The acquisition of softPOS firm Mobeewave by Apple could be a game-changer in the industry and impact traditional players‍

Over the last 18 months in the payments industry, we have noticed more and more the appearance of new companies that are all working on opportunities to convert tablets and mobile phones into card acceptance devices. There has been talk of a migration from hardware to software solutions in the POS space for some time now and the growing interest in this space is illustrated by the extent of external investment that is being placed into this segment: Phos added another $1.5m in funding from venture capitalists NewVision3 and MagicCube announced an undisclosed amount of additional funding by CVentures. Phos has a strategic relationship with Mastercard whilst SoftSpace is part of Visa’s Fintech Fast Track program. myPinpad was the first to receive full PCI accreditation for contactless payments on mobile and tablet (CPoC). Rubean is running trials with a Spanish bank and Aava Mobile is running a trial with a French bank. There is hardly an end to related press releases all highlighting the increasing relevance of these payment software developments, that were only known to insiders a few years ago.

In previous articles of our newsletter, we have spoken in detail about the role of software at the POS, SPoC and CPoC, Pin on Glass etc. and we don’t want to go into much detail on this now but a brief summary of what all these companies are working on might still be helpful at this stage.

Of course, each of the above-mentioned players is taking a slightly different approach and has developed products or solutions that differ from each other, but what all have in common is the desire to find a technical solution to convert a COTS (commercially-off-the-shelf mobile/tablet) into a device that can accept payment cards. Only a few years ago, mPOS devices flooded the market, provided terminal solutions to previously un(der)served merchants at lower costs. mPOS terminals provided mobility and were attractive to merchants that did not want or could not use fixed infrastructure such as a connection to a cash register in a physical store. The mPOS solution worked via a combination of a mobile app and a separate, connected hardware device for card and PIN entry. In this next stage of POS evolution, the aforementioned companies are looking for solutions with the aim of reducing the additional hardware device. The first stage is SPoC (Software-based PIN entry on COTS) which, for people that are not overly technology-minded (like myself!), means something like a contactless reader stuck on the back of a tablet or separate handheld card reader that is paired via Bluetooth. It is the sort of terminal that many airlines have deployed for in-flight purchases – tablet on the front, reader on the back. CPoC will be a solution that will remove the need for a separate card reader. That means that any PIN entry would need to happen on the front, on the screen of a tablet or mobile. CPoC is very new and there are very few deployments to date, but the EDC expectation is that it will rapidly leapfrog the SPoC solution.

Now, back to M&A. Last month, Apple reportedly paid $100m to acquire Mobeewave. Headquartered in Montreal, Canada, Mobeewave allows merchants to use their smartphone as payment terminal simply by tapping the card on the phone. They have an Android proposition which we would expect Apple to withdraw and build upon the iOS platform. Apple never give much away in terms of what the rationale for any of its acquisitions is but there are probably two issues to consider: a) some form of integration with ApplePay – today users will need to upload card details into the Apple wallet but could this upload be avoided through contactless features?; b) integration with payment acceptance functionality will arguably make Apple a much stronger proposition for SMEs and sole traders so additional iPhone sales are to be expected. Is this deal that will be a threat to players like Square, SumUp, and iZettle. It will certainly impact the number of mPOS devices newly distributed but most of these players have moved into additional services and functionalities and are not totally reliant on the terminal device anymore. The more intriguing thought is about implications for banks and payment networks? If Apple owns the customer and the merchant relationship and processes the transactions, this sounds very much like a three-party model in the context of card schemes. Just imagine Apple running a payment network demanding fees from banks and/or a share of the interchange fees. With this acquisition, the concept of Apple running such a network has become a real possibility.‍

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