Mobey Forum: M-POS Shifting ‘Balance of Power’ in Payments (Nov. 26, 2013)
The m-POS revolution, led by newcomers like Square targeting small merchants with smartphone-based card readers since 2009, is slowly but surely reshaping the payments landscape while regulatory and competitive changes also are afoot, according to Mobey Forum. In its latest white paper in a series analyzing the disruptive effects of m-POS released this week, “The MPOS Impact: Shifting the Balance of Power,” the bank-led industry association outlined m-POS risks and opportunities for existing payments industry players.
Payment networks and terminal hardware makers face changes in revenue streams from the rise of m-POS devices. In the short term, as millions more merchants adopt card acceptance through mobile devices, total transaction volume will rise, but the average revenue per transaction likely will decline. “Players with a high dependency on physical POS are the most at risk, as transactions slowly migrate to mobile POS and competition eats away at margins; these players must innovate or face extinction,” according to Mobey.
Card issuers also stand to lose revenues and leverage if interchange rates decline, and with regulators and emerging players working to push down merchants’ payment acceptance costs, there is concern about downward pressure on interchange rates. m-POS and mobile wallet strategies could offer issuers an edge, but the uncertainty surrounding interchange rates creates challenges for card issuers’ road maps, Mobey warns.
So far banks have been relatively cautious, with several large banks including Bank of America hedging their bets by offering branded m-POS solutions or taking a wait-and-see approach, Mobey observes. But it is time to act, through partnerships or innovation, to offset risks, Mobey advises. Before entering the m-POS arena, banks must make sure their organizations can support digital banking, mobile app management and distribution through a solid branch model.
A big shakeout among m-POS providers is inevitable, and even though new players continue to emerge, the first signs of consolidation already are on the horizon among large players, with the recent Intuit-Square alliance a prime example. “The big guys are already starting to see areas where they can yield and cooperate,” Matt Calman, general manager at Calman & Co. LLC, and a Mobey Forum working group member, said during a Webinar this week discussing the paper. He predicts widespread consolidation will probably be underway in the m-POS sector within two to three years.