Mobile POS Moves Forward, With MasterCard’s BlessingWritten by Walter Conway
A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.
I have just seen the future of mobile point of sale (MPOS), and I think those ubiquitous plug-in card-reading dongles may be winning. It doesn’t matter that these MPOS approaches pose risks for cardholder data, that the payment applications are not PA-DSS validated or that they are not part of a point-to-point encryption (P2PE) solution as recommended by the PCI Council. What does matter is that the card brands have embraced them as the MPOS approach for merchants of all sizes, even while recognizing that it may be difficult for these same retailers to achieve PCI compliance.
MasterCard on May 23 released formal guidance giving retailers a roadmap to implement MPOS using smartphones, tablets and other devices equipped with a “card reader accessory.” The problem? The recommended best practices may not be PCI compliant and they conflict with MasterCard’s own rules, as the card brand acknowledges.
This situation poses the question, “What is a retailer to do?” I don’t have any simple answers. But MasterCard’s recommendations seem to point a way forward, while simultaneously acknowledging the business risks and conflicts with PCI.
The guidance is targeted at very small merchants “that previously operated on a cash- and invoice-only basis.” MasterCard even invented a new category for small merchants to accommodate the growing needs of these MPOS retailers.
The document also targets larger retailers “adopting MPOS solutions and integrating them into their current point–of-sale environment to enhance the retail and payment experience.” That means the target audience includes just about every retailer.
MasterCard’s “Best Practices for Mobile POS Acceptance” tell merchants how they can process payment cards today using their smartphones, tablets or PDAs combined with an attached “card reader accessory” or dongle. MasterCard cites the growing shipments of MPOS solutions and the resulting increase in payment card acceptance at traditional cash- and check-only merchants as the driving force.
Not wanting to be left behind any competitors, maybe MasterCard felt the prudent course was to get in front of the MPOS parade by issuing its own set of retailer best practices. After all, Visa clearly expressed its own support for MPOS when that card brand announced in April it had actually invested in Square, a leading dongle vendor.
The best practices document recognizes that an MPOS solution provider may be a “Payment Facilitator.” A payment facilitator has a merchant agreement, and it essentially resells card processing to its “sub-merchants,” e.g., small merchants who do not need their own acquiring relationship. This puts payment facilitators somewhere between an independent sales organization and a PCI service provider. Payment facilitators must register with MasterCard and follow the program rules, including screening their sub-merchants and guaranteeing that none of them processes more than $100,000 in card transactions (presumably annually, but no time period is specified).
Memo to all potential payment facilitators: Make sure to check the MasterCard program rules. Check, too, with your QSA. It may be that your own PCI assessment will need to include a sample of your sub-merchants. They seem to be in your PCI scope, because you are the merchant. Then again, it may be that the card brands will lump payment facilitators with service providers. But if that is the case, why the separate program?