I recently published a post – here – about Personal Finance Management tools (PFM).
MPOS (Mobile Point of Sale) have a lot in common with it, in my opinion.
What are they (to start with) ?
THINK SQUARE. Think of a device plugged into your phone to transform any mobile device into a payment processing device, to swipe your card, or to do chip & PIN.
The number of startups into this market is very big. Crowded market.
I would like to think there is at least one startup or grown up company per developed country and in many places more then one.
The newest trend – a much wiser one – is now to do the same without device, seamlessly, an example of it being Mobeewave.
My point is : is this enough ?
Several banks have now tried to integrate MPOS in their Eco-system, many of them actually commercialising their own devices (partnering with a technology provider).
See here the example of Sabbadell
Granted : if a bank pushes. It might work.
In Italy, the government has enforced a law against “underground” economy and obliged all merchants to have an electronic way to execute payments (read about it here).
Granted : of legislation pushes, it might work.
My point : just not enough.
Devices will become a commodity and all you do is to move same old payments through a new system. If you don’t combine it with real innovation, you are just replacing a device (granted, with a cheaper, already in the market, and faster).
What do I mean by “more” ? Loyalty programs would be a good example.
Not only card loyalty, but consumer loyalty. Buy 10 pizzas have 1 free or being able to pay a pizza with your miles, for example.
Every single MPOS player claim that the DATA will be a mainstream source of revenue for them, as the information they will collect will be unprecedented. It should not only generate new business for financial institutions, but for insurances, or simply raise financial inclusion particularly in developing countries.
Another interesting angle of this debate is to figure out where MPOS have better chance to flourish. One could argue that developed countries could use this technology to develop their networks of small merchants, fight against black economy and money laundering. You could also think of it as a way to promote financial inclusion in countries where in practice there are no other form or payments outside cash. The debate is open.
What is certain, is that MPOS is a very high cash burning business, by nature (not to mention the fact the the biggest factory producing these devices are in China and I believe the biggest is the same one producing all iPhone components), therefore it has to find quick other form of monetisation, and most importantly sync up with the pace at which banks will be able to adopt it.