The payments landscape in India is evolving rapidly and merchant acquirers face as many challenges as they do with new opportunities. Payment processing rests on merchant acquiring, and acquirers empower merchants to accept cashless payments through cards and other digital forms.
They are an important interface between the various parts of the system – payment instrument issuers, merchants and networks/schemes. They also provide authorization, clearing and settlement, dispute management and information services to merchants.
The most commonly used acceptance channels are Point of Sale (POS) terminals. Earlier a terminal was just treated as an electronic device that reads a card, transmits information for authorisation processing, records the transaction and prints a receipt. Before the advent of electronic POS terminals, manual imprinters (a.k.a. ZipZap machines) were used to capture information embossed on a credit card onto a paper slip with carbon paper copies.
These paper slips had to be taken to the bank for processing, a cumbersome and time-consuming process. The first POS terminals emerged in 1979, when Visa introduced a bulky EDC (electronic data capturing) terminal for magnetic stripe cards. Today we have almost around 2.7 million terminals in India with just 2 suppliers owning the lion’s share of the market.
Most POS terminals transmit data over a standard telephone line or a wired or wireless Internet connection. All terminals today are PCI-PED certified with EMV kernel enabling PIN based transactions. The communication protocol, though not the only way, is the best way to distinguish POS terminals:
PSTN POS: The classic POS, it’s a device connected through a standard telephone line needing continuous flow of electricity to operate.
GPRS POS: The most common terminal today, it accepts payments through the POS device without a telephone network but through a
GSM/GPRS device or UMTS (Universal Mobile Telecommunications Service) connection. It uses a SIM card for data transmission.
Ethernet POS: This can also connect your printers to cloud-based applications and works with Internet Protocol (IP).
Mobile POS: Enables mobile payment (smartphone or tablet) via Bluetooth. One needs to install the application on the client device. Once the transaction is successful, the customer receives an SMS or confirmation email. This also checks expenses and avoids card cloning.
The POS market has evolved very quickly in the recent past because of new features and applications developed by different manufacturers, acquirers, payment service providers and aggregators. Various business applications today offer an omni-channel environment for consumers, resulting in a seamless shopping experience.
Technological efforts are pivoted around increasing transactions on the same POS terminal, consumer convenience, reducing transaction cost and most importantly, enhancing security. Here are a few new applications available on numerous POS terminals in India:
- NFC: Known as Tap-and-Pay, it offers a very quick, seamless transaction experience
- Thin client: Connected to the cloud, this helps in managing the POS remotely resulting in quick downloads and resolutions
- EPOS: Integrated with billing software of the retailer, it helps in quick checkout.
- DCC: Dynamic Currency Conversion allows overseas consumers to shop in their home currency and enables transparent currency conversion.
- EMI on POS: Converts the card transaction into monthly equated instalments on the POS itself.
- Bharat QR/UPI: A dynamic QR code is printed on the charge slip and consumers can pay from their virtual payment address.
- Cash@POS: Consumers can withdraw cash from the POS as per RBI limits. The cash is handed over by the retailer.
- Pay by Points: Merchant-owned or close loop loyalty programs are also available on POS terminals.
- Wallets: Many terminals are integrated with mobile wallets, enabling PIN-based transactions.
- AEPS: Biometric POS devices enable payments with Aadhaar numbers and biometric authentication.
All in all, POS terminals have definitely improved retailing and consumerism. The experience of using a POS will further improve with the introduction of Android-based POS and digital POS. Retailers can download the payment application and start using it after digitally signing the end user agreement, allowing seamless integration with many more business applications.
We have come far from manual imprinters to swipe machines, dip cards and now tap-and-pay. Very soon, we will have digital POS and Android-based POS in the market and the innovation will go on. This will not only drive more seamless, secure, convenient and cost-effective transactions but will help make the entire business model very lucrative for retailers and acquirers.
By Deepak Chandnani, CEO, Worldline South Asia and Middle East