly fees, meaning the only overhead is the initial hardware purchase. Furthermore, new industry-leading payment providers also enable instant settlement of funds for no additional fee, with the market-leading solution enabling merchants to access their funds for no extra charge just three seconds after the transaction has occurred.
New cloud-based solutions
Finally, a new generation of card machines and POS systems are actually fit for purpose in today’s digital-first world. These new systems are cloud-based and can be integrated with other online payment methods through ready-to-use tools.
Some of the features go far beyond the expectations of a simple payment method – like giving small businesses the chance to receive an online payment without having a website, create customised gift cards for clients or top-up pre-paid mobile phones. Merchants can also use these newer fintech solutions to track customer data, thereby increasing customer engagement.
POS card machines are the lifeblood of many UK small businesses and independent retailers. As more and more consumers switch to digital forms of payment, there is a huge opportunity for these retailers to capitalise on this trend and turn it to their advantage.
It’s our responsibility, within the payments sector, to ensure they are equipped with the best possible tools to do so.
