The newest iPhones are drawing a lot of attention for omitting the headphone jack, causing worry among the small merchants that rely on headphone-connected card readers to handle payments.

CardFlight reports it's getting a lot of questions about Apple's iPhone 7, which uses only the company's proprietary lightning port for wired connectivity (though Apple does provide an adapter for headphone plugs). Rather than view the change as a problem, CardFlight says it is a chance for payment companies such as itself to fast-track their deployment of more advanced technologies.

"The shelf life isn't there in the mobile point of sale space," said Derek Webster, founder and CEO of CardFlight, a New York-based payments technology company.

Most of the merchants in its market are smaller shops that wouldn't necessarily rush to upgrade to an iPhone 7, but CardFlight anticipates iPhone 7 sales will accelerate, prompting a change in mobile payments technology. Almost immediately after Apple's iPhone 7 event last week, Cardflight debuted a new family of mobile card readers that communicate with Android and iOS devices via Bluetooth, supporting magstripe, EMV and NFC payments.

By supporting wireless Bluetooth card acceptance today, "the merchants won't need to upgrade," when they eventually buy a newer phone.

Bluetooth already powers the beacons that merchants are using for location-based marketing, and the same technology enables mobile payments at some vending machines. CardFlight is positioning its readers for resale through ISOs and other acquirers. The frequent changes in payment technology are a challenge for ISOs, which must constantly adapt to keep up, Webster said, adding CardFlight employs internal engineers and frequently issues updates for the iOS and Android app stores.

The audio jack was a big part of early mobile point of sale products, though many companies also supported wireless alternatives, particularly in chip-and-PIN regions where a PIN pad was required. Square has also added support for contactless technology such as Apple Pay, which helped Square win the payments contract at the recent Coachella music festival and has reduced Square's reliance on audio jacks.

Also, the new iPhone 7 may not require merchants to dump legacy mobile point of sale hardware attachments entirely. The iPhone has an adapter that can be inserted into the Lightning port for backwards compatibility.

"For portable devices that currently use something like the Square dongle, it will be more awkward as the dongle doesn’t offer any rigidity, so the user will have two disconnected devices," said Tim Sloane, vice president of payments innovation for Mercator Advisory Group.  "But that would also be true if it's a Bluetooth connected device, so I'm not sure if Bluetooth is the answer. More likely it is a new dongle that combines the reader, the dongle and a snap on construction that makes the two devices act more like a single card reader."

The adapter cable doesn't fit as snugly as the Bluetooth solution, so Bluetooth is better for iPhone users, but "that doesn't mean that ISOs should offer only Bluetooth," Webster said. "You have to support anything that the merchants are using."

CardFlight also has an audio jack card reader called the Eclipse A200, which has been in the market since 2015, supports EMV and mag stripe acceptance on four processors, and remains available going forward, Webster said.  

"We expect the Eclipse A200 to continue as our best selling unit for at least the next few months, and potentially well into 2017, given that almost all smartphones currently in the field contain an audio jack and that the iPhone 7 ships with an adapter," Webster said..

There are many merchants that prefer Bluetooth devices - either because they don't have an audio jack and don't want to use an adapter, or because they use a thick outer case that blocks access to the audio jack, or otherwise prefer the more handheld form factor of our Bold series, Webster said.

Apple's move will provide an opportunity for mobile payment technology companies that can move quickly, by Sept. 16 when the new iPhone users will be looking to activate payments in their new phones, said Rick Oglesby, president of AZ Payments Group. "For existing mPOS users, they may need to hold off on upgrading their phones until new solutions are in place, or switch to an Android device."

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry