February 21, 2024

Consumers are used to paying by card. The problem is, not all merchants can afford the onboarding and maintenance costs of a traditional point-of-sale (POS) system. That’s an obvious hurdle, especially since the pandemic has accelerated digitization, leading to a surge in contactless payments.These transaction volumes are expected to range from 195 billion in 2022 to 408 billion in 2027. Merchants across many verticals, including traditional retailers, public transport operators, hospitality and more, must find reliable, secure and affordable solutions.

SoftPOS (Software Point of Sale) solutions transform ordinary smartphones, also known as commercial-off-the-shelf (COTS) devices, into contactless payment terminals. This makes it easy and affordable for merchants to accept digital payments, opening up new markets and customers.As a result, the number of merchants deploying SoftPOS solutions is expected to grow by nearly 500% between 2022 and 2027. As merchants prepare to embrace the technology, let’s explore the future of SoftPOS.

embrace opportunity

already have 5.3 billion mobile phone users worldwide. These devices are now an essential part of everyday life. Merchants can easily take a COTS device — or extend the use of a device they already own — and turn it into one capable of accepting digital payments. This allows them to bypass some of the costs associated with traditional POS systems.

Not only small and medium merchants can use SoftPOS to enhance their digital payment network. SoftPOS is also available as a companion solution. For example, if a standard POS terminal fails, a SoftPOS solution can be used while waiting for a replacement.

Additionally, the flexibility of SoftPOS can greatly enhance the checkout experience. Because COTS devices are relatively inexpensive, they can be distributed to more employees, giving customers more options for where to pay. In retail, assistants can carry SoftPOS devices with them, allowing customers to pay for products in-store. In the hospitality industry, restaurant workers can use issued devices to digitally send orders to a central POS system for payment. Similarly, in the transportation industry, ticket inspectors can collect tickets on board, and consumers do not need to queue in front of ticket machines. By providing customers with more options for where to pay, merchants can significantly reduce congestion at traditional checkouts by eliminating the need for all customers to go through traditional checkouts.

In the future, SoftPOS may also simplify the online and in-app payment experience. In this use case, the plan is for consumers to simply tap their card on the back of their smartphone when they arrive at the checkout during the online payment process. This could mean no longer having to enter card details or store them at retailers.

However, as more SoftPOS use cases emerge, stakeholders must be aware of some risks that still must be addressed.

The impact of authentication on SoftPOS

Secure payments can be difficult in SoftPOS environments because they often lack the hardware security features found in traditional POS devices. With the new PCI SSC certification released in November 2022, compliance is more important than ever.

Mobile Payments over COTS (MPoC) is a new mobile standard that relies on existing PCI standards to support the future of mobile payments. The update means that COTS terminals will be able to support PIN and PINless transactions, offline transactions and manual card data entry. It also helps SoftPOS devices accept contactless NFC transactions and transactions using external chip or magnetic stripe card readers.

This will also allow the components of the SoftPOS solution to be tested individually and then together as a complete solution. By standardizing the security assessment methodology, this makes the certification process clearer and easier to manage, helping solution providers reduce development costs and time-to-market while prioritizing security.

looking to the future

The number of merchants deploying SoftPOS solutions is expected to explode and use cases are expected to continue to grow as more major global technology companies prepare to enter the SoftPOS industry. To meet demand, compliance and certification should continue to be at the center of the conversation around this innovative approach to digital payments. Both international and domestic payment schemes require compliance with functional and security certification requirements. Meeting these needs is key to success, however, if they are considered during the initial design and development phase, manufacturers can ensure that they do not impact time-to-market.

Meanwhile, a cloud-based kernel is being developed specifically to meet the needs of the SoftPOS ecosystem. These can simplify payment device management, as the ability to automatically update eliminates the need to push new kernels to each device individually after each program update.