Tablets and Mpos - Business Solution

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1 TABLET POS BROADENS OPPORTUNITIES FOR MERCHANT PAYMENTS ISOs and Acquirers Increase Revenue and Protect Market Share by Enhancing Solution Portfolios with Mobile POS Software and Services

2 EXECUTIVE SUMMARY MOBILE PAYMENTS DISRUPTION Mobile technology has disrupted traditional behaviors and commercial solutions, replacing anything from handy pocket cameras to anchored-in-place ATMs. The next target for such disruption is the traditional merchant point of sale, where non-traditional service providers believe they can bypass traditional distribution channels by going direct to merchant with tablet-based POS solutions, also known as mobile POS or mpos. The sales pitch is alluring; merchants can obtain a more cost-effective, flexible and adaptable solution to replace or avoid investing in traditional point-of-sale solutions. Non-traditional service providers from PayPal to ShopKeep are targeting the small merchant segment, oftentimes seeking to lock in processing fees and lock out independent sales organizations (ISOs) and acquirers. ISOs and acquirers who broaden their portfolios with mpos will be able to strengthen their ties to existing customers while expanding their reach to new customers who either have traditionally resisted POS solutions, or are just getting started in business. 2

3 MOBILE PAYMENTS MARKET ON FIRE According to Forbes, Money is going mobile, and the race is on to control the flow of bits and cash across a billion smartphones and at millions of online and physical locations. Small- and medium-sized businesses (SMBs) are increasingly interested in using tablets as an alternative to electronic cash registers for fixed and mobile POS. Mobile payment and Corporations and massive mpos providers are flooding the market, with new competitors popping up enterprises have traditionally been almost every week. the leaders when it comes to being on the very cutting edge of The low cost of tablet and smartphone hardware and the ease of integrating technology, but when it comes to apps and components provide a compelling alternative to traditional, small m-commerce, a major push is being merchant POS systems. They are easy to operate and easy to enhance with supported by small and medium add-ons that are simple to install and relatively painless to replace. Tablets sized businesses that are not held utilize mass-market, standards-based technology to keep prices low and can back by the solid infrastructures and be updated frequently and easily with new features. Additionally, standardsbased tablets are able to run a variety of non-payment applications to provide red tape restricting their larger counterparts. merchants with business management solutions encompassing other day-today requirements, ranging from appointment scheduling and inventory Mcommerce Press, Jan. 21, 2014 management to sales tracking and marketing. ISOs seeking to identify and deploy feature-rich software often find themselves in conflict with the goals of these new challengers. Rather than offering complementary products and services, these new providers are primarily focused on displacing existing processing relationships. Acquirers and ISOs who do not respond to these changing circumstances risk losing established merchants and missing out on new revenue-generation opportunities. COMPETING FOR MERCHANT LOYALTY Tablet-based POS systems build on the success and popularity of smartphone-based payment acceptance solutions. With tablet-based systems, though, merchants can often take advantage of additional capabilities such as inventory tracking, customer relationship management and accounting features. When the tablet and POS software are paired with peripheral devices such as cash drawers, scanners and printers, a merchant can enjoy a complete POS system that is less costly and simpler to operate than traditional proprietary POS solutions. The more robust systems integrate with traditional POS card-acceptance devices and back-office software. Many of the new payments solutions providers are start-ups, new to the marketplace and funded by venture capital investors hoping to grab a piece of the North American mobile transactions market, which is estimated by Gartner, Inc. to be $37 billion for 2013, up from $24 billion in In 2013, Javelin Strategy & Research projected that mobile POS could expand current payment card acceptance by as much as 20 million firms if eligible firms started accepting payments. This impact could account for up to $1.1 trillion in annual new card payments. 3

4 The gold rush mentality has produced a plethora of me-too product offerings, generally involving direct-tomerchant offers with a simplified pricing scheme. Some offer a flat transaction fee or monthly equipment rental subscription, or some other non-traditional pricing arrangement. Service providers are drawn to the SMB merchant market like moths to a light according to PYMNTS.com s monthly mpos Tracker, more than 100 companies are offering solutions. Many of the new payment offerings rely on Internet-based marketing and sales. In some cases, the inability of merchants to directly obtain support for technical or billing issues has resulted in numerous complaints. Acquirers and ISOs risk erosion of merchant loyalty as new players enter the mpos space and steal market share. With so many tablet POS options available to merchants, independent sales organizations that choose not to expand their portfolio with a mobile or tablet-based solution risk losing established and valuable customers. GROWTH OPPORTUNITIES Despite the growing ranks of new competitors, independent sales organizations have an advantage. They traditionally provide premium support or tailored solutions that meet the specialized needs of merchants. Those capabilities cannot be matched by solution providers who offer a one-size-fits-all approach to the SMB market. With all the new solution providers entering the market, casualties are bound to mount quickly as business models prove elusive, technology fails to deliver as promised, or service providers are unable to provide specific expertise and ready support valued by merchants. Acquirers and ISOs can capitalize on the opportunity to help merchants wade through an increasingly confusing landscape and provide existing merchants with new tablet- and smartphone-based options. The opportunities are: 1. The ability to upsell small merchants to a POS system with recurring incremental revenue rather than one-time sales of individual hardware devices 2. Increased sales potential based on how the system is configured or bundled with other hardware (cash drawers, scanners, PIN pads, etc.) and sales of additional apps for general business management 3. Strengthened merchant relationships as a result of helping customers keep pace with advancing technology and future consumer demand 4. Gaining new merchants who either were resistant in the past to purpose-built payment devices, or are new businesses more attracted to trendy mobile technology BROADENING PRODUCT PORTFOLIOS WITH mpos Leading-edge ISOs and acquirers have begun to enhance their portfolios with mobile POS offerings that can do more than just accept payments. With the right solution, ISOs and acquirers can quickly answer demand for tablet- and smartphone-based software solutions. 4

5 Small- to medium-sized merchants, though, are understandably hesitant to invest in new technology in the face of many competing options. As a result, merchants are confused as to which technology is needed for their business. Yet if they are unable to keep up with changes in consumer behavior and emerging payment technology such as EMV, NFC and Bluetooth low energy (BLE), these merchants risk losing customers who expect to be offered the latest options. In the wake of recent large retailer data breaches, adoption of EMV is expected to accelerate. Many larger retailers and boutique chains are now deploying tablet-based solutions through their stores in order to deepen engagement with consumers already accustomed to using tablet- and smartphone-based apps themselves. In light of these trends, the movement to mobile retail and mobile POS appears unstoppable. Tablets and smartphones represent an opportunity to provide merchants with comprehensive business management solutions. In addition to providing the option for use at the countertop or throughout the store, tablet mpos solutions can provide a platform for a full range of business-oriented apps including capabilities such as integration with certain providers, inventory management, appointment scheduling and integration with ecommerce Web operations. Some mobile POS solutions may offer more sophisticated capabilities such as multi-store operations and the ability to be used across different types of mobile devices. Few ISOs have the resources or inclination to build their own full-featured tablet mpos solution because doing so is costly and a diversion from core competencies. Developing and integrating core payments functionality requires assuming significant costs, as well as the challenge of keeping up with the rapid evolution of mobile payments and standards requirements around EMV, NFC and mobile wallets. For example, device vendors and solution providers are just beginning to introduce products based on Bluetooth low energy, and both Visa and MasterCard early in 2014 announced they would support host card emulation (HCE), which supports NFC payments by storing secure credentials in the cloud rather than on a smartphone. Given the rapid advances in mobile payment as well as uncertainty on how particular technologies or standards will play out over the long term, the most flexible and cost-effective path to implementing a mpos solution is selection of a platform that will support deployment of mobile wallets, alternative payments, apps, loyalty programs and future technology. By opting for a turnkey platform, ISOs and acquirers are able to quickly respond to demand and pursue new opportunities. Rather than investing in and recruiting specialists, the acquirer or ISO is able to leverage the dedicated payments specialists and scale of an established partner, including support, distribution and training resources. The acquirer or ISO is further able to solidify the merchant relationship by creating or packaging a suite of back-office and value-added apps and services. In doing so, the acquirer or ISO may be able to create more referral opportunities with other companies that are providing applications or services for the standardized tablets. With the right solution, acquirers and ISOs can provide merchants with a complete, business-management mpos solution at a relatively low, monthly, subscription price that generates recurring revenue and reduces attrition. ASSURED SECURITY By forging partnerships with established payment solutions providers, acquirers and ISOs can leverage the 5

6 partner s dedicated payments security team as well as the partner s ongoing PCI DSS validation, processor certifications and other compliance efforts. The payments industry is evolving rapidly. Visa, MasterCard and other card brands have established incentives and penalties aimed at moving merchants to acceptance of chip cards based on EMV (Europay- MasterCard-Visa) technology beginning in Merchants that do not migrate may be forced to absorb the costs of counterfeit card fraud that, in the eyes of the card brands, would have been prevented by the use of EMV. Those new card requirements also are aimed at mitigating card fraud and enhancing card payment security. Some payment systems may inadvertently expose merchants to financial risk or put additional burdens on them for which they are not prepared or equipped. With security breaches becoming more prevalent among larger companies and garnering more public interest and concern, small merchants are wondering how they can protect themselves from fraud. The price small businesses have to pay for mobile payment fraud isn t small the lesson is that small businesses are big targets for fraudsters attackers go for the weakest link, not the strongest, wrote Inc. Magazine. With much confusion in the market, they need a secure, credible solution that will protect them from fraud. Acquirers and ISOs with established reputations allied with payment solution providers with strong brands are a winning combination for cutting though confusion in the marketplace. Small businesses in particular need education on the financial risk they may encounter from poorly conceived mpos solutions, as their very livelihood may depend on avoiding such risk. SERVING MERCHANT NEEDS Tablet-based mpos solutions can be a compelling solution to a merchant s payments and business needs. The devices can be fixed in place like traditional POS/ECR solutions, or used as a true mobile device. With the right solution, acquirers and ISOs can provide flexibility and adaptability that allow merchants to: The tablet POS is a new technology that incorporates the Create memorable consumer experiences and elevate their brand by features of traditional merchant leveraging technology that is familiar POS devices into a tablet Sell from anywhere inside and outside the store floor, even at pop-up solution that is both compact and locations and outside events flexible. A merchant s tablet becomes a multichannel POS Get up and running quickly system that supports all standard Access business intelligence on the spot to make smart business decisions payment services and includes additional value-added services Utilize a secure PIN pad so they can accept any form of electronic payment such as employee tracking, Enhance operational efficiencies with a feature-rich, full-function inventory management, sales business management tool analytics, loyalty, and rewards. Re-configure the store layout to sell even more merchandise Easily add sidewalk sales or pop-up stores Smart Card Alliance, November

7 Tablet mpos solutions that utilize cloud services can provide faster response times to consumer needs. The mpos tablet may offer added functionality to accept experience-enhancing applications like digital discounts, offers and coupons. Utilizing a tablet solution that accommodates VeriFone s VX 805, an EMV- and NFC-ready PIN pad, provides both ISO/acquirer and merchant with a future-proof, all-in-one retail POS solution that meets current and future standards, such as PCI PTS 3.0, EMV, NFC, Interac and more. Many of the new, emerging solutions providers are essentially offering dongle-like devices that only offer one payment-acceptance capability a swipe of a credit or debit card and apps that may lack some of the more robust security protections available today. Many of the newer mpos solutions are limited in functionality or can only be used in a single location, which greatly limits flexibility and scalability. PUTTING THE mpos SOLUTION TOGETHER Acquirers and ISOs are in an ideal situation to take advantage of new mobile POS opportunities. The SMB market traditionally defies one size fits all solutions that do not accommodate the diversity of merchants. The ISO channel has been able to bridge the gap between technology suppliers and end-customers by developing specialized services and/or solutions that meet specific needs. With the right tablet-based POS solution, acquirers and ISOs can leverage new, cloud-based services and apps to expand their offerings and make themselves more invaluable to merchants. Standards-based hardware ensures that ISOs and acquirers can equip solutions with a broad variety of peripherals, whether cash drawers, scanners, printers or other devices. Utilizing a tablet-based mpos solution that can accommodate purpose-built payment PIN pads and terminals ensures that new payment standards can always be integrated with little disruption to business. Merchants already trust their existing acquirer or ISO contact. The acquirer or ISO that takes a proactive approach to the new mpos challenge can ensure merchant loyalty while increasing revenue opportunities and attracting new customers. Traditionally, the ISO/acquirer merchant base suffers a 20% or more turnover on a yearly basis, but the new mpos solutions provide a stickier relationship between ISO/ acquirer and merchant to stem such abandonment. Acquirers and ISOs who select a payments solution provider with an established record and clear distribution strategy can avoid channel conflicts and leverage that partner s brand and expertise to provide a trusted solution to merchants. 7

8 ABOUT VERIFONE About VeriFone Systems, Inc. ( VeriFone Systems, Inc. ( VeriFone ) (NYSE: PAY) is a global leader in secure electronic payment solutions. VeriFone provides expertise, solutions and services that add value to the point of sale with merchant-operated, consumer-facing and self-service payment systems for the financial, retail, hospitality, petroleum, government and healthcare vertical markets. VeriFone solutions are designed to meet the needs of merchants, processors and acquirers in developed and emerging economies worldwide. VeriFone s GlobalBay Merchant provides a complete turnkey POS system, along with training, tool kits and set-up guides, that enables ISOs and acquirers to quickly answer the demand for tablet software solutions. By partnering with VeriFone, ISOs and acquirers can generate recurring revenue streams and solidify small business relationships without fear of competing with their supplier. GlobalBay Merchant plus VeriFone devices ensure access to the latest payment security and technology. And because it s cloud-based, implementation and support are simple and painless, and it accommodates most existing payment processing relationships. For more information contact your merchant service provider for more details or try a 15-day trial at globabaymerchant.com. i Steven Bertoni, Can PayPal Beat Apple, Google, Amazon And Icahn In The Wallet Wars?, Forbes, March 3, ii Gartner Says Worldwide Mobile Payment Transaction Value to Surpass $235 Billion in 2013, Gartner, Inc., June 4, iii Javelin Finds Mobile POS Acceptance Could Result in $1.1 Trillion in Card Payments, Javelin Strategy & Research, April 29, Acceptance-Could-Result-in-1-1-Trillion-in-Card-Payments/d,pressRoomDetail iv MPOS Tracker January, 2014, PYMNTS.com, Feb. 6, mobile/mpos-tracker/mpos-tracker-february / v Jessica Guynn, As Square considers IPO, rancor from merchants is a trouble spot, The Los Angeles Times, Jan. 17, vi Will Yakowicz, Mobile Payment Systems Pose Fraud Risk For Small Businesses, Inc. Magazine, Feb. 10, VeriFone. All rights reserved. VeriFone, the VeriFone logo and GlobalBay are registered trademarks of VeriFone in the United States and/or other countries. No portion of this document may be reproduced or distributed in any form or by any means without the prior written permission of said company. All other trademarks are the property of their respective holders. 04/ Rev A FS 8