KEY POINTS

  • The mobile point-of-sale (mPOS) market is expanding rapidly. BI Intelligence estimates that there will be 27.7 million mPOS devices in circulation in the US by 2020, up from 3.2 million in 2014. These terminals are an increasingly compelling option for merchants because of the added features and convenience they provide at an affordable price. 
  • Retailers are the key group driving the growth of the mPOS ecosystem. As the market expands, vendors' focus is shifting away from micromerchants and toward small retailers. These retailers do more business than micromerchants, invest in more services, and are likely to be more loyal clients, making them the most lucrative and reliable option for mPOS firms. 
  • There are several added features that are likely driving retailers to the product. These include EMV support, value-added services, affordability, and convenience. Such features can also appeal to smaller merchants, but this population is less likely to view them as necessary or worth the capital outlay.
    • For example, a smaller merchant may not be particularly concerned about fraud, and therefore may be less interested in EMV, or an individual seller might not require business management tools to manage employees. 
  • Hardware upgrades will be a core driver of mPOS usage. Upgrading to EMV is expensive, and as a result, many merchants have opted to avoid making the switch. But as chip cards become more common, the fraud benefits that EMV provides are starting to appeal to merchants. This is driving retailers to mPOS firms, as the solutions they provide are fairly easy to implement, and largely affordable.
    • In Q3 2015, when liability for in-store fraud involving non-EMV-enabled terminals shifted from issuers to merchants, just 15% of small sellers were using mPOS solutions, a one percentage point increase over the year-earlier period. That had jumped five percentage points by the next quarter. 
  • But value-added services will be the biggest contributors to mPOS firms' success. Hardware is a key draw for merchants looking to incorporate EMV in a simple and convenient way. But software and value-added services, like working capital programs, omnichannel integration, and business management tools, will be the reason that retailers stay with mPOS. That's because these tools tie merchants closely to the product and keep them loyal, while generating additional sources of revenue for mPOS providers. 

Introduction

When mobile point-of-sale (mPOS) devices first entered the market, they [...]