Intuit GoPayment

Ah, street fairs—one of the many pleasures of summer. A few weeks back I explored one near my old office in Campbell in the heart of Silicon Valley. As usual, I went for the food while my wife went for the crafts.

It was like many other fairs across the country but in one way was a bit unique: all 90 vendors were using either a smartphone or tablet as their point-of-sale (POS) device. By actual count, all were using either an iPad or iPhone except for one using a device from another vendor. All devices had 3G and used an external credit card scanner from Square or Intuit tied to a banking service of some sort.

Recently I was shanghaied into going to a Nordstrom Rack, where I also discovered iPhones being used as point-of-sales devices. Here sales clerks in green vests roam the floor with POS-based iPhones and can check you out right on the spot. Apple has done this for years in its stores but the idea is finally catching on in a lot of retail stores. And, at least up until now, the majority of them are iOS devices.

Not long after iPads came out I started seeing them in upscale restaurants where they were used for wine lists. Now they more often serve as a menu. I also see more and more iOS devices becoming POS devices for taking orders even in mainstream food establishments.

They also have a place in hospitality. I recently stayed in a swanky hotel and it too used an iPad to check in guests quickly. Any tired traveler greatly appreciates this convenience.

It's plain to see why retail establishments and even street vendors are moving quickly to smartphones and tablets for managing POS customer transactions. In the past, POS and credit card devices could cost retailers anywhere from $5,000 to $10,000 depending on the nature of the systems. One of the major software leaders in mobile POS systems is Square, founded by Twitter co-founder Jack Dorsey. In a recent article in QSR, a trade magazine covering quick-service and fast casual restaurant industry news, Dorsey said, "We want to build a system that scales to any sort of commerce, where we are using devices you already have, and make it as cheap as possible to do."

The article goes on, "The existing credit card system is obscure, Dorsey says, because the fees are not upfront or fixed. The amount that flows into a merchant's account after a transaction depends on the brand of card, the issuing bank, and the rates set by an outside merchant processor, and the money may take five to 10 days to process." Square therefore traded that convoluted accounting equation for a flat 2.75 percent fee; the rest goes into a merchant's account the next day.

I can see why retailers are switching to Square, Intuit, and other mobile payment systems that provide similar types of fast payback services. However, it is their link to mobile devices that is really helping these services take off. For street vendors, mobile payment systems are a no-brainer. Vendors already have smartphones and when linked to a credit card reader and a service like Square, they have a cost-effective way to handle customer transactions on the spot.

The popularity in traditional retail shops and restaurants makes sense too. The ability to take the checkout system directly to the customer delivers much better customer service.

I recently saw a report showing Apple devices make up about 90 percent of the mobile payments business today. Apple's foresight in making software APIs that can be tailored for this type of use has clearly given the company quite a lead. While most of the industry has focused on Apple's success with its retail stores, it's pretty clear its triumph in providing a key piece of hardware and software for mobile payments has to be considered its other great retail victory.

Apple's success is not by accident. Early on it realized that creating iOS apps was critical to its success. And from the beginning it created the kind of APIs needed to use iOS devices as POS systems. I am told Apple decided to use iPhones right from conception for easy checkout POS systems in its stores.

However, Square and most other mobile payment software companies now offer their services for use on Android devices and I suspect that over time Android will steal some market share in this space.

And while street vendors and restaurants are the early adopters, having the checkout counter come to me instead of the other way around is quite appealing. I hope this catches on with all brick and mortar retailers soon.