The mobile point of sale market is getting more and more crowded, even as the market's largest and most established players struggle to find footing.
The MPOS market has come a long way since tech vendors began flocking to imitate or one-up the simple Square reader, and today providers focus on niches or partner up to offer services that go beyond payments. But each new product development has a high cost and an even higher risk.
"Successful companies in the mobile point of sale space are far and few between, largely because the business model for success in the space is complex," said Rick Oglesby, a senior analyst and consultant for Double Diamond Group.
The mobile point of sale market has shown signs of market saturation, with even well-funded diverse providers scrambling to evolve beyond their core models, while others struggle to simply pay their own bills. Notably, London-based Powa ran out of funds last month and found itself split up and sold shortly thereafter.
"The mobile point of sale market has been very crowded for some time and we've already seen some high-profile casualties, such as Powa," said Zil Bareisis, a senior analyst at Celent. "And the competition has been shifting from the 'M' to 'POS'. It's not just about the mobility aspect, but all the additional services that the platform can offer."
Despite the crowding, the market still draws new players, attracted to the anticipated demand and the hope that specialization and easy access to other business services through the mobile point of sale gateway will be a winning strategy.
"We see some people saying 'compete with Square head on.' But for us it's really staying focused on our core customer base, which is service based small to micro service users," said Mark Girvan, vice president of products for FreshBooks, a Toronto-based cloud accounting software company that serves small-business owners. FreshBooks just released FreshBooks Card Reader, a device that plugs into a smartphone's audio jack to accept credit card payments.
"Our accounting software is focused on home services, trades, lawyers, consultants, IT professionals, people who invoice for their time," Girvan said. "We don't want to shuffle our clients off to a partner for new services."
FreshBooks has a direct link to accounting in a market where providers are often required to work through third parties such as Intuit's QuickBooks.
The FreshBooks integration enables credit card payment processing in under a minute and a full link to FreshBooks accounting software, Girvan said. Invoices and reports are updated as payments are processed.
Another newcomer, Bambora's Beanstream, is also betting on easy linkage to other digital merchant services to sell mobile point of sale devices. The Victoria, British Columbia-based Beanstream last month launched sproutPOS, a mobile point of sale product that enables EMV payments for Interac, MasterCard, Visa and American Express for smartphones and tablets.
Beanstream has operated for nearly two decades as an e-commerce company in Canada, the U.S. and the U.K. It plans to initially deploy Beanstream first in Canada, then to its other markets.
Beanstream is positioning sproutPOS as an enabler of omnichannel commerce through its direct connection to the company's e-commerce engine, which supports mobile shopping, fulfillment, brick and mortar e-commerce tie-ins, and other services.
"There are a lot of mobile point of sale software providers. You can license the software, but the payment doesn’t interface with other services directly," said Grant Storry, Beanstream's director of mobile products, who is also counting on the loyalty of Beanstream's audience of independent retailers. "It will be tough for one company to dominate all of the verticals."
The mobile point of sale market has attracted very small merchants that don't generate much payments revenue, so success is a result of building scale and/or having multiple services, Oglesby said.
Both of these things are difficult to accomplish and require innovations across sales and marketing strategies, underwriting and risk mitigation, platform development, product development, marketing and bundling—along with speed to market and price optimization, Oglesby said.
"I wouldn’t call mobile point of sale mature as of yet, rather I'd argue that mobile point of sale is still at the late stages of the introductory phase," Oglesby said. "However, there are many companies that have focused too much on the technology aspects and not enough on the business aspects and as a result they are having a difficult time making ends meet."