The biggest changes coming to the point of sale in 2019

Despite years of advancements in mobile and online payments, the physical point of sale remains still ripe for disruption.

The physical POS is, in many cases, still a heavy piece of hardware plugged into a receipt printer and maybe a PIN pad. As the new year begins, replacement systems — based primarily on cloud and mobile technologies — are finally ubiquitous and practical enough for nearly any retailer to consider.

But this is more than about a tech upgrade. Anything retailers can do to move the payment away from the checkout lanes will reclaim valuable store space and remove friction from sales.

Amazon is a catalyst, but not one-size-fits-all
Amazon Go
Pedestrians walk past the Amazon Go store in Seattle, Washington, U.S., on Wednesday, Jan. 17, 2018. After more than a year of testing with an employee-only focus group, Amazon Go opens to the public Monday in downtown Seattle, putting to the test the online retailer's technology that lets shoppers grab what they want and leave without paying a cashier. Photographer: Mike Kane/Bloomberg
Amazon's experiments in physical retail may not have forced other retailers to copy its model, but it is forcing them to adapt.

Scale isn't part of Amazon's physical retail playbook just yet. The company's cashierless checkout technology is working in smaller venues, and for now Amazon seems content to dot the map with smaller Go stores rather than challenge Walmart with something more ambitious.

As it stands, Amazon Go is a bigger threat to convenience stores such as those operating in transportation hubs or airports.

Some who have spent time researching these cashierless stores sense that, over time, this will have to be the way modern retail looks and feels.

"The success of Amazon Go will be a wakeup call for all retailers in 2019 and change the point of sale," said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.

After visiting every Amazon store and spending an entire day in the San Francisco location, Crone said he left the store feeling Amazon is well positioned to meet its goal of adding hundreds, if not thousands, of new stores in the coming years.

"This is game-changing, really, because it invents a whole new category of retail," Crone said. "It will be easier for those who can start with a clean slate and adopt that type of technology, but the primary requirement that goes into this is having the customer register a payment credential with the retailer."

Such a landscape will do much to accelerate the order-and-pay-ahead technology that quickly became common at quick-serve restaurants.

But the proliferation of new POS strategies also poses a significant danger to a payments tradition. While companies like Stripe, PayPal, iZettle and Shopify may flourish, it "will cause the extinction of independent sales organizations and reseller models of payment processing services," Crone warns.
A race with no clear winner
Sam's club bags
The logo for Wal-Mart Stores Inc.'s Sam's Club is displayed on a shopping bag inside one of the company's store in Zhuhai, China, on Friday, Oct. 14, 2016. Wal-Mart sees big potential in China: its Sam’s Club in Shenzhen, a fast-growing urban center in the southeast, is the chain's best-performing outlet globally. Photographer: Qilai Shen/Bloomberg
To avoid being left behind, retailers are responding with the next-best plan they can find.

Often, that falls somewhere between the mobile-centric sales experience of an Apple retail store, a Scan & Pay model recently embraced by 7-Eleven, a hybrid of mobile and traditional POS as is used at Walmart, or a Click & Collect model such as Kroger grocery chain's ClickList for online ordering and pickup.

Even though it had a bit of a rocky start at Walmart's Sam's Club, a Scan & Go technology remains on the drawing board for the mega retailer in what it calls its Sam's Club Now retail tech hub.

The variety of models shows that even though retailers aren't sure what the future POS will look like, they're certain that their current model is on its way out.
How apps are taking over retail
Amazon's iPhone ap
The Amazon.com Inc. application icon is displayed on an Apple Inc. iPhone in Washington, D.C., U.S., on Monday, Dec. 5, 2016. Amazon.com unveiled a new security tool for cloud customers last week, part of a slew of product announcements designed to fend off competition from Microsoft Corp., Alphabet Inc.'s Google and others in the fast-growing cloud computing market. Photographer: Andrew Harrer/Bloomberg
The mobile POS is no longer a novelty, but a platform on which retailers expect to see multiple services and apps.

Open development platforms supported by payment processors and card networks have enabled far more apps to integrate into physical POS locations, or to introduce simple tap & pay capabilities on any mobile device.

The growth of open platforms has also led to far less squabbling over who controls secure elements on phones or who can control NFC technology. This was a major point of contention in the early mobile wallet days, when hardware played a greater role in determining how mobile payments occurred.

In an app-based world, companies don't have to worry about controlling the hardware and can customize their offerings for any consumer or merchant niche.
'PIN on glass' opens new possibilities
Tablet card payment
For merchants seeking more security — and possibly eliminating POS hardware costs — PIN on glass is set to play a major role.

PIN on glass describes a point of sale system built around a touch-screen interface that can accept PIN authentication. PIN on mobile is considered a more advanced flavor of this concept, as it allows a consumer to input their PIN directly into a mobile device through communication with a card reader.

The technology essentially allows acceptance of debit card PINs on the mobile screen, a welcome advancement for the mobile POS.

After the Payment Card Industry security council established PIN standards for mobile POS developers, it signaled more awareness amongst retailers to consider it.

Santa Clara, Calif.-based MagicCube jumped into the PIN on glass fray quickly, developing the MC-Screen Shield as a way to guard against man-in-the-middle attacks that intercept a PIN after it is typed on the screen.
E-commerce breaks into physical world
Walmart trucks
A Walmart truck makes it way down the highway, Wednesday November 8, 2007 just outside Hurricane, Utah. George Frey/Bloomberg News
While mobile POS and cloud platforms are changing the way retailers can position their checkouts, in many cases a POS isn't needed at all.

To bridge the gap between customer preference and digital convenience, Walmart this month began providing its store employees with a new app to help customers order items from Walmart.com when they are wandering the store and can't locate a specific product.

The problem Walmart faces is that its customer base includes people who are presumably less tech-savvy than Amazon's e-commerce devotees. Even when Walmart.com may provide the better experience than Walmart stores, those shoppers still come to shop in person.

Other brands will take similar steps as e-commerce becomes more secure.

"3-D Secure 2.0 will also have an impact in that it will lower the consumer effort with fewer challenges and no longer requiring user ID-password in e-commerce," said Tim Sloane, director of emerging technologies advisory services for Boston-based Mercator Advisory Group. "It would reduce fraud overall and offer merchants zero liability."

As that technology rolls out, and if the card networks deploy Secure Remote Commerce rules effectively, then "digital commerce becomes much more convenient and safe," Sloane said.

Every mobile operating system and browser company is already embracing the W3C payments API, and they are all interested in a finding a way to participate in payments, Sloane added.

Such momentum could translate to new entrants on the payments landscape offering new payment methods and a very different type of POS setting or interaction between physical settings and online orders and payments.

"It only leaves new entrants the problem of giving merchants a reason to adopt," Sloane said.

Ultimately, the coming year is likely to demonstrate how each retail segment can benefit by cutting ties with the traditional POS. In its place will be checkout systems based on mobile, cloud and location-based technologies that remove friction from the payment and clutter from stores.
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