Mobile POS in Europe in 2012

A Recap on Mobile POS in Europe in 2012
Prepared for:
Dramatic Activity, But No Clear Winners Yet

21 December 2012

Not For Redistribution

CONFIDENTIAL: This mailer is solely for the use of the recipient. No part may be circulated, quoted, or reproduced without prior approval by First Annapolis Consulting, Inc.

Mobile POS in Europe

This report reviews what has happened with mobile card acceptance solutions in 2012.
This document is an update to our first mailer from April 2012.

• Our April report defined "what is mobile POS?" and
examined the positive and negative implications for
acquirers
– "Mobile POS" refers to card acceptance tools which
operate on consumer-grade mobile devices.
• Includes simple "card terminal apps" or more complex
products, such as "tablet ePOS" and bespoke retailing apps for
which payments is just a minor function.
– Mobile POS can dramatically expand acceptance,
making cards practical for new kinds of merchants.
– Serving micro-merchants successfully requires innovation
in the acquiring back office, not just a front-end product.
– Mobile POS is likely just an early step in a broader trend of
innovative mobile commerce products.
• If you haven't seen it, download our prior report from
http://www.slideshare.net/benbrownFAC/the-mobile-
pos-opportunity-for-european-acquirers

First Annapolis Consulting, Inc. | Confidential | 21 December 2012 2


Mobile POS solutions have appeared in Europe at a rapid pace this year.

European Mobile POS Activity

MasterCard Visa Europe Intuit
Ingenico issues mPOS updates mPOS expands to
takes control best practices best practices UK from US
of Roam Data

payleven
mPowa (UK) exists launches SumUp O2 launches Adyen launches
"stealth mode" in Germany launches mPOS in UK Shuttle mPOS

January 2012 Feb Mar Apr May June July Aug Sep Oct Nov Dec

May 2010 May 2011 Elavon offers handpoint
PayPal Here WorldPay JUSP (Italy)
Square iZettle launches mPOS in the UK pivots to offer
launches pilots "Pay exits "stealth
launches in Sweden services direct
(not in EU) as You Go" mode"
in USA StreetPay to merchants
launches
in Germany
payleven
iZettle
expands
expands
globally
to UK, DE



Mobile POS offerings now exist (or are coming to market soon) across Europe.

• Mobile POS startups are moving very quickly to expand to more markets.
• Products are evolving beyond simple card acceptance apps, as they have in the U.S.
• Competition is likely to intensify in 2013 as traditional merchant acquirers start to offer
mobile POS with improved back office processes.



Early case studies demonstrate strong demand for mobile POS,
even in highly developed cards markets.

Existing Terminals ~200,000
New Mobile POS ~25,000
Card Market Maturity Market Expansion 12.5%
• In 2012, iZettle expanded to Norway,
Denmark, Finland, the UK, and Germany.
POS terminals per 1,000 people

Australia
30 • iZettle signed 10,000 users at launch in
Hong Kong Norway, an 8% expansion of that market.
Canada
20 Brazil Denmark Finland
Italy Spain France Sweden Existing Terminals ~10 million
USA
Portugal UK New Mobile POS ~2.5 million
Turkey Japan
Greece Germany Holland
10 Belgium Estonia Market Expansion 25.0%
Taiwan
S. Africa Argentina
China Poland • Square dominates the U.S. market with
India Russia Mexico and others over 2 million users; Intuit (who just
0
entered the U.K.) is a strong #2
0 2,000 4,000 6,000 8,000 10,000 12,000

Annual Transactions per POS Terminal
• PayPal received 1,000 applications per hour
the first day it offered mobile POS.
• In two months, PayPal signed 300,000 users
across the US, Canada, Australia, and HK.

Source: First Annapolis Consulting estimates and analysis, company statements


We project strong demand for mobile POS in Europe and around the world.

• Europe is still early in its development (for mobile
Global Adoption Forecast for Mobile POS
Millions of Users (businesses, not units) POS) with about only 150,000 users across the EU
304 • Mobile POS in Europe is likely to grow rapidly,
286 to about 3 million users by 2017
267
250 39
• The opportunity is spread across micro-merchants
34
(who require a Square/iZettle-like solution) and
traditional acceptors (i.e., larger merchants)
26
– Most players should focus on a particular merchant
18
segment or product niche because business
14
requirements and relevant distribution tactics are
11 very different
8
1 • Mobile POS will cannibalize traditional POS
terminals (and traditional acquiring services) to
2011 2013 2015 2017
some degree
Addressable Market Actual Adoption Total Businesses – Anecdotes suggest that up to 20% of SME attrition at
traditional U.S. acquirers is now caused by Square

Source: First Annapolis Consulting estimates and analysis


Mobile POS is evolving rapidly from a basic card acceptance tool to more complex propositions.
We think tablet-based ePOS solutions will be a particularly important area in 2013.

Likely Mobile POS Product Evolutions

iZettle payleven LevelUp
(Mobile Card Terminal, (Mobile Card Terminal, (cloud-based
Chip-and-Signature) Chip-and-PIN) Mobile POS)

Square App Square Register Punchd Passbook QuickBooks Tablet
(Mobile Card (Tablet ePOS) (Mobile Loyalty) (Mobile Coupons) (ERP Software)
Terminal,
Mag Stripe)

PayPal
Pay with Square GoPago
(Alternative Payments,
(Mobile Wallet) (Mobile Ordering)
Cloud Wallets)

• Winning products are likely to look quite different in a couple years than today's mobile POS offerings.
• Innovative products are increasingly integrated, towards both the merchant back office (e.g., ePOS and ERP
software) and the consumer (e.g., mobile wallets and mobile ordering apps).
• In advanced forms, mobile POS is much more interesting to traditional acceptors – SMEs and large retailers.


U.S. merchants are proving that mobile POS is far more than a micro-merchant phenomenon.
We expect to see this same up-market trend flourish in Europe in 2013.

Major Merchants Using Mobile POS
Case Study: Apple Store
• Mobile POS is Apple's primary POS;
clerks use an iPod and card reader
sleeve to process sales anywhere
• In U.S., Apple uses an IPS/Datecs
sleeve; in Europe, it uses
Ingenico's iSMP sleeve
• Digital receipts available
• A 2011 study of 32 large U.S. retailers found that 63% were
• Apple has been using mobile
using mobile POS or planning to do so by 2012.
POS for a decade (originally
• JCPenney (a mass market U.S. chain with 1,100 department via a bespoke device)
stores) announced that it planned to migrate its entire in-
store POS estate to mobile POS and self-checkout in 2013. • EasyPay app enables
customers to use their own
• Nordstrom (an upmarket U.S. department store chain with device to self-checkout
$8.6 billion in sales) executives recently said, "[we] believe
• Purchases are billed to the
the future of our point-of-sale systems is completely
customer's iTunes account, if
mobile."
they have a domestic card on
• Starbucks recently converted its 11,000 U.S. stores (and file
their $8 billion in sales) to Square/Chase Paymentech, but
Starbucks will continue to use its MICROS ePOS system.



Mobile POS has received a mixed reception from the card schemes. Visa Europe, most notably, has
"doubled down" on EMV and will require all readers to support chip-and-PIN.

Payment Industry Action on Mobile POS Security

August 2011
Nov 2010 April 2011 June 2011 Visa announces May 2012 July 2012
requirement for US
PCI Council Visa invests in Square, PCI Council re-certifies processors to support Mobile POS Best Visa and MasterCard
decertifies all gains Board seat; tells purpose-built mobile merchant acceptance Practices issued by prohibit the use of
mobile payment Square to add encryption acceptance devices but of chip transactions PCI, MasterCard, non-compliant
applications before going international not mobile POS apps by April 2013 Visa Europe* payment applications

future

Schemes grant Visa Europe to stop
PCI Council Visa Inc. releases Best waivers from some MasterCard issuing waivers at
establishes Mobile Practices for Mobile rules in Europe to invests in iZettle year-end, enforce
Working Group Payment Acceptance foster mobile POS chip-and-PIN rules

Early 2011 April 2011 Late 2011 June 2012 Early 2013
Indicates positive industry action
American Express
Indicates neutral industry action invests in iZettle
Indicates negative industry action

October 2012

Note: (*) Visa Europe best practices version 2 released in September 2012


Vendors are pursuing a number of different business models in the mobile POS marketplace.
The market remains fragmented, though we expect evidence of leadership to emerge in 2013.

Mobile POS Market Sample
Facilitators & Acquirers & MSPs Solution Integrators Component Vendors
Full Stack Terminal Hardware Vendor

Mobile App Developer

Partial Stack Gateway

Back Office Services



All types of acceptance players should think carefully about mobile POS. It creates a substantial
new, unserved niche – but also has the potential to cause material disruption across the market.

Acquirers Gateways (PSPs)
• Were slow to move (due • Well suited for wholesale
to legacy tech and risk /compliance "solution integrator" role
worry) but now investing in mPOS • New products, channel
• Can just clear for others, but usually convergence create investment
want to "own the merchant" demands for gateways
• Doing nothing risks disinter-
mediation or marginalization

Startups POS OEMs
• Europeans (iZettle, payleven, • Well suited to provide
etc.) have been fast followers of reader hardware, though VeriFone
Square and first movers in the EU and Ingenico using mPOS to move
• Most act as payment facilitators, into services (as solution integrators)
some focus on a wholesale "solution • Opens door for second-tier,
integrator" role low-cost, or foreign players

Business Software
Schemes
Developers
• Visa Inc. and MasterCard
• View mobile POS (especially have both invested in start-
tablet ePOS) as a platform to ups – and allow chip-and-sign
deliver business software/services
• PayPal has developed its own SME
• Both Sage and Intuit now offer solution to make the leap offline – a
mobile POS in the UK major strategic evolution for them
Positive Implication
Negative Implication and a threat to acquirers


First Annapolis can help to analyze the mobile POS market, to develop your strategy,
and to support implementation to get you into the market.
First Annapolis Areas of Assistance
Opportunity Strategy Go-to-Market
Assessment Development Support

Market Sizing Customer Needs Analysis Evaluate / Select Vendors (RFP)

Product Landscape Develop the Business Case Establish Partnerships

Benchmark the Competition Product / Proposition Design Review & Improve
Operational Processes
Analyze Your Strengths and Distribution Strategy
Weaknesses and the Market
Opportunity and Threats Pricing Strategy

Relevant Experience

• Developed a pan-European mobile POS • Advised a multi-national payment processor
strategy for a large merchant acquirer on opportunities in mobile POS (and mobile
• Evaluated potential mobile POS partners / payments more broadly)
vendors for a European bank acquirer • Studied the mobile commerce activity of the
• Assessed the disruptive potential of mobile top retailers in the U.S. and U.K.
technology on acceptance for multiple • Extensive strategy, sourcing, and M&A
private equity investors and one of the experience over the past decade in acquiring,
world's largest POS terminal OEMs mobile, and alternative payments


First Annapolis is a leading payments consultancy and M&A advisory firm.

Company Summary Service Offerings

Proven Acceptance & Acquiring

Management Consulting

Sourcing & Partnerships
Mergers & Acquisitions

Full Service Advisory
• Founded in 1991
Credit Issuing & Retailer Services
• Global HQ in Washington, D.C.;
European HQ in Amsterdam
Deposit Access (Debit)
Professional Expertise
• Focus exclusively on payments Commercial Payments
• Circa 90 employees
• Balanced combination of industry, Mobile & Alternative Payments
functional, and consulting experience
Market Leadership Global Coverage
• Advise market leaders:
‒ Financial institutions
‒ Payment schemes
‒ Transaction processors FA Offices
Representative Clients
‒ Technology providers
‒ Retailers and leading global brands

EXPERIENCED COMMITTED OBJECTIVE
Baltimore - Washington, D.C. | Amsterdam


First Annapolis Consulting | M&A Advisory
Keizersgracht 313-I 900 Elkridge Landing Road #400
1016EE Amsterdam Linthicum, Maryland 21090
The Netherlands United States of America
Phone: +31 20 530 0360 Phone: +1 410 855 8500
Fax: +31 20 530 0369 Fax: +1 410 855 8599

Prepared for:
http://www.firstannapolis.com

Joel Van Arsdale, Partner Ben Brown, Consultant
joel@firstannapolis.com ben.brown@firstannapolis.com
+31 20 530 0363 +31 20 530 0364
+1 410 855 8512 +1 410 855 8510

CONFIDENTIAL: This mailer is solely for the use of the recipient. No part may be circulated, quoted, or reproduced without prior approval by First Annapolis Consulting, Inc.

Mobile POS in Europe in 2012

Recommended

Recommended

More Related Content

Recently uploaded

Recently uploaded (20)

Featured

Featured (20)

Mobile POS in Europe in 2012