Mastercard Advisors

MPOS: Moving Beyond The Hype

RR MPOSAs often happens in the retail technology space, hype can be distracting. Consider Square. As 2016 opens, Square is surrounded by its initial public offering hype and CEO drama. That’s unfortunate. Because retailers should be focused on what the company does and what it represents. Square, and all the companies it competes and cooperates with, make electronic payments mobile. Anywhere. Mobile point-of-sale systems (MPOS) help create the customer experience at Apple Stores, and the same technology helps the local food truck increase sales. If there’s anything to be gained from the recent drama of Square, it is this: its  attention from the upper echelons of MPOS systems are not the future of retailing. They are retailing present as well as future. MPOS is here.

And as something that’s “here,” rather than in the future, it brings retailers of all sizes and specialties into electronic payments. MPOS brings with it the kind of data that can drive customer-centric decisions. As retailers consider MPOS as an in-store as well as external payments system, it may come as a surprise that across the globe, MPOS is enabling sales and customer experiences on a daily basis. And that goes beyond payments.

Cost-Effective Agility and Engagement

MPOS enables merchants to reach customers in ways not possible in the pre-digital world. It increases agility and decreases overhead costs. From recent MasterCard use cases, take, for example, the Nike Air store in Iceland’s Smaralind shopping center. The retail experience was transformed by removing fixed countertops for customers to pay. Sales associates were freed up to build a tighter interaction with customers and take payments directly on the shop floor using MPOS devices. It translated to increased space to display products, increased sales and higher customer engagement.

Another example: mobile food vendor Bun Bun in Stockholm, Sweden. After moving away from cash to only accepting card payments via MPOS, Bun Bun cut labor costs, reduced operational expenses and mitigated security risks, resulting in 33 percent cost reduction. MPOS can increase the quality of the customer experience and cut costs. It also serves as a customer strategy. Consider the Sippy Medicals pharmacy in Chennai, India, which needed a convenient card acceptance solution to simplify home delivery payments to ailing and aging customers. MPOS gave its customers, most of whom could not make it out of their homes to collect medication or access the cash to pay for it, a convenient way to pay for deliveries. The use of MPOS gave Sippy a competitive advantage against larger chains and increased sales by 14 percent.

Mobile at Scale

These individual cases are repeated on a global scale every day. Taken in the aggregate, they show not just a developing acceptance solution, but an acceptance solution that has arrived and is already creating value on a global scale. In October 2014, MasterCard began to aggregate and analyze transactions originating at mobile point of sale terminals, those that are comprised of a feature phone, smart phone or tablet connected together with a card reader accessory often called a dongle and the associated merchant software. Only anonymous, MasterCard-processed transactions were part of the research; non-MasterCard transactions and those processed in the U.S. were not included.

Approximately 83 million transactions occurred during the first half of 2015. MPOS volume has grown steadily month on month in 2015. Volume increased by 33.5 percent in Q2 versus Q1. Approximately 500,000 additional merchants used MPOS to accept a MasterCard transaction in Q2 compared to Q1. Here are some other numbers regarding MPOS that may surprise you. MPOS is not reserved for high-frequency, low-value transactions. In fact, the highest transaction was recorded at a luxury goods retailer who accepted a payment of $129,000. We have tracked a heating company that received $85,000 via MPOS and an events organization that received a $51,000 payment. At the same time it’s not surprising to find the lowest transaction amounts occur at food stores and cafés for $1 or less.

Mobile Global Meritocracy

The most common merchants to make use of MPOS on a global scale may also surprise you. At the top are barber and beauty shops; but, dentists, doctors and pharmacists are in the top five, as are insurance sales. It’s the more developed markets that are driving the largest volumes, but niche deployments drive the highest Average Transaction Value (ATV). By volume, the U.S., UK, Canada, Sweden and Brazil make up the top five markets. The top markets by ATV are all in the Middle East and Asia. The highest average markets by ATV start at $688 ranging down to $306, again higher than anticipated. These numbers as well as hundreds of merchant success stories establish the credibility of MPOS as a value-creating technology.

Retail Expansion

On the retail level, SMBs will drive a good deal of MPOS expansion. The firm 451 Research projects the global MPOS installed base will grow from 13.3 million units today to 54.03 million units in 2019. Diverse factors including enterprise deployments, expansion into new vertical industries and financial inclusion in developing economies will serve to increase the installed base at a 32 percent CAGR during the forecast period. But its expansion is hardly limited to SMBs or emerging markets. 451 Research finds that 87 percent of IT decision-makers at larger companies feel that accepting card payments on a mobile device and providing a real-time receipt are both important.

In summary, MPOS is here to stay. It includes small merchants and will, in a sense, depend on them for growth, but it is more than the long tail. With MPOS, we’re helping merchants increase sales by bringing the till to the consumer and giving consumers the freedom they want to check out in the aisle, or elsewhere, speeding up the entire buying process. The key is not to simply enhance merchant solutions of the past, but rather to enable retailers to do something new and better, for both the customers and themselves.

Not convinced? Just ask a stockbroker.

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