KEY POINTS

  • The mobile point-of-sale (mPOS) is a broad category for a handful of devices and software that allow merchants to accept payments and manage their businesses. An mPOS system is often portable, integrates with a consumer tablet or smartphone, and uses cloud-based software, though no definition can do justice to the wide spectrum of technologies in this emerging category. Examples of mPOS software include inventory and payroll management.
  • mPOS is disruptive, but retail adoption is lower than surveys suggest. Multiple surveys have mPOS adoption at over 40% in the US among small to medium-sized businesses, but we estimate adoption is lower for retail merchants.This finding is based on a detailed look at the data, and conversations we've had that suggest many of these merchants revert to sturdier legacy solutions.
  • We forecast mPOS adoption among US retailers will grow from 31% in 2014 to 79% by 2019. Industry consolidation, the development of scalable solutions, improved software, and purpose-built hardware will drive adoption.
  • By our estimates, mPOS companies targeting small retailers could earn up to $8.4 billion in the US from processing fees. But acquiring enough low-volume retailers to generate substantial revenue net of paying out other intermediaries remains a major challenge.
  • The business model is shifting from processing to software-based value-added services. What mPOS providers are realizing is that upselling to existing merchants is a better strategy than solely focusing on acquiring more merchants for pure-play processing. When small businesses are ready to start accepting cards they're often looking for other business solutions like marketing and payroll management as well.
  • Payment processors, independent sales organizations (ISOs), and terminal providers face the biggest threat from mPOS. mPOS providers allow customers to buy devices directly from stores or the mPOS company, allowing customers to bypass ISOs, which act as a middleman. mPOS companies still use legacy payment processors like First Data, but as mPOS companies gain more market share they will have greater leverage in setting the fees paid to processors.
  • Purpose-built mPOS hardware will drive industry consolidation. If the purpose-built mPOS hardware that is coming on to the market catches on, it would displace many of the products that pair with consumer smartphones and tablets. That could mean that mPOS providers move from acquiring merchants with hardware to providing mPOS software to mobile terminal providers or legacy acquirers.

Defining The mPOS And Their Legacy Competitors

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