2022: The year of the SoftPOS

When one walks around a major event like Money20/20 Europe, major trends materialize through the exhibitors' booths as well as the topics of the conferences. This year, the SoftPOS, or in other terms the ability to use a simple smartphone to emulate a payment terminal, is on everyone's mind! Many players are already present on this field, including MyPinPad, SoftPos, Softpay, Famoco, DejaMobile, MineSec, Halo Dot, Spectra Technologies, Rubean, among others…

The megatrend that consists in replacing every separate device by a smartphone app was slow to reach payments on the merchant side. We have already witnessed the disappearing of our watches, diaries, adressbooks, maps, notebooks, etc.… NFC has brought us the ability dematerialize our payment cards in our handsets. The POS terminal was still resisting! The mPOS was clearly an intermediate step. The SoftPOS means the payment terminal is to be replaced by an app in a smartphone.

But when we get into details, not everything is so rosy! Many in the payment industry are fast to consider payment terminals, such as those sold by Worldline (Ingenico), Verifone, PAX Technology and the like are obsolete. However, dedicated POS terminals are still an absolute necessity when it comes to complete a large number of payments, in supermarkets for instance. SoftPOS for the time being are only an alternative for merchants making small numbers of transactions per day. Even so, not every phone is ready to become a SoftPOS: the NFC chips and their implementation in lower-end handsets can create numerous issues when it comes to making transactions: card positioning may be uneasy, EMV transactions unable to complete, etc.

Also a SoftPOS operation on the merchant's own handset may be interrupted by the permanent flow of WhatsApp, Facebook or Instagram notifications each of us gets on one's phone. And not every merchant is ready to handle his/her own smartphone worth hundreds of Euros to unknown consumers: what if they drop the phone or, even worse, if they run away with it?

Standardization is still ongoing on the topic. PCI SSC's standards are still undergoing evolutions. The PCI-CPoC (PCI Contactless Payments on COTS (Commercial Off-the-Shelf)) specification is not covering PIN presentation. For a couple years, SPoC (Software-Based PIN Entry on COTS) solutions have been developed, but a better solution was still needed. Now, PCI-MPoC (Mobile Payments on COTS) specification, still in draft mode, is expected to reach fruition later this year, allowing a secure PIN entry on a commercial smartphone, and enabling a security architecture under which a card-present transaction can be completed.

For years, the most visible difference between a merchant and a consumer was that the merchant owned a POS terminal. Now that the POS terminal is merging into the smartphone, shall we see a convergence between P2P and consumer-to-merchant transactions? In this case, more questions are arising: what will be the fee schedule for such transactions and how will they be subject to taxation? The great thing with the payment industry is that its permanent innovation streak always brings new questions, …. which, in turn, bring new answers.