2014 has seen economists, politicians and business leaders cautiously welcoming a steady rise in global retail sales. But it’s no longer the sound of ringing tills that helps herald the emergence of economies from recession, it’s increasingly the swish of smartphones and the snap of plastic.
Payments technology has evolved rapidly in recent years. The digital revolution has meant that credit and debit cards - once the costly preserve of larger retail stores - are now being accepted by everyone from pop-up shop owners to Big Issue sellers.
This widespread adaptation by a diverse array of businesses, organisations and individuals is why mPOS (mobile point of sale) has become an industry worth as much as $507 billion in 2014 (£320 billion).
And far from reaching a plateau, as many have claimed, mPOS is still a sector in the ascension.
The seeds of mPOS bearing fruit
Apple’s recent announcement of Apple Pay - a new mobile payment and digital wallet service - has served to again focus the spotlight on mobile payments.
One of the key elements worth noting about Apple Pay is that it while it is disruptive, it is built on existing infrastructure. The major card providers such as MasterCard, Visa and American Express are partners and the contactless technology which makes the payment so effortless already exists.
For many, the tech giant’s entry into the market (hot on the heels of e-commerce giant Amazon’s mPOS swipe solution) is confirmation that mobile payments is reaching a new level of maturity. Apple is rarely the first to market with concept or technologies, rather they are a firm that looks to innovate and push the boundaries in an already established space.
Apple Pay’s use of the existing infrastructure (and therefore lack of need for merchants to invest in new hardware) will serve to encourage growth of the mPOS sector.
Yet while Amazon and Apple’s entry into the payment ring will no doubt help mature the market, the mPOS industry has already fundamentally changed the payments game forever, particularly for SMEs.
For all the chatter of doubting Thomas's in relation to companies like Square posting annual losses, the investment into mPOS has kept coming and it has done so for good reason. Besides, Square’s recent investment of $150 million (£95 million) has seen the firm’s value rise from $5 billion (£3 billion) to $6 billion (£3.8 billion).
A further indication the market is maturing is a slowdown in the number of new mPOS companies entering the fray and the falling by the wayside of others. The emergence of a handful of key dominant players in the field should be seen as the market taking shape and solidifying, rather than signs of a possible bubble burst.
Banks the missing link in the evolution of mPOS
Crucially, the current wave of success the mPOS industry is riding has not been driven by banks, but by start-ups in the financial tech space (referred to as fintech companies). The smaller, fresher and more innovative nature of these fintech firms has allowed these organisations to stay several steps ahead of traditional banks.
Whilst increasing numbers of banks are beginning to offer their own mPOS packages, these larger organisations can’t move as nimbly as smaller fintech firms. The startups can build new products, onboard users and respond to customer demands far more quickly than a high street bank can.
There are also cultural reasons banks may struggle to win over customers with their mPOS offerings. US Analyst Karen Webster argues that many SMEs felt they were not serviced well enough by the big banks prior to the global collapse and that as a result many SMEs may be reluctant to use their mPOS offerings, preferring instead to turn to the disruptors who are making the very same banks uncomfortable.
Whether SMEs turn to banks or fintechs firms, the important thing for the mPOS industry is there seems to be no slow down in adoption and room for growth. With an estimated £7.5 billion lost by SMEs not accepting cards in the UK alone, the untapped potential in the market is hugely tantalising to investors and financial service firms.
Beyond pure payments
Another reason to be optimistic about growth is that mPOS is as the market matures it is no longer about accepting cards. Tech-savvy SMEs have moved beyond asking simply how they can easily and cheaply process cards in their business, but are now asking what else the technology can give them.
SMEs are increasingly expecting mPOS platforms to help them with customer analytics, accounting, stock facilitating and loyalty schemes.
The battle to meet the needs of SMEs and help them achieve their goals is hugely positive for the global economy.
Onwards and upwards for the mPOS journey
The impact of mobile payments is undeniable and despite some murmurings to the contrary, there is no imminent bursting of an mPOS bubble - there is much to play for and plenty of opportunity for expansion.
mPOS has helped to level the playing field for SMEs, democratised payments and armed entrepreneurs with analytics and business tools beyond their imagination only a couple of years ago. With consumer behaviour increasingly relying less on cash and early adopters having blazed the way, more and more entrepreneurs are realising that taking card payments isn’t a luxury but a necessity.
Whether driven by banks, fintech firms or a combination of both, the mPOS market is still only at the start of its journey.
Jacob De Geer is a Swedish entrepreneur and founder and CEO of mobile payments company iZettle. Prior to iZettle, he was also the co-founder of film sharing firm Ameibo and communications agency Tre Kronor Media.