ETA Expert Insights: SoftPOS & Tap to Pay

By Russell Palay, VP of Products, Infinicept  • ETA Industry Affairs Retail Technology Committee

Midway through 2023 finds us in the midst of a remarkable evolution in payments acceptance in the form of SoftPOS, or Tap-on-Phone, enablement. Through a convergence of advanced security and capabilities within mobile device hardware and software components, including NFC, or near-field communication, the opportunity is ripe for disruption in the cardholder-present payments capture environment where a built-for-purpose terminal, or payment capture device, is not necessarily a hard requirement for merchants anymore.

This emerging retail technology is not only enabling new solution provider entrants to the market; it is important to note that many existing point-of-sale and terminal solutions providers also recognize the disruptive potential and strategic value in SoftPOS and currently, or in the near future, will be offering their own SoftPOS solutions to the market.

This evolution is leading to advancements across multiple industry verticals and acceptance environments within on-premise environments. In this article, we will explore what SoftPOS, or Tap-on-Phone, is and how it can be successfully applied within a merchant’s retail technology environment. Additionally, opportunities where merchants can utilize this new technology are explored.

What is SoftPOS?
A number of different terms are circulating by different providers representing SoftPOS solutions, Tap to Pay, Tap on Mobile, Tap to Mobile, etc. “SoftPOS” appears to be the most used and understood naming of the technology that has evolved from mPOS (mobile point of sale solutions). mPOS solutions leverage off-the-shelf devices, such as a smartphone or tablet, along with additional hardware or peripheral devices to accept payments.

Tap on Phone, or SoftPOS, allows merchants to accept payments using an NFC-enabled smartphone or tablet without any additional supporting hardware or peripherals, turning any NFC-enabled mobile device into a payment terminal. This has tremendous potential considering there are approximately 3 billion NFC-capable devices in the world today³. For example, Apple’s entry into the SoftPOS market has provided an estimated 1.2 billion iOS users with the ability to begin accepting payments with their iOS-enabled phone or watch⁴.

As POS devices have evolved over the last decade, so too have the security standards requirements. It began with SPoC (Software Based PIN entry on COTs); then subsequently CPoC (Contactless Payment on COTs) was introduced, supporting contactless, PINless solutions. Most recently, PCI SSC has released a standard that streamlines and incorporates the features from both SPoC and CPoC into one set of security requirements. In November 2022, PCI SSC released MPoC (Mobile Payments on COTS) which builds upon the previous standards and adds the support of PIN and offline transactions.

SoftPOS solutions must adhere to compliance requirements as well, most notably Software PIN on COTS (SPoC) and Contactless Payments on COTS (CPoC). Additionally, payments are protected with EMV chip-based technology that encrypts the account data stored in the chip.

Benefits
Aside from the cost savings and no longer requiring an estate of built-for-purpose payments acceptance devices for large retailers, some of the benefits of SoftPOS include mobility, security, ease of use, affordability, and contact-free acceptance. SoftPOS eliminates the additional cost of purchasing point-of-sale hardware and may also offer an easy enrollment and onboarding experience with reduced maintenance overhead and an integrated mobile management app for reporting, analytics, and transaction management.

No purpose-built terminal or Bluetooth-tethered device is required for a merchant to accept payment. Simply having the right mobile device—and using a secure application harnessing the inherent on-board device capabilities in a secure and compliant manner—opens up an entirely new channel for payments acceptance at a lower cost than before.

An additional benefit is fast enablement of alternative payment methods available for acceptance. Given the proliferation of alternative payment methods in use by consumers today, having a SoftPOS app that can quickly enable acceptance in the field of a new payment method will help grow customer satisfaction and keep the merchant’s revenue stream solid by enabling payment the way their customers want to pay.

Of course, with benefits come a few downsides to consider, including:

• Usage of employee-owned devices. Where employees are using their own devices to capture SoftPOS-enabled payments, security is a consideration as opposed to purpose-built, merchant-owned terminals or devices. What other apps might be in use on the employee-owned device which could pose a security risk to payments acceptance? A potential solution to this concern could be usage of dedicated, company-owned iPhones or Android devices specifically for SoftPOS payments acceptance where it is an older handset no longer used for personal purposes.
• Consumer awareness and confidence. Consumers will need to become comfortable and accepting of capturing their payment information on mobile-enabled devices. A gap in the understanding of SoftPOS and contactless technologies might be present, requiring additional education and awareness of the safety and security of the technology for the consumer.
• Power usage and store-and-forward capabilities. What happens if the device runs out of power or the Wi-Fi or cellular network is not operational?
• Availability of SoftPOS solutions. While the SoftPOS market is ramping up, there is a limited selection of solution providers available today due to development and certification overhead, though more solutions are coming to market each month for merchant evaluation.

Merchants that can benefit from SoftPOS solutions include small business owners looking to accept payments in person without a dedicated hardware terminal like food trucks and market stall operators, field services technicians, delivery drivers, and general on-premise goods and service providers. Additionally, line busting opportunities enabled with SoftPOS solutions during peak business times help keep consumers happy and sales growing. Merchant mobility and consumer convenience are optimized when SoftPOS solutions can be enabled.

Conclusion
The SoftPOS user base is expected to grow 475% globally by 2027. A study by Juniper Research found the total number of merchants deploying SoftPOS solutions will surpass 34.5 million globally by 2027, up from 6 million in 2022. SoftPOS is an emerging payments acceptance model which will become more and more prevalent in the coming months and years, and understanding this retail technology and evaluating whether the time is right to adopt SoftPOS in your payments acceptance environment is important for merchants to consider today.