Exploring softPoS: Digitizing the PoS Payments Landscape

Asheeta Regidi Head, Fintech Policy at Cashfree.

This blog is penned by Asheeta Regidi, Head of Fintech Policy and Amlan Chanda, Associate Director of Product Management at Cashfree Payments.

Point-of-Sale (‘PoS’) terminals play a key role in taking merchants and consumers from cash payments to digital. Today a range of options are available to choose from- PoS terminals are increasingly sophisticated, feature-rich and available at a range of prices. The softPoS or software PoS nevertheless changes things here, as a technology that allows a merchant to convert any NFC enabled device into a PoS terminal. Be it from a financial inclusion perspective for merchants in rural or out-of-reach areas, or for onboarding multiple delivery agents engaged by a business, payments acceptance can be enabled simply via an app download on their existing smartphones. Distribution challenges with PoS terminals are thus eased. The need to purchase additional hardware, in the form of a terminal or even a card reader is also removed, thus also lowering costs. ‘

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The benefit of a PoS terminal

Adopting a PoS terminal and moving to digital payments in general brings multiple additional benefits. Merchants can accept and offer a range of payment modes to their customers. Offering credit based options like card EMIs or BNPL becomes easier. In general, managing money becomes digitized for the merchant, reducing paperwork and also easing access to credit via the transaction data recorded. PoS terminals themselves are evolving. New age ‘smart’ PoS terminals are cloud based and perform a range of ‘smart’ functions beyond payments alone. For example, they can enable front-end to back-end business requirements like customer loyalty programmes or inventory management. Value added services and customisations in fact are a key factor. 

How softPoS works

The softPoS is itself a smart PoS, providing the same benefits as a mobile/ tablet based PoS terminal but without the additional hardware. It is essentially an app or an SDK, which utilizes the smartphone’s (or tablet or other device’s) existing NFC and other hardware capabilities to enable payments acceptance. Payments are made possible via tap-n-pay card payments (NFC), UPI, QR codes (scanning) and payments links generated and shared via SMS/ email, which allow a range of online payment options. With interoperability rules coming into force by March end, the softPoS will also accept wallet payments using the same UPI or card rails.

A typical PoS machine can cost Rs.12,000/- while an mPoS machine can cost Rs. 5,000/-. Costs like manufacturing, installment, distribution, servicing and upgradation, etc. all come in here for each individual terminal, whereas with the softPoS these are one-time costs for app development and maintenance, while hosting charges become negligible at scale. The softPoS allows a smartphone worth even Rs.7000/- to do almost anything a dedicated PoS terminal can do, except accepting magstripe/ EMV and chip cards or print receipts.  

The use-cases enabled

SoftPoS this way enables different use-cases, also bringing different benefits for each. For example:

  • For retail businesses: For supermarkets, homeware stores, apparel stores, etc. the softPoS can enable flexible checkout points on the sales floor and freedom from queues along with door step delivery
  • For restaurants: For hotels, food courts, etc. the softPoS can enable doorstep payments, tableside ordering, self-checkout options at tables, etc. 
  • For service-based businesses: Similar benefits can be enabled for theaters, beauty salons, at-home services (carpenters, repairs, etc.) and BFSI collections via agents etc. 
  • For small and medium businesses: For SMBs, freelancers, kiranas, etc. the low costs and quick adoption are the benefits. 
  • For businesses on-the-go: The portability of softPoS and lack of additional hardware as an additional point-of-failure are key benefits for on-the-go businesses like door-to-door tradespersons, food trucks, etc. 

The RBI focus on payments penetration

Even outside of the benefits for specific businesses, fostering financial inclusion is a key governmental goal. This has led to steps like the RBI setting up the Payments Infrastructure Development Fund, which utilizes a corpus of Rs. 614 crores to subsidise the deployment of payments infrastructure. For smaller businesses and tier 2 to 6 centres, the cost of a PoS terminal and the time taken to acquire one can be a barrier to adopting digital payments. SoftPoS’s features here thus provide an advantage. Merchant acquisition can become faster, cheaper and more far-reaching. The PIDF in fact has set targets of deploying 30 lakh new digital payment touch points each month, and the softPoS can play a key role in enabling this.

Changing the UPI vs. cards game 

In addition to everything else, the softPoS also has the effect of evening out the playing field between UPI and cards in the offline space. Here UPI has gained a significant edge over the years given its easy use and adoption via QR codes. The pandemic appears to have been a tipping point, with the gap between the two deepening significantly post April 2020.  As of November 2021, card payments are at 54.18 crores by volume vs. 418.64 crores for UPI, and Rs.1.5 Lakh crores for cards by value vs.  Rs. 7.6 Lakh crores for UPI. UPI P2M transactions in fact have grown from 1.0 billion in early 2021 to 1.7 billion by the year end in December. The softPoS now brings the potential to make accepting card payments equally easy and far-reaching, even for remote and small merchants. From a customer convenience perspective moreover, NFC tap-n-pay payments are even easier and faster than UPI QR payments. 

Supporting the drive to payments adoption

The RBI has also been taking other steps, such as easing merchant onboarding via digitizing and easing KYC, or enabling and encouraging contactless payments via enabling tap-n-go payments on all purchases or allowing device-based tokenisation. Each of these provide additional support to efforts to increase digital payments penetration in the country. The softPoS adds to these efforts, bringing significant potential to change the game for merchant acquisition, financial inclusion and payments acceptance.

Asheeta Regidi Head, Fintech Policy at Cashfree.