While global shipments of mobile point of sale devices reached 8.4 million units in 2013—a 53% increase over 2012—more than 1.3 million of the devices went unused during the year, according to new research from ISH Technology.

"We found that there is a big chunk of the market that just isn't using it," says Wincey Tang, a digital identity and IT security analyst at IHS.

IHS, which did not publically release its full report, examined mobile point of sale hardware that clips onto or integrates directly into smartphones and tablets. Ironically, most of the inactivity—ranging from total dormancy to usage only a few times per year—was traced to the smallest business segments, the mobile point of sale industry's original target market.

But if large merchants are willing to buy mobile card readers, they are more likely to use them, vendors say.

"In our experience, large retailers tend to have very high activation and usage rates for mobile point of sale devices," said Scott Holt, vice president of marketing for mobile point of sale vendor Roam, in an email to PaymentsSource. "After all, those implementations are generally run by a retailer's headquarters, where mobile point of sale is rolled out to the field very strategically—with training and incentives—thus making adoption of the mobile point of sale solution much greater."

IHS did not explain why micro merchants are leaving mobile point of sale devices unused, though Tang say the smallest merchants still receive cash and checks in most instances.

"A one- or two-person business may take a card transaction every so often, so there's not as much of a need for the mobile point of sale product in that segment," Tang says.

There is little cost and no risk to obtaining a mobile card reader, so the incentive to use it heavily isn't there, says Rick Oglesby, a senior analyst at Aite Group. "There are lots of people that have obtained mobile point of sale devices on a 'just in case' basis and/or for a single use, such as running a one-time garage sale," he says.

Some of the utilization issues for small merchants may be also due to timing— the bulk of mobile point of sale shipments came late in the year, says Brad Brodigan, vice president and general manager for retail in North America for PayPal.

"It's an activation issue. It takes times for small merchants who are not used to using mobile point of sale technology to change," Brodigan says.

Some of the small merchants who have adopted mobile point of sale have done so for specific use cases in the future, Brodigan says. "They may use it periodically at events, so I wouldn't say they aren't using mobile point of sale."

Flint, which offers a "no hardware" mobile point of sale product that relies instead on the smartphone's camera to read card data, hopes the underutilization of mobile point of sale systems will benefit is model.

"Many micro merchants are highly mobile and need utmost simplicity. Users have told us that while on-the-go it's hard enough to just keep track of your keys, wallet, phone and the job at hand.  As a result many who have tried dongles are switching to our patented card scan approach which provides an always on secure app with just your phone," said Greg Goldfarb, CEO of Flint Mobile, in an email to PaymentsSource.

It's unclear whether one technology model is superior to another for micro merchants, Tang says.

"I think if you're using mobile point of sale technology it really has to do with the reason you're adopting it, the business case. If you're a micro merchant it's hard to take credit card payments, and the reader makes it easier," she says.

The overall percentage of active mobile point of sale systems should increase as larger retailers fully deploy the technology, Tang says.  "More tier-one and tier-two retailers are doing pilot schemes now, and if they see mobile point of sale as a success, you'll get more usage in the future," Tang says.

Mobile point of sale companies such as Square, Revel Systems, Groupon, Leaf and Ingenico's Roam are actively marketing to larger merchants and tailoring their products to serve the needs of businesses with multiple locations and more complicated needs.

This week, Square announced that Whole Foods would use both its Square Stand card acceptance hardware and its Square Wallet cloud-based payment app. And Revel Systems announced that Pizza Patron, a Texas-based restaurant chain with over 100 locations, would deploy its iPad-based point of sale system to all stores over the next two years.

The rising adoption by larger merchants will help boost global mobile point of sale device shipments to nearly 88 million in 2018, more than 10 times the total in 2013, IHS predicts.

"The mobile point of sale opportunity is clearly moving upmarket and larger merchants are showing considerable interest," says Jordan McKee, an analyst at Yankee Group, which reports the slowest area of mobile point of sale growth over the next 12 months will be micro merchants. "The fact of the matter is, many of the micro and small merchants that wanted this technology already have it. Will there still be growth in this area? Of course. But it will be much smaller than in the past."

By the end of 2014, mobile point of sale will virtually be unavoidable on the retail sales floor, McKee says.

"Already, large players like JCPenney and Nordstrom have adopted the technology," he says. "Larger merchants are showing interest in mobile point of sale because they are looking for better ways to engage with shoppers and prevent showrooming," the practice of going to physical stores to evaluate products but purchasing them online, he adds.

"An enterprise-grade mobile point of sale device will have capabilities like back end integration, product comparison tools and sales tips allowing associates to play a more dynamic and influential role in the consumer's decision-making process, "McKee says.

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