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Table of Contents

Lead Story

What ISOs can learn from consultants in today's complex payments arena

News

Industry Update

Will Isis launch shuttle in new era for NFC?

Cisero's amends counterclaim in Elavon case

Challenges ahead for EMV

Jones predicts ISOs will remain at payments hub

Features

Volunteerism bolsters local economy

It's all about increasing ROR

Research Rundown

Selling Prepaid

Prepaid in brief

AmEx goes big with Bluebird

Prepaid card dispensing ATM technology advances

Views

Whatever happened to the British motorcycle industry?

Brandes Elitch
CrossCheck Inc.

Can mPOS be a game-changer in India?

Sunil Rongala
MRL Posnet Private Ltd.

Education

Street SmartsSM:
Make large merchants your gravy

Jeff Fortney
Clearent LLC

Coping with PCI noncompliance fees

Adam Atlas
Attorney at Law

200 ways to get noticed - Part 1

Nancy Drexler
Acquired Marketing

The smart way to sell POS systems - Part 2

Joe Porco
Harbortouch

Company Profile

PayCube Inc.

New Products

A platform for smart businesses

Newtek Advantage
Newtek Business Services Inc.

Virtual POS system for QuickBooks

Instant Accept
NorseCorp

Inspiration

Functioning in today's challenging payments world

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

November 12, 2012  •  Issue 12:11:01

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Can mPOS be a game-changer in India?

By Sunil Rongala

The mobile POS (mPOS) is taking off in a big way everywhere because mobile and payment technologies comprise a match made in heaven, like cookies and milk - or in the case of India, curry and rice. They are naturally symbiotic because of the cost and convenience advantages they bring to merchants. In India, where the POS market is dominated by small desktop payment terminals, mPOS is still in a fledgling stage.

Until now, mPOS efforts have largely focused on higher-end smart phones or tablets, such as the Apple Inc. iPhone and iPad, and Research In Motion Ltd. BlackBerry. These are not really viable in an emerging market like India, where they can cost upwards of $500 without a contract.

An initiative in India has endeavored to develop mPOS on a phone that costs $40 without a contract. But that effort stalled when the phone manufacturer discontinued the model. While mobile and payment technologies are a combination whose time has come, the duo has fared better in developed countries than in emerging markets because of cost and other factors.

Questions in need of answers

For mPOS to be a game changer, the following questions need answers.

Fertile ground

The conditions are perfect in a number of ways for mPOS to scale up. For starters, India has over 900 million mobile phones in use, according to official numbers. Even if we reduce that number by 25 percent, the quantity is still massive. However, most of the phones in the market are lower-end. Yet, smart phones are beginning to capture a larger share because manufacturers have been able to introduce models for under $100 without contracts.

Credit card spending in the past two years has grown at an average rate of 25 percent, while debit card volume has risen by 42 percent. Growth for both types of card is likely to continue as India moves away from a largely cash-based economy. The number of POS terminals is about 700,000, and that doesn't come close to the number of individual merchants in the country.

Anecdotal evidence and informal surveys suggest India has some 30 million individual merchants, most of them small to midsize businesses. This untapped market exists because Indian acquirers do not pursue smaller merchants since the acquirers provide POS terminals for free. Given the capital cost, growth and penetration in this sector have been abysmal.

The regulatory environment stars have also aligned for mPOS. The Reserve Bank of India - the central bank - which sets the larger direction for payments, has taken upon itself the mission of making India a less cash-dependent society. It wants fewer payments to be made by cash or checks and had hoped for this to be achieved by mobile payments, much like the mobile money-transfer system M-Pesa is used in Kenya.

But this effort is stuck in a quagmire of interoperability issues between banks and telecom companies due to regulatory and political blunders. With this effort now essentially dead, the next best way to achieve the RBI's goal is going to be through mPOS.

Addressing high equipment costs

If mPOS is to succeed in India, it needs to be accepted by small and midsize merchants. They are being asked to buy mPOS terminals, which means that cost is going to play a huge role if it is to be accepted on a mass scale. The battle is half won, since merchants will be buying a device that is multipurpose in nature relative to a regular POS terminal.

While some merchants may want high-end smart phones, an iPhone 4S costs about $750 in India, which may be prohibitively expensive. The majority of merchants are likely to go for phones that are less than $250 without a contract. For the whole mPOS package to be effective, it will have to operate on a smart phone.

Given that most global efforts have been focused on relatively few, expensive smart phone brands and models, development in India will have to address the sub-$250 smart phones, and herein is the problem.

No clear global mPOS standards exist. Just because an mPOS dongle works on one phone brand and model, it doesn't necessarily work on another model from the same maker, even if both phones have the same operating system. This happens because the dongle usually connects through the headphone jack, and incompatible frequencies prevent dongles from working across all models and brands.

That said, for mPOS to succeed, not every dongle has to work on every sub-$250 smart phone; but a dongle that works across at least the most popular ones is needed. The good news is that a few firms have made serious and, in some cases, successful efforts to allow multiple cheap smart phones to work on the same dongle.

Multifunctional and feature-rich

To make mPOS successful, the mPOS application on the phone, apart from following best practices, must provide more than just payment card processing capability. The application should be designed with extra features, such as accounting functions that merchants will use daily. Even if payment card usage rises, cash payments are still likely to represent a large percentage of transactions. So additional applications will be necessary to help spur adoption.

Apart from that, applications will need a great deal of flexibility to be able to work seamlessly on multiple smart phones, regardless of a phone's operating system.

The way forward

Based upon the evidence, all the necessary factors seem to be in place for mPOS to scale up and be the game-changer that the Indian acquiring industry desperately needs. However, for the program to really succeed, the following roadblocks need to be cleared.

These factors have the potential to slow, but not prevent, adoption. With the stage set for growth, mPOS could begin to steamroll. As that happens, equipment costs will come down, and compatibility issues will be resolved along the way.

Sunil Rongala is the Head of Risk Containment and Business Strategy at MRL Posnet Private Ltd., a technology-driven transactions facilitator based in India. He is a professional economist and holds a Ph.D. in economics from Claremont Graduate University in California. To reach him, call +91-99490-61784, fax +91-40-2355-4002 or send an email to sunilr@mrlgroup.in.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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