SoftPOS solutions are rapidly gaining popularity among both buyers and sellers (particularly, SME segment). In our previous articles we wrote a lot about contactless payments, mobile and in-app processing techniques. However, we never specifically focused on the SoftPOS technology description. We will try to address this issue. It will be helpful to the following categories of readers.
- Micro-merchants and SMEs that want to implement SoftPOS solutions instead of (or in addition to) payment terminals.
- Managers of large SaaS platforms that need to add SoftPOS functionality to their omnichannel offerings.
So, let us briefly outline the historical background and the concept of software POS systems.
Initially, people who wanted to accept credit card payments needed to use payment terminals. Several decades ago, most cards were swiped cards. Then, invention of silicon integrated circuit gradually led to emergence of contact EMV payments. In fact, integrated circuit-based technologies provided the basis for introduction and usage of EMV compliant POS terminals worldwide. A bit later, significant advances in implementation of NFC technologies provided opportunities for contactless payments. Finally, as smartphones and tablets became more affordable and widely used, various card readers also became popular.
Nowadays, partly, due to COVID-19 pandemic, NFC contactless payments are as relevant as ever. Post-pandemic reality calls for growing contactless payment penetration and increase of contactless payment limits on consumer cards. More consumers prefer to pay for products and services using their smartphones or wearables. So, more businesses want to be able to smoothly accept such payments.
At the same time, payment terminal fulfillment and management is often a challenge for merchants and software platforms. The merchant has to deal with such issues as logistics and the cost of initial provisioning and maintenance of the terminal. These issues make it more difficult for micro-merchants and some SMEs to accept cards. Plus, they slow down the penetration of credit card payments. Consequently, the concept of SoftPOS becomes more and more popular, especially in developing countries.
From the merchant’s perspective, the concept is as follows.
Let us assume, you are a small-size merchant that needs to accept card payments at a low cost. You can achieve this goal by turning your phone or tablet into a POS system without purchasing any additional hardware.
For this purpose, your smartphone (or other device, such as a tablet or a wearable) should be equipped with an NFC circuit. The circuit makes it possible for the device to read payment data from other devices or NFC contactless payment cards.
Now, SoftPOS, is, essentially, a software application that you download and install on an NFC-enabled device. The app uses the NFC circuit of the phone to accept contactless payments. Thus, it turns the phone into a contactless payment terminal.
No wonder, SoftPOS solutions are becoming more and more popular.
SoftPOS: advantages, disadvantages, and latest trends
The main advantage of SoftPOS technology is that it requires no additional hardware or dongles. Thus, you can accept contactless payments using a smartphone or a tablet. There is no need to implement special POS terminals at all. So, the terminal-free solution works perfectly if you need high mobility.
A SoftPOS app goes through PA DSS certification, because the merchant has to satisfy the general requirements of PCI compliance for POS systems. However, if the merchant uses his smartphone as a POS system, he does not face any additional requirements or issues. In most cases, a micro-merchant or SME just has to complete a standard SAQ for level 4 businesses.
Just like other types of NFC contactless payments, SoftPOS transactions have their limits in terms of maximum amounts. If you want to make (or accept) larger payments, you need to be able to input PIN. Initially, SoftPOS systems did not allow PIN entry. However, presently, the new PIN on Glass technology is becoming available. This technology would allow you to input PIN onto glass surface of the smartphone screen. So, the solution makes it possible for merchants to process larger payment amounts (requiring the input of PIN) through SoftPOS.
As of now, software POS solutions work only on Android-based phones and tablets. So, if you want to accept payments using SoftPOS technology, you have to use only the equipment supporting Android OS.
The good news is that recently many Android-based terminals have appeared on the market. The software developed to operate within Android-based terminals, such as Sunmi, can be adopted to operate as a SoftPOS app. In the latter case, the smartphone becomes a payment terminal.
Advantage for mobile POS developers
An additional advantage concerns the developers of mobile POS platforms. These platforms, usually, work from a phone a tablet, and can integrate SoftPOS system functionality within their feature set.
SoftPOS systems are here to stay. They have several major advantages over payment terminal solutions. These advantages make them the best payment handling option for many small-to-medium-size merchants.