Mobile point of sale terminals are projected to reach 46% market penetration by 2017, up from the 17% share of the point of sale terminal market that mobile systems held in 2012, according to a whitepaper by Mobey Forum.

Mobile point of sale has been a disruptive force within the payments industry, but many traditional players wonder if these business models can be sustained, says Nicolas Dinh, mobile lead of Canada at MasterCard Inc. and a member of the global business association's MPOS workgroup, during a Nov. 25 webinar on the whitepaper.

The number of mobile point of sale terminals grew 111% to 9.5 million terminals from 2011 to 2012, according to the whitepaper, entitled “MPOS Impact: Shifting the Balance of Power.” By 2017, the number of terminals is expected to reach 38 million, the association, which focuses on spreading bank-driven mobile financial services, said in the report.

The mobile POS market can be generally divided into four business models: specialized, custom-built hardware, such as Infinite Peripherals' mobile device sleeves used by employees at Apple retail stores; payment transaction services like Square; small business platform suites, such as ShopKeep; and transaction-driven marketing services, like LevelUp.

As startups come in and take market share, traditional financial institutions have taken a wait-and-see approach, says Matt Calman, general manager at Calman and Co. LLC, and the whitepaper's editor in chief, during the webinar. But about one-third of businesses expect to see mobile point of sale as part of their transaction offering, so the time to act is now, he says.

Business-in-a-box solutions, such as ShopKeep and NCR’s point of sale system, “are a particularly important facet of the marketplace and where there’s a lot of potential growth,” Calman says.

The bundled packages include value-added services like customer relationship management, reporting and accounting, business analytics, marketing and loyalty and inventory management.

Several Brooklyn merchants use ShopKeep to streamline sales. Jane’s Carousel, a landmark in the borough, started using the tablet-based point of sale after an unsuccessful run with automated ticketing kiosks.

Many new models in the industry offer free features or reduced cost. “Anytime you see free offers the question comes to mind, ‘How long can that persist?’” Calman says. Traditional players wonder “if the approach is a long-term play or an evolutionary step.”

LevelUp has garnered a lot of attention from its Interchange Zero model, waiving transaction fees in return for marketing agreements. Because LevelUp and similar providers look to complement traditional payment methods, like plastic cards, these providers will likely scale more successfully since it doesn’t compete head-on with incumbents, according to the whitepaper.

The mobile point of sale market is likely to see quite a bit of consolidation soon, says Calman, citing Square’s partnership with Intuit to provide QuickBooks accounting software integration.

“Mobile point of sale has revolutionized convenience for both consumers and small businesses,” Calman says. “But mobile point of sale is just the beginning of the changes.”

Dinh says those with the most to lose are processors and independent sales organizations that will need to quickly figure out a way to compete with the nimble startups — a warning was reiterated at the Western States Acquirer’s Association conference in October.

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