Tap-on-phone: the way forward for the financial inclusion of small and micro-businesses?

The industry today is toiling hard to lower the cost of acceptance for merchants and to revolutionize the payment experience for digitally-savvy consumers - Tap on Phone technology promises to accomplish both.

One can't keep from appreciating that financial innovation has mostly kept end-consumers as the focal point. But today, Tap on Phone addresses a critical opportunity in the market by radically democratizing the acquiring business while putting merchants at the center.

This contactless acceptance solution that turns any NFC-enabled Android phone into a physical point of sale is likely to be low cost, low maintenance, and peripheral-free for merchants – which makes it a particularly powerful tool to draw millions of micro and small merchants into the world of digital payments. Also, this cheaper, faster, and easier to deploy POS solution, can help the acquirers to access new customer segments and to drive volumes enormously.

What is Tap-on-phone: it is one of the mobile payment solutions that enable smartphones and tablets to accept payments. By simply eliminating the need for traditional terminal hardware, it is likely to be the future of the simplified payments ecosystem that will not only benefit large and small businesses but also their customers.

Consider Tap on Phone as the latest phase in the evolution of payment acceptance. Remember the classic times when the world accepted only cash or embossed cards for making a purchase? With time it led on to NFC SIM, SmartPOS, mPOS, contactless payments and they are now sub-consciously a part and parcel of our purchase journeys. Only some of us today would have the patience to spare another 1-2 minutes to key in the PIN and wait for the POS machine to confirm. Less than 25% of users today care to notice if they are tapping on a merchant's xyz device, and are barely keen to collect a physical receipt.

Contactless payment acceptance has shown to drive revenue for the acquirer and issuer, increase the number of transactions merchants accept, and gives the end-customer a better experience. With Tap-to-pay solutions, the idea is to ride on this wave of contactless payments and empower the point-of-sale of another hundred of millions of smaller businesses - that they are ready to accept payments through Cards and QR, within seconds, at minimal costs. Interestingly, more than 130 million micro and small businesses worldwide still do not accept electronic payments, and the legit question to ask is despite banks trying to increase the acquiring network aggressively, what is keeping these businesses from accepting digital payments. Some of the reasons are pretty obvious -

• The enormous cost of POS and tariff model on POS terminals levied by the acquirers
• Existing POS solutions offer proprietary and menu-based hard-to-navigate screens, slightly difficult for an average small-scale merchant to handle
• Most POS solutions offer insufficient mobility to provide a decent shopping experience to the on-the-go consumers (imagine why the grocery stalls or pop-up sale vendors would want to opt for a P2P / POS device when it limits their mobility)

With Tap on Phone solutions that are cheaper, faster, and easier to deploy, the advantages are manifolds -

For the merchants-

1. Reduced costs: Merchants don't need to purchase additional equipment, onboarding and authentication of their account can be faster and through a DIY interface, and so is the payment experience for their customers. It is fairly simple, they present their phone to a consumer, and the consumer can use a contactless card, mobile phone, or wearable to tap and pay.
2. Increased use-cases and average ticket size of the purchase: A typical Tap on Phone merchant would be a small business, or a mobile or seasonal merchant with high variability in the volume of transactions over time, such as food trucks, flower shops, farmers markets, grocery stores, etc. Not only does this increase the use-cases, but it is also likely to increase the average transaction ticket size for the merchants.

For the acquirers-

1. Access to new customer segments: it will help acquirers in emerging markets that have problems penetrating into cash-centric small and micro merchants payments. The banks currently don't invest heavily in field marketing for these merchants due to acquiring costs and profitability
2. More Volumes and higher margins: Contactless consumers tend to transact and spend more than other payment method users. With the higher rates of penetration, more merchants would not only lead to more transaction volumes, but they also tend to increase margins.

The use cases are immense and so is the promise of the future of digital acceptance by the Tap-to-pay solutions in the market. The next thought is, do the acquirers/networks want to limit the usability to just merchants, or can we have a lighter version of this as a Mobile App that can enable P2P payments as well. Just pay me through your card or wearable (on my personal mPOS) and move on! Let me know what do you think is going to be the future of ubiquitous acceptance via Tap-on-phone or beyond?