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Will SoftPoS be the new global payment mechanism?


by Arun Krishnakumar.



SoftPoS stands for Software Point of Sale. If you lived in parts of the world outside of the US, you would have come across contactless payments. It made the payment experience seamless and almost invisible to the customer. As a result, in the UK for instance, by Q4 2018, contactless payments took over chip and pin.

Contactless is pretty helpful for a small coffee shop at a peak hour during a work day. It saves time, and the shop could take payments from more customers when compared to chip and pin. SoftPoS takes contactless payments one step further, mostly for the coffee shop.

The coffee shop does not need a PoS device to take payments anymore. The coffee shop could use a simple software (an app) that can be set up on a smartphone or a tablet. From this point, the customer can use their usual NFC based payment – only this time, they will bring their phone/card in contact with the coffee shop’s phone/tablet.

The user experience for the customer shouldn’t change – and that is good. Onboarding customers to a whole new payments experience is often a pain. However, for the retail outlets (our coffee shop), it offers a bag of benefits.

The coffee shop doesn’t need to invest in a third party PoS device any more. It also takes away some cost pressures on the shop. I did a quick search on PoS devices and their charges. For example, iZettle (a PoS device for SMEs) charge the merchant a flat 1.75% transaction fees. This fees would be saved with a SoftPoS solution.

The costs involved for the coffee shop in a SoftPoS setup is still not clear. If there is a cost saving as the PoS device provider is out of the picture, the coffee shop can use that saved amount to perhaps reward loyal customers.

At the IFA event in Berlin earlier this week, Visa, Fiserv and Samsung together announced their plans for a SoftPoS solution. Visa would provide the contactless feature, Fiserv will perform the settlement and Samsung will take care of the security. They plan to do a pilot run of the system in Poland that has high penetration for contactless payments.

I did a quick analysis on how impactful this change could be for UK merchants. Some stats that caught my attention are as follows,

- In the UK there are around 5.7 Million private companies,
- Of which 99.9% are Small and Medium Enterprises (SMEs).
- The definition of an SME in the UK is a firm with less the 250 employees.

However, this change will be most beneficial for the shopkeeper who has less than 10 employees working for him/her.

- A business in the UK that has less than 10 employees is called a Micro-SME.
- 96% of all private companies in the UK are Micro SMEs.
- Micro SMEs contribute 33% of employment in Private sector, and 21% of turnover.

Let us look at the impact of retail companies in the UK

- Retail companies make up 10% of all UK private companies
- Retail companies employ 19% of the UK private sector workforce, and generate 33% of the turnover generated by all UK industries.

I couldn’t find the numbers for Micro SMEs that are in the retail industry. If we really want to drill into that space, we could do some estimates from the figures above. In any case, the numbers are massive and the impact of helping Micro-SMEs would be felt at the grassroots of the society.

This technology could also be rolled out into emerging markets where Point of Sale devices are yet to penetrate into rural areas. This is yet another interesting space, as financial inclusion (cards) reaches the last mile, payment infrastructure could perhaps leap frog to SoftPoS. Interesting times ahead.

Arunkumar Krishnakumar
Arunkumar Krishnakumar
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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Vendredi 20 Septembre 2019
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