SECURE: Now you can swipe and pay for goods on your cellphone
SECURE: Now you can swipe and pay for goods on your cellphone

IT was only a matter of time before the technology arrived to make and receive payments on the go. The first mobile point-of-sale devices (mPOS) are due to be launched locally on November 16.

The mPOS is a card-acceptance solution that turns a cellphone into a secure point-of-sale device via an accessory that can be plugged into the phone jack, allowing merchants to accept payment by credit and debit cards. The technology lets the seller come to the customer to get a payment instead of the other way around.

Vendors will need to download an application onto their cellphones and register their device with their bank. Once this has been done, whenever the card reader is plugged into the handset, the payment application will load on the phone.

The amount to be charged is then keyed onto the phone and the credit, debit or cheque card is inserted — chip first — into the slot at the bottom of the device. Customers then key in their pin code and their accounts are debited and the vendor’s credited.

An e-mail address or a cellphone number is then keyed in for the receipt to be electronically sent to the customer via e-mail or SMS. A photo of the purchased item can be attached as well, and customers can even get the GPS coordinates of their purchase at the same time.

The mobile card readers are designed to work with most cellphones and on all networks. The vendor’s network provider is used to make the transaction using whatever signal — 3G, GPRS or HSDPA — the phone picks up.

Previn Pillay, Visa’s head of acceptance in Africa, says the mPOS devices have important implications for service providers such as plumbers, electricians, food delivery providers, taxis and informal traders who want to move away from the security threats and inconvenience of cash.

But the devices can also be used in traditional stores, either as the primary payment acceptance device or as an additional option for use during peak periods to help customers avoid long queues.

The devices are designed to accept the chip and PIN standard we have as opposed to the signature-enabled payments in many other parts of the world.

In August, Visa rules were changed to allow sales receipts to be issued in electronic form instead of on paper, a prerequisite for this technology to work.

Concern around the security of a transaction is likely to be foremost in the minds of customers.

According to Pillay, adherence to the chip-and-PIN standard will preserve all the security benefits the consumer and merchant have with traditional in-store point-of-sale devices. No card data is stored on the phone; data is encrypted by the mobile card reader and transmitted securely to the bank.

So even if the cellphone and device were stolen, customer details wouldn’t be available.

Visa also monitors transaction trends associated with the device. If sale numbers and amounts suddenly spike, transactions will be placed on hold until they have been investigated.

Card schemes, such as Visa and MasterCard, will benefit if this technology succeeds as they have a vested interest in the shift away from cash transactions.

The hope is that merchants who are currently excluded from formal banking operations will increasingly adopt the technology.

Forbes.com announced in June that Seattle-based fashion and beauty retailer Nordstrom had seen a 15.3% increase in sales after rolling out mobile point-of-sales devices last year. Nordstrom’s device has a scanner that can price and charge for any item available in the store, and the app on the phone gives staff access to the company’s entire inventory.

Pillay says it is a matter of time before local retailers build customised solutions, such as inventory management, into their mPOS devices.

The way the devices will be sold or enter the market is largely up to the big four banks. In the US, the devices can be bought from a supermarket for about $10, which is refunded by the bank once registered. The local roll-out will be subject to the marketing decisions of the individual banks.

Currently, point-of-sale devices are rented to vendors at about R250 a month with a merchant fee charged on transactions. Pillay believes the mPOS devices will cost less than this, making them more attractive to smaller traders.

* This article was first published in Sunday Times: Money & Careers