Does Apple’s Point of Sale Software Mark a New Dawn for Retail Payments?
By: Paul Snelling, Director of Platform Solutions at FreedomPay
Working in Payments — while very rewarding — isn’t exactly showbiz. However, Apple — world leader in ultimate cool tech — could be about to change this by shaking up how we pay. Could my job become a crowd-pleaser?
Apple has a long, substantive history of adopting new technologies and product designs. It hasn’t always developed emerging tech. Instead, pioneering easily adoptable tech and driving it to a mass market, global audience has positioned Apple among the world’s largest and most profitable companies. Apple recently announced its upcoming software update, Tap to Pay, enables iPhones to serve as a card payment terminal, demonstrating the multinational’s latest pioneering, technological focus on the Payments industry.
Could the Tap to Pay iPhone software update become a viable, mainstream alternative to the traditional payment terminal? Will consumer devices and SoftPoS (Software Point of Sale) replace merchants’ in-store hardware?
In my opinion, Apple entering the Payments market is very positive. The move will validate the use case for enabling contactless card payments using consumer devices as payment terminals. FreedomPay customers and partners are lining up to get on board, asking when FreedomPay will enable Apple Tap to Pay. Until Apple’s announcement, I’d considered myself ahead of the curve in my personal approach to SoftPoS: advocating turning Android devices into payment terminals. I’m excited that this vision is a step closer to reality. Nevertheless, the development presents many more questions than answers for the Payments Industry.
Does Tap to Pay mean that Apple will penetrate Merchant Services?
No. Or at least, not yet. Apple has announced partnerships with payment goliaths such as Stripe and Shopify. Apple will retain consumer control through Apple Pay, and merchant control through Tap to Pay.
However, there is nothing to prevent the tech giant cutting out the traditional acquirers and processors if they acquire a merchant services license. Akin to the recent acquisition of Credit Kudos, a British company which enters Apple into the world of Open Banking and replacing the need for a partnership like it’s one with Goldman Sachs in the US, to be able to offer device financing.
It seems that Tap to Pay could financially benefit merchants by reducing the costs associated with accepting payments.
Merchants highly value a straightforward, seamless payment experience for their customers and team. They tend to care less about the players involved in the transaction ecosystem than about receiving timely, secure payment into their account for goods or services provided.
If SoftPoS providers can simplify and reduce the cost of customer-present payment acceptance, mass adoption is a distinct possibility.
Is SoftPoS Secure?
Handling of consumer payment data using traditional payment terminals must comply with P2PE, a secure strict standard set by the Payment Card Industry Council. A P2PE-approved solution is table stakes for a provider to bid to sell or rent payment terminals to merchants. This requirement becomes even more stringent with sizeable merchants.
P2PE does not apply to SoftPoS. The PCI Council recently defined new standards for the secure capture of card details and authentication credentials, such as PIN numbers. The measures are under review by a limited industry audience, with an aim to make them visible to all industry stakeholders towards the end of 2022.
Defining standards to protect our data across devices within an open ecosystem like Android can be an arduous and complex task. Apple’s closed ecosystem has a distinct security advantage. But as it is not regulated by an independent body, what risk could Tap to Pay pose to consumer data?
Will SoftPoS replace traditional payment terminals?
An industry shift towards SoftPoS won’t happen overnight. Major merchants utilize integrated solutions across thousands of PoS and PMS. On the other hand, many SMEs do not own their payment terminals.
Payment terminals typically cost $200-$800 to buy or $15-$40 a month to rent. Whether a merchant owns or rents a number of devices impacts heavily on the cost of changing to a SoftPoS.
Configuring an iOS or Android device with an NFC reader into a secure payment terminal may reduce costs associated with payment processing and impact a merchants’ bottom line.
At technology evolves, merchants may eventually be forced to replace their terminals, just as we’ve swapped our Nokia 3210s for smartphones.
Disruption is rife throughout the payments industry. Options that challenge the use of scheme branded cards to settle transactions at a Point of Sale are emerging. Companies like FreedomPay, with its agnostic approach, are set to benefit greatly. Additionally, Biometric technology and QR Codes remove the need for NFC readers and can offer consumers secure payment solutions.
From a consumer perspective, there are huge disparities in the readiness of consumers to embrace payment technologies such as contactless payments, digital wallets, and SoftPoS. This can vary by geographic region or demographic. Tapping our cards against smartphones and other consumer devices could become commonplace over the next 5 to 10 years. Or will a wave of alternative payment methods drown out the SoftPoS revolution entirely?
FreedomPay was the first to market with a P2PE approved EMV solution for North America, as well as the first QR code-based BNPL in-store solution in the US. FreedomPay is closely following the PCI Council’s assessment of the MPoC security standards. This industry standard for SoftPoS is scheduled for release later in 2022, after which FreedomPay will be ready to add this proposition to our Next Level Commerce Platform.
As an industry, we must approach technological changes with positivity and collectiveness. With any industry, change is inevitable, but it’s not the change that matters. It is how we adapt and embrace it that will ultimately determine how the future of payments unfolds.