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Everything has been said a long time ago, but since no one listens,
you have to constantly go back and repeat everything all over again.
Andre Gide
A complex economy has been built around the POS terminal, which involves device manufacturers and software vendors, as well as banks, payment systems and laboratories that test and certify EMVCo L1, L2 and L3, PCI DSS terminals. The terminal needs to be designed and manufactured in China, certified in laboratories, introduced into the country and cleared through customs, sold, supported and life cycle managed. And all this costs money, which is ultimately reflected in the tariff line for trading enterprises on the part of banks and payment systems, which play on the principle - we took our interest, and you do as you please.
The process of washing out POS terminals from the pinnacle of technological progress occurred in waves and now we are probably seeing the terminal stage. The stage has passed when Chinese and Korean manufacturers destroyed the monopoly of Ingenico and Verifone on the production of POS devices and the exclusive supply of software. Then, for several years, small mPOS machines showed that the cost of the device could be tens of times less. True, we stumbled over the PIN. And finally, in connection with the directives of payment systems, the issuance of cards without an NFC chip will cease by 2021. The SoftPOS concept - a way to accept payments without the participation of a POS terminal at all - is just the final chord. Today it is technically possible to accept payments using user mobile devices - via NFC and QR.
What should happen next? After the PCI SSC (Security Standards Council) releases a new standard, CPoC (Contactless Payments on commercial off-the-shelf), regulating the use of a PIN code on a mobile phone screen, more and more merchants will rush towards a software solution that will represent a symbiosis of classic acquiring of contactless cards and smartphones and national and corporate QR. The pressure from central banks and the rate war will continue - the issue of acquiring profitability and cost reduction will be more relevant than ever.
However, the process will not end there. Acquiring has ceased to be a service that banks exclusively provide to merchants. Access to accepting and processing payments is increasingly becoming similar to access to water and electricity. There is no longer any “magic” in this service, which means it can be controlled and provided by the state. It is more convenient for the state when there are uniform rules of the game: all POS acquiring converges in one national switch, and all market participants follow national standards for software design, security and functionality. This is exactly what MADA (Saudi Payments Network) is doing in its home market. There is every reason to believe that in all markets where central banks are pursuing active policies to manage domestic payments, this will remain a strong trend.
Of course, the end point is that several large players in the local market will directly accept payments. These will be local large systemically important commercial banks, states and several transnational players (Google, Apple, Amazon). They will provide their applications as a service, which will include NFC payments, various QR, biometrics and everything that they come up with at this point.
POS terminals and classic acquiring will not disappear tomorrow. The payment industry is extremely conservative and new payment methods, with all their convenience and variety, will be introduced for decades. Many countries are just launching contactless projects; QR is actively used only in Asia, where sales of POS machines are actively growing. But the direction of movement is beyond doubt, and the sale of Ineginco Worldline at the price of Plaid is a clear example of this.
The plastic card was too late. For example, the VISA company is already 62 years old, and the first card was issued by Long Island Bank back in 1951, when Stalin was still alive! The card has certainly gone through some serious technological evolution over the years. Following the magnetic stripe, Chip&PIN appeared, which, by the way, was not implemented very quickly in the world. And then the time came for contactless cards.
You can simply touch your contactless card to the terminal to make a payment. The numbers on it are now needed only for e-commerce, and the magnetic stripe continues to be made out of respect for history (for the sake of supporting fallbacks?).
However, the contactless card reached its peak of development already in the late iPhone era. It suddenly became clear that everyone has a sophisticated smartphone in their pocket, but not everyone has a bank account. Inclusivity. New word. The fastest to understand this was in China, which was much behind Western countries in the development of the fintech sector, but, accordingly, did not have a balance of legacy technologies of the past on its balance sheet. AliPay and WeChat.Pay have completely captured the payment market, making the traditional UnionPay payment system just an addition. Why do you need a card if you can pay conveniently without it?
But the Chinese experience is not for everyone. In many countries, payment cards based on the VISA and Mastercard infrastructure have become so entrenched that the victory of QR wallets is still not obvious, even despite numerous pilot projects and the penetration of Asian giants. In Switzerland, for example, there are no problems with opening a bank account for the huge population from the rural hinterland in the sense of India and China. But it’s still convenient to pay by phone, and the answer to VISA and Mastercard is tokenization - the MDES and VTS services, which allow you to issue an existing card as a “token” inside your smartphone. It's fast, cheap and convenient for the buyer. A real card is no longer needed - you can pay with a bracelet, ring or watch. The Spanish bank BBVA has already begun issuing exclusively digital card products in the spirit of the digital first concept .
It’s a little less obvious that there’s also no point in showing her photo on the phone screen - it’s just a nod to a bygone era, a symbol of continuity and nothing more. No card, no chip on the card and therefore no more need to enter a PIN - smartphone manufacturers Samsung and Apple will be able to authenticate you using your fingerprint or head shape.
The card disappeared, shrunk to a QR square or digital token inside key fobs and watches. And this has very serious consequences. For example, e-commerce has traditionally been built around entering card details into a payment form. But if there is no more card, then what should I enter and where? The simplest answer is that you don’t need to enter anything except a one-time password in the best traditions of SCA (strong customer authentication). Your payment data is already stored in the Apple.Pay, Google.Pay or Sber.Pay systems and almost everything is done to ensure that the purchase takes place in one touch. It's comfortable.
Card makers, in a desperate attempt to save what no longer exists, are introducing a series of innovations - a card with an embedded fingerprint, a vertical card, a card without a number and an eco-card made from recyclable materials. The idea is to increase the customer's enjoyment of using the card. To make it pleasant to hold it in your hands. Stylish, expensive and technologically advanced. But in fact, it still gives off a “retro” vibe, and there’s nothing more environmentally friendly than a QR code or token. These are all small niche solutions that will not be able to radically change the picture and reverse the trend towards the destruction of plastic.
What will happen next? Now, to pay with Apple.Pay, you just need to show your face to the camera of your smartphone. Development of this idea is authentication on the part of the merchant. This is exactly what they have been doing in China for several years. National biometric databases, roaming between regions and biometric authentication on the merchant side are logical, convenient and at the same time cheap for all participants in the process.
Today it is absolutely unclear why the service of banks will be better than the same service provided by a large supermarket chain that has received a banking license? Why will their mobile app be worse? If it turns out that the only difference is historically serious barriers to entry into the market, then serious changes await us. Nobody likes intermediate links that take more money than they add value to the value chain.
It doesn't look like "supermarkets" will completely replace banks. They will take up their significant share, but their advantage will also be a limitation - a loyal audience. In addition, people tend to choose simpler solutions - twenty different tokens and wallets in a mobile device - this is clearly not the case.
NFC usage statistics
One can also see the ongoing merging of the payment world and normal everyday infrastructure. It is already difficult to find a vending site where the POS terminal is, if not built-in, then at least not attached to the outside. In urban transport systems, almost every day a new project is launched that allows the use of tokenized cards (mobile phone) for payment, applied to conventional mounted terminals. Urban transport such as bicycles or electric scooters are available with the possibility of contactless payment by card, at least via QR.
In the post-PSD2 world, there are a relatively small number of banks that are engaged only in service functions of managing user accounts, while all other operations are performed either by the state or by a swarm of fintech organizations that collide on marketplaces and compete on standardized terms. People will choose between product ecosystems or mobile banking interfaces. It is possible that large companies will make banking services simply part of a wider subscription - a 10% discount on taxis and here you also have preferential conditions for financial management. The emphasis will be on functionality and convenience for the end user. Initiatives like personal finance management from Excel will become the norm.
Embedded-finance is an opportunity to conveniently and quickly part with money at any time and anywhere. A concept that can be called “pay and live”. There is no longer a need for POS terminals or physical plastic - everything has gone digital. In essence, we are a step away from the payment method from the Altered Carbon series, where the main character simply spat on the sensor.
you have to constantly go back and repeat everything all over again.
Andre Gide
POS terminal is no longer needed or commoditization
What is a POS terminal? This is a compact and secure hardware solution specifically designed to accept payments in trade using cards from international payment systems. It solves many problems, including simplification and standardization of the purchase process, allows you to get rid of cash and makes it possible to instantly verify the client’s solvency. It sounds solid, there is only one thing - this technology appeared in 1983, almost 40 years ago!A complex economy has been built around the POS terminal, which involves device manufacturers and software vendors, as well as banks, payment systems and laboratories that test and certify EMVCo L1, L2 and L3, PCI DSS terminals. The terminal needs to be designed and manufactured in China, certified in laboratories, introduced into the country and cleared through customs, sold, supported and life cycle managed. And all this costs money, which is ultimately reflected in the tariff line for trading enterprises on the part of banks and payment systems, which play on the principle - we took our interest, and you do as you please.
The process of washing out POS terminals from the pinnacle of technological progress occurred in waves and now we are probably seeing the terminal stage. The stage has passed when Chinese and Korean manufacturers destroyed the monopoly of Ingenico and Verifone on the production of POS devices and the exclusive supply of software. Then, for several years, small mPOS machines showed that the cost of the device could be tens of times less. True, we stumbled over the PIN. And finally, in connection with the directives of payment systems, the issuance of cards without an NFC chip will cease by 2021. The SoftPOS concept - a way to accept payments without the participation of a POS terminal at all - is just the final chord. Today it is technically possible to accept payments using user mobile devices - via NFC and QR.
What should happen next? After the PCI SSC (Security Standards Council) releases a new standard, CPoC (Contactless Payments on commercial off-the-shelf), regulating the use of a PIN code on a mobile phone screen, more and more merchants will rush towards a software solution that will represent a symbiosis of classic acquiring of contactless cards and smartphones and national and corporate QR. The pressure from central banks and the rate war will continue - the issue of acquiring profitability and cost reduction will be more relevant than ever.
However, the process will not end there. Acquiring has ceased to be a service that banks exclusively provide to merchants. Access to accepting and processing payments is increasingly becoming similar to access to water and electricity. There is no longer any “magic” in this service, which means it can be controlled and provided by the state. It is more convenient for the state when there are uniform rules of the game: all POS acquiring converges in one national switch, and all market participants follow national standards for software design, security and functionality. This is exactly what MADA (Saudi Payments Network) is doing in its home market. There is every reason to believe that in all markets where central banks are pursuing active policies to manage domestic payments, this will remain a strong trend.
Of course, the end point is that several large players in the local market will directly accept payments. These will be local large systemically important commercial banks, states and several transnational players (Google, Apple, Amazon). They will provide their applications as a service, which will include NFC payments, various QR, biometrics and everything that they come up with at this point.
POS terminals and classic acquiring will not disappear tomorrow. The payment industry is extremely conservative and new payment methods, with all their convenience and variety, will be introduced for decades. Many countries are just launching contactless projects; QR is actively used only in Asia, where sales of POS machines are actively growing. But the direction of movement is beyond doubt, and the sale of Ineginco Worldline at the price of Plaid is a clear example of this.
No more cards or biometrics needed
The situation with physical plastic is no less dramatic. It so happens that plastic is no longer needed. This specter is based on the so-called ingrained “card experience”, the conservatism of people, inertia and uneven development of countries. But Henry Ford has been producing cars in his factories for 10 years, Elon Musk launched his Tesla into space - progress is inexorable and nothing can save the horses. One can see desperate attempts by individual participants in the payment market to find some new use for what is essentially a disappeared artifact. Which doesn't exist.The plastic card was too late. For example, the VISA company is already 62 years old, and the first card was issued by Long Island Bank back in 1951, when Stalin was still alive! The card has certainly gone through some serious technological evolution over the years. Following the magnetic stripe, Chip&PIN appeared, which, by the way, was not implemented very quickly in the world. And then the time came for contactless cards.
You can simply touch your contactless card to the terminal to make a payment. The numbers on it are now needed only for e-commerce, and the magnetic stripe continues to be made out of respect for history (for the sake of supporting fallbacks?).
However, the contactless card reached its peak of development already in the late iPhone era. It suddenly became clear that everyone has a sophisticated smartphone in their pocket, but not everyone has a bank account. Inclusivity. New word. The fastest to understand this was in China, which was much behind Western countries in the development of the fintech sector, but, accordingly, did not have a balance of legacy technologies of the past on its balance sheet. AliPay and WeChat.Pay have completely captured the payment market, making the traditional UnionPay payment system just an addition. Why do you need a card if you can pay conveniently without it?
But the Chinese experience is not for everyone. In many countries, payment cards based on the VISA and Mastercard infrastructure have become so entrenched that the victory of QR wallets is still not obvious, even despite numerous pilot projects and the penetration of Asian giants. In Switzerland, for example, there are no problems with opening a bank account for the huge population from the rural hinterland in the sense of India and China. But it’s still convenient to pay by phone, and the answer to VISA and Mastercard is tokenization - the MDES and VTS services, which allow you to issue an existing card as a “token” inside your smartphone. It's fast, cheap and convenient for the buyer. A real card is no longer needed - you can pay with a bracelet, ring or watch. The Spanish bank BBVA has already begun issuing exclusively digital card products in the spirit of the digital first concept .
It’s a little less obvious that there’s also no point in showing her photo on the phone screen - it’s just a nod to a bygone era, a symbol of continuity and nothing more. No card, no chip on the card and therefore no more need to enter a PIN - smartphone manufacturers Samsung and Apple will be able to authenticate you using your fingerprint or head shape.
The card disappeared, shrunk to a QR square or digital token inside key fobs and watches. And this has very serious consequences. For example, e-commerce has traditionally been built around entering card details into a payment form. But if there is no more card, then what should I enter and where? The simplest answer is that you don’t need to enter anything except a one-time password in the best traditions of SCA (strong customer authentication). Your payment data is already stored in the Apple.Pay, Google.Pay or Sber.Pay systems and almost everything is done to ensure that the purchase takes place in one touch. It's comfortable.
Card makers, in a desperate attempt to save what no longer exists, are introducing a series of innovations - a card with an embedded fingerprint, a vertical card, a card without a number and an eco-card made from recyclable materials. The idea is to increase the customer's enjoyment of using the card. To make it pleasant to hold it in your hands. Stylish, expensive and technologically advanced. But in fact, it still gives off a “retro” vibe, and there’s nothing more environmentally friendly than a QR code or token. These are all small niche solutions that will not be able to radically change the picture and reverse the trend towards the destruction of plastic.
What will happen next? Now, to pay with Apple.Pay, you just need to show your face to the camera of your smartphone. Development of this idea is authentication on the part of the merchant. This is exactly what they have been doing in China for several years. National biometric databases, roaming between regions and biometric authentication on the merchant side are logical, convenient and at the same time cheap for all participants in the process.
Banks are no longer needed or Embedded Finance
Commoditization of payment processing, intervention of central banks in payment services directly, identical product lines and, as a result, intense competition, rapid growth of fintech companies and, of course, open banking under the banner of PSD2-like directives. It would seem that things couldn’t get any worse, but then there’s a knock from below - technology companies have arrived. Samsung, Google, Huawei, Amazon, Apple, Uber and countless smaller organizations began to actively enter the financial services market, not wanting to allow other companies to access their users and, moreover, pay a significant percentage for the service.Today it is absolutely unclear why the service of banks will be better than the same service provided by a large supermarket chain that has received a banking license? Why will their mobile app be worse? If it turns out that the only difference is historically serious barriers to entry into the market, then serious changes await us. Nobody likes intermediate links that take more money than they add value to the value chain.
It doesn't look like "supermarkets" will completely replace banks. They will take up their significant share, but their advantage will also be a limitation - a loyal audience. In addition, people tend to choose simpler solutions - twenty different tokens and wallets in a mobile device - this is clearly not the case.
NFC usage statistics
One can also see the ongoing merging of the payment world and normal everyday infrastructure. It is already difficult to find a vending site where the POS terminal is, if not built-in, then at least not attached to the outside. In urban transport systems, almost every day a new project is launched that allows the use of tokenized cards (mobile phone) for payment, applied to conventional mounted terminals. Urban transport such as bicycles or electric scooters are available with the possibility of contactless payment by card, at least via QR.
In the post-PSD2 world, there are a relatively small number of banks that are engaged only in service functions of managing user accounts, while all other operations are performed either by the state or by a swarm of fintech organizations that collide on marketplaces and compete on standardized terms. People will choose between product ecosystems or mobile banking interfaces. It is possible that large companies will make banking services simply part of a wider subscription - a 10% discount on taxis and here you also have preferential conditions for financial management. The emphasis will be on functionality and convenience for the end user. Initiatives like personal finance management from Excel will become the norm.
Embedded-finance is an opportunity to conveniently and quickly part with money at any time and anywhere. A concept that can be called “pay and live”. There is no longer a need for POS terminals or physical plastic - everything has gone digital. In essence, we are a step away from the payment method from the Altered Carbon series, where the main character simply spat on the sensor.
