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STODDER: iPad spurs disruption in point-of-sale payment industry


Apple created and marketed the iPad mobile tablet as a media player for the family, and it is that. But its versatility, coupled with the imaginations of its users, has launched mini-revolutions within some business sectors, as entrepreneurs discover the iPad is a readymade platform for cloud computing.

An illustration: App-makers and entrepreneurs are taking a run at replacing many point-of-sale (POS) systems with cheaper apps and accessories that can be run on the popular tablets. The established players in the POS industry have noticed and are fighting back, many with products that replace their brand-named hardware with iPads.

This year, two companies with iPad-run POS products were finalists for iPad Biz APP of the Year at MacWorld’s iWorld: The Square payment app and Revel Systems’ iPad POS kiosk.

Both firms offer retail businesses an iPad-based, alternative way to take orders and accept payments from customers, and then manage data from each transaction.

Point-of-sale systems began appearing in the 1980s and became widespread by the 1990s. They are electronic cash registers, often with touch-screen capability and various peripheral devices that manage customer orders, scan bar codes, read credit and debit cards, dispense change, print receipts and store business information.

POS systems are expensive, but most restaurants and hotels and many retailers adopted them because they brought efficiency and improved controls over money and inventory. Several dozen companies sell POS hardware and software, including NCR, VeriFone, Microsoft and IBM.

Square came onto the scene in 2009 aiming at an underserved slice of the retail market, the small business owner who needed a way to accept credit card payments. The idea arose when one of the cofounders, who was taking a break from technology to work as a glassblower, couldn’t sell a $3,000 glass faucet to a customer who wanted to pay with plastic.

The company developed a small credit/debit card reader – a “dongle” – that plugged into the earphone jack of an iPhone, and eventually into the iPad and Android-based smartphones or tablets. The dongle is provided to retailers, and Square takes 2.75 percent of each payment as a processing fee. It has 1 million customers, the company claims, and now processes some $5 billion a year in payments.

With an app product called Square Register, Square is aiming to replace the point-of-sale hardware and software with a system that runs through the iPad. The Square Register can keep track of inventory, set up customer loyalty programs, print receipts and run a program that opens a cash drawer.

However, Square did not win the iPad Biz APP of the Year award. That went to Revel Systems, which also provides POS services using the iPad. Square’s product is aimed primarily at the small businesses that formed its initial customer base, while Revel is marketing its product to quick-serve restaurants.

Revel’s POS app, Kiosk Mode, allows fast-food customers to use in-store iPads to place and pay for their orders.

For a chain like the ice-cream stand Twistee Treat, a Revel Kiosk customer, the installation of a few iPads in each store, equipped with Revel’s app – as part of a system that also helps merchants track sales and inventory data — will save in personnel and equipment costs in each store, while updating the brand’s image, according to Twistee Treat’s president, Cory Balzer.

The iPad, iPhone and Android smartphones are the keys to providing payment services so much less expensively – not merely because of the devices’ versatility, but because they tap into the cloud, the offsite infrastructure that does most of the computing for these devices. The conventional POS system is more like a PC network, storing and processing its information onsite, using expensive hardware.

New entrants like Square and Revel have disrupted the POS industry leaders enough that they are now developing similar products that also use iPads and the cloud.

For example, VeriFone has acquired a firm called Global Bay, which also has an iPad kiosk for retailers. In June, NCR will follow suit, with a product called NCR Silver. The pitch from VeriFone and NCR is that retailers should stay with firms that have a long history of serving their point-of-sale payment needs. VeriFone and NCR are adding sweeteners to their iPad-connection devices, such as features that facilitate marketing campaigns. In their own marketing, they leverage their long experience with customers in the industries they’ve served for decades.

Time will tell whether upstarts like Square and Revel can take over the payments industry, or if they will merely be the catalyst for industry leaders like VeriFone and NCR to use the iPad and the cloud to save their customers money.

From the standpoint of Apple and its products, iPhone and iPad, it doesn’t matter who wins and who is left behind after the shakeout. Their mobile devices and mobile computer are already winning.

— John Stodder


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