Dongles are a serious business. They are transforming the point-of-sale industry as higher rates of mobile penetration, the growth of e-commerce, and advancements in digital payments lead to a much-needed overhaul.

Today, Javelin Strategy and Research released a report that found mobile point-of-sale (POS) technology poses a significant and growing threat to terminal-based solutions.

Despite the popularity of online shopping, in-store retail still “towers above” the online market with 92.6 percent of total retail dollar volume in the U.S.. However, mobile devices have fundamentally changed the way brick-and-mortar businesses accept payments. Javelin’s report involved interviews with executives at 14 mobile POS providers, as well as data from a random survey of 6,651 consumers, and identified some key trends and themes in the market.

Javelin estimates that mobile POS could expand payment card acceptance by up to 19 million businesses, which could account for up to $1.1 trillion in annual new-card payments. Most of the mobile POS companies offer bundled solutions (hardware + software + services) and charge a fixed percentage fee per transaction, with no hidden costs. Since margins in this area are “razor-thin,” simple sign-up and setup, fast access to money, and strong customer support are necessary for survival. Strategic distribution partnerships, such as Square’s arrangements with Starbucks and Walmart, also help with adoption.

Security is another important concern because without it, neither businesses nor consumers will be willing participants. Javelin found that only 28 percent of consumers consider processing card payments on a mobile device to be secure, and financial institutions require high security standards.

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