“Certainly there are mobile locations being set up,” says Todd Ablowitz, president of Centennial, Colo.-based payments consultancy Double Diamond Group LLC. But “it’s hard to know exactly how many,” he says.

The answer is simple economics, says Ablowitz. The key is to find a population of underserved merchants, he says.

If an ISO can locate enough of these merchants, it may make sense to pursue them, Ablowitz says.

Of course, the seller will need to calculate the cost of delivering a mobile POS service to a merchant, he says.

“What does it really cost me to deliver this to a merchant?” Ablowitz says. A merchant can download software online, such as from Apple Inc.’s iTunes or Google Inc.’s Android Market for less than $1, and get a simple, low-priced or, in some instances, a no-cost card reader.

With the card-acceptance technology in place, the next issue is how to ensure transactions are secure, Ablowitz says.

The answer for many ISOs is online payment gateways, which route transactions to various processors via the Internet, because of their reliability and built-in security, Ablowitz says.

The ISO’s rate deal with its processor also is a factor. Assuming the rate is reasonable, an ISO could be well-positioned to bring on merchants suited for phone-based acceptance, Ablowitz says.

“It boils down to cost,” Ablowitz says. After that, it is a matter of how well the ISO can sell the service, he says.

Selling mobile POS services is different in that there are “untapped opportunities, Ablowitz notes. “But it’s not any different from other kinds of business. It just gives you a new dimension,” he says.

ISOs and acquirers also should study the pool of merchants to ensure they will generate enough profit, Ablowitz says.

“There is more than one firm that can give you security and reliability,” he says. “You have to focus on the economics and how you sell the devices.”

ISOs also should consider the ease of getting merchants operating on mobile platforms. A small mobile merchant that is unable to begin processing transactions immediately could hamper the profit potential, Ablowitz says.

Payments Source, November 11, 2010