Securely accepting payments using your smartphone: Interview with Brad Hyett, CEO of Phos

By Gaia Lamperti

One of the main protagonists at this week’s retail big show NRF 2022 in New York, was undoubtedly Phos, the FinTech behind the leading software-only Point of Sale system. Its SoftPoS solution allows retailers and merchants to securely accept payments on their smartphones so that they no longer need to invest in costly physical payment terminals.

IBS Intelligence met the company’s CEO, Brad Hyett, who offered insights on the new technologies emerging in the payments landscape, the shift towards mobile devices for enterprise use and the growth of contactless spending.

Could you draw an overview of how the payment landscape has changed in recent times, particularly from the merchants’ perspective? What are some of the latest advancements that are particularly benefiting SMBs?

Most of the time, the merchants’ perspective is driven by consumer demands. So, just as we’ve seen with e-commerce consumers globally starting to look for their preferred payment options to be available (whether that’s Apple Pay, Alipay or WeChat), I think we’re starting to see something similar happening in-store as well. Merchants have already switched to incorporate alternative payments into their online platforms, which tend to have a much more international audience. But they are now also looking to incorporate alternative methods with in-store payments as well. This means that we could be seeing more options with Open Banking, which comes with advantages to the merchants in terms of cheaper processing compared to using cards; and probably more demand for crypto acceptance, not just because of the consumer drive, but also because merchants themselves see the advantages of it.

One particular trend I’d love to focus on is mobile payments. Mobile adoption has now peaked, and the use of mobile is playing an increasingly central role in payments. Some specific demographics can hugely benefit from it…

Phos is now a global business, and we’re speaking with companies across Europe, North America, South America, the Middle East, Africa, and the most recent deal we did was in Australia. So, we get feedback from all those different regions, and there are various reasons driving mobile payments adoption. In Western Europe, it might depend on a mix of cultural aspects and a digital-first approach, while across Africa, for example, mobile use is definitely there because they’ve kind of skipped a stage of technology and moved straight onto mobile for their banking and payments. So, we see it as being really, really critical almost everywhere, and the payments infrastructure associated with the use of mobile is becoming more important.

Most businesses may be already using it in enterprise retail for stock control or internal store communications, and now there’s no real reason why they can’t also accept payments on those sent devices. It might even be only for failover, so if they experience a power cut or connectivity issues, they might be able to use 4G or 5G instead.

When we talk about mobile payments, there’s also a big focus on younger generations who are basically doing everything on their mobile devices now. And data reflect that since the beginning of the pandemic, there’s a huge drive towards people opening their own businesses, and we expect that those entrepreneurs are very familiar with mobile technology, and they’re very comfortable with downloading an app, whether it’s for their banking or with us, if they want to accept payments straight through their mobile, wherever they are.

One of the innovative use cases for payments via Phos was that of volunteers delivering groceries to the elderly during the most challenging months of the pandemic. How did you come up with the idea?

Well, the pandemic kind of forced everyone to think about how to do things in a slightly different way and at a time when not a person in the world wanted to touch cash that however many hundreds of other people had touched, we thought about that. We actually did pilots in my road where lives an elderly man and people were offering to get groceries for him, but he wasn’t very familiar with doing a bank transfer or anything like that. So, that sort of spurred me to offer this service, and then we rolled it out as a free offer during the pandemic to anyone volunteering. It worked out quite nicely.

Contactless payments are on the rise, just a few months ago, the UK raised contactless payments’ limit to £100. Do you think this is going to happen in more countries? Is it a sign that people are getting more and more comfortable with tapping their cards to pay?

Yes, absolutely so. We see the trends in contactless payments and get that data reported directly from the card schemes, so we see the increase in contactless payments, and it’s huge, especially in the US. In the country, contactless payments are kind of nascent, not every cardholder in the US has a contactless card, but the pandemic sort of lit a fire under the banks, and they immediately started a replacement. So, we saw a five-year program of card replacement probably compressed into about two years. We see that the numbers there are at a 200% increase month on month. It’s a really amazing trend in a market that historically has tended to be slower to take things up like chips and PIN.

Regarding the contactless limit rising in the UK, it will be interesting to see how it evolves as the UK market related to payment security is very mature, so it’s a good test. The early data that we’re seeing is promising because there’s basically no increase in fraud from the trends that we’ve seen before. And once regulators, banks and issuers start to see that across the rest of the world, specifically across the rest of Europe, it’s straightforward for them to say, “Ok, let’s increase the limit somewhere else too.” I would expect during this year and the next, other countries to start to follow suit.

While contactless has made payments easier and swifter, there’s still an important quest for safety, and indeed Phos too introduced PIN to its solution. How will this feature favour even more security of payment?

The new requirements that came out with PSD2 are turning contactless payments not quite as straightforward as just paying as many times as you like. Issuers can now implement limits in terms of how many consecutive contactless transactions you may have on your card, and that can incorporate difficulties for a solution that doesn’t come with a pin pad. So, we developed PIN on mobile. PIN on glass or pin on mobile is a specification that you can have, but it must be segregated from the card reader. But for Phos’ solution, that’s impossible because everything runs on the same device, the mobile is the card reader, and it’s also the glass where you’re entering a PIN. With the scheme’s approval, we became part of Visa’s certified tax paid plus PIN program, and Mastercard has given waivers to our partners that want to take the solution to market with PIN. This also means that our solution can now accept payments for any value, rather than just going up to the CDM limit.

What does Phos have in store for 2022 in terms of expansion, product launches, and partnerships?

It’s exciting times for us because we are about to move into a Series A raise, and that will enable us to bulk out the team, we’re looking to double the number of people by the end of the year. We are also focusing a lot on our US launch where we’ll start to support end-users and merchants directly.

For us, it’s very straightforward to think about a product road map, we basically take feedback from our partners and then we use that to deliver feature updates. But when we take the product directly to market, we need to strategically start to include what we think will be helpful to the end-users. So, for the US launch, we’re probably going to look at a very straightforward loyalty solution and deliver it in two ways, either a percentage discount for future purchases or a stamp card program.

As a business, we want to stay cutting edge, so there are also thoughts around adding crypto acceptance and Open Banking to our solution for in-store payments. Also, we may potentially look at lending; one of our UK partners offers a premium same-day or immediate settlement service, which is interesting for our end-users.