Category Archives: Newsletters

November Newsletter

The quixotic US decision to implement chip and signature gives a good excuse to show this video of Americans buying stuff by drawing pictures of cats on touch screen payment terminals. Only in America, of course, as the head of NRF discovered when he tried to use his signature card in London.

Interesting innovation

Reductions in Interchange and consequent cuts in credit card reward programmes leave space in the market for rebooted store cards. The good news is that issuing cards just got easier. Marqeta aims to “democratise” this market with a developer friendly platform that allows any business to set up its own Visa or MasterCard- badged payment cards. Take a look at the Kabbage Card as an example of what’s possible.

3D Secure has been annoying shoppers and merchants ever since its introduction in 2001. One possible alternative comes from New Zealand start-up MyPinPad, which would like to replace your 3DS password (which you’ve probably forgotten) with your payment card’s PIN (which you probably haven’t).

On a similar theme, Oberthur is commercialising payment cards with dynamic CVV codes that change hourly. BNP is said to be running a trial although I would hope that biometric authentication via mobile will soon make both 3DS and CVV largely redundant.

In-store analytics

In-store analytics is hot right now as digital natives begin to take control of retail operations and despair at a black hole where they expect KPI’s to be. Simple footfall monitoring, for example, is no longer sufficient and it was good to see retailer Dune adopting a Walkbase solution based on Wi-Fi analytics and video monitoring.

“As well as tracking transactions of all visits, we can now use transactions per engaged visits as one of the key performance indicators for our store teams.” – Zoe Owen, retail sales director at Dune Group

Analytics don’t need to stop at the shop door. Facebook announced a new product that will provide retailers summary demographics for people passing nearby including how many have seen a particular advertisement online. The challenge with these services is not the technology; it’s going to be to recruit/retain enough clever people to do something useful with the data.

Square heads for the mid-market

Square’s IPO has been well covered elsewhere but I was intrigued by these two graphs showing that the US business has steadily been moving away from its initial audience of micro-businesses. There’s no money in that part of the market. Instead, it has quietly gravitated towards serving more established, larger retailers although its one brush with the enterprise market didn’t end well. The processing contract with Starbucks has been terminated amidst much red ink.

Square revenue by customer sizz

Square losses on Starbucks contract

While Square had a revolutionary product for the little guys, as it moves up-market it is pushing up against more established competitors (such as Heartland, see below) who have been given plenty of notice to up  their game.


SmartPOS is the new way small retailers are buying technology – as a bundle of ePOS software, in-store hardware and fully integrated payment services. With Clover, First Data has one of the most complete solutions including an app store. I’d been wondering what manner of apps retailers would find attractive. According to First Data, the most popular app is Homebase which helps businesses manage their employees.

Heartland is another payment company moving into ePOS. It bought Digital Dining (a restaurant specialist), bringing to 100,000 the number of locations served by the string of small ePOS vendors it has acquired. The strategy is to cross-sell payments to the new customers but there is a risk Heartland will find itself saddled with a portfolio of difficult to maintain and non-compatible software applications.

A less risky alternative to commercialising ePOS software is to deploy more sophisticated payment terminals that can subsume some of the functions of a traditional PC-based till system. First Data are doing this too, with Clover Mini, but the smart money is backing Poynt, a start-up that has raised $28m with a promise to start shipping this quarter. Its cool looking terminal (shown below) runs on a modified Android operating system..

Poynt payment terminal

Omni-channel retailer needs omni-channel vendors

The crashing together of store and e-commerce technologies continues with the ambitious Payworks, a German cardholder present payment gateway making two interesting announcements. Firstly, it has commercialised an easy integration with e-commerce platforms so that shops can sell direct from their website using a chip and PIN machine. This is actually more innovative than it sounds. Payworks has also announced an integration with Stripe which will be attractive to app vendors making their first forays into physical retail and allows Stripe to position itself as an omni-channel payment service.

In enterprise, WorldPay quietly announced that it was partnering with Wincor to add integrated in-store payments for its large retail customers. The link takes you to an unofficial clip from its customer conference; you’ll find nothing on the web concerning the partnership. On similar lines, but more widely publicised, Cybersource and Verifone have partnered to produce a solution called Omnisource.

Wallet wars

The first anniversary of Apple Pay’s launch was met with some disappointment that the service hadn’t been more successful. The slow roll-out of contactless payment terminals in the US hasn’t helped but the international expansion has been slower than many would have liked. The UK is up and running but an announcement of five additional markets is with Amex only.

One innovation that comes with iOS9 is the integration of Apple Pay and loyalty cards within the Wallet app. Walgreens is the first merchant to provide this but the customer experience is less than elegant. First you tap for the loyalty card. This tap pushes the bill to your phone with any discounts/offered applied. Then you tap a second time for Apple Pay to work.

Meanwhile, Samsung Pay launched in the US at the beginning of October and reported an impressive average of eight transactions per user in the month.  Samsung Pay works on more payment terminals than Apple Pay as it spoofs the magnetic strip if there is no contactless pad to tap.

Retail Week Payments conference

Retail Week hasn’t run a conference on payments since the initial introduction of chip & PIN in 2005. At that time, all retailers wanted to learn about the same topic. Now, the diversity of presentations showcased the wide variety of challenges facing merchants today but also the challenge to conference organisers of programming a full day that keeps all delegates interested.

geoff tweet

I made the keynote presentation that you can see here. More interestingly, Subway showed that integrating card machines with till systems saves time and sells sandwiches. Green Man Gaming revealed that Bitcoin sometimes accounts for as much a 17% of sales value. This was the first positive Bitcoin case study I’ve seen but I’m still a sceptic.

Store of the future

It seems increasingly likely that the store of the future may contain no technology at all, at least none visible to the shoppers. Amazon – who have done their homework – made a first foray into physical retail that looks at first sight like a standard shop. All the smart stuff (including checkout) takes place on the customers’ phones, not on the store’s own systems.

Exhibit two is this thought-provoking video from Retail Week’s John Ryan, looking at the future of store design. Nobody mentions technology. Nobody. It’s all about lighting, sightlines and visual merchandising. Tech vendors need to learn to speak this language.

Finally, read RSR’s note “Why bringing digital into stores won’t work” which argues that under any viable staffing level shop assistants will be too busy folding clothes or bagging up click and collect orders to make use of any technology their employers provide. Unless you’re Apple, in which case different rules apply.

ePOS is back

Long in the doldrums, the enterprise ePOS market is picking up as retailers realise that they need both to invest in their stores and to integrate them fully with their e-commerce operations. Credit to George Lawrie at Forrester for producing the first POS Wave for some time, and more credit to Demandware for making it available free of charge.

Notable changes to the leaderboard include: Aptos (formerly known as Epicor) leading the pack; e-commerce giant Demandware making a new entry following its acquisition of Tomax, and Oracle slipping back as its inability to explain its roadmap begins to hurt. The newly reinvigorated Aptos has been quiet about its international expansion plans but must be considering a stronger partnership with BT Expedite, which holds European rights to most, but not all, of its software.

Forrester POS Wave

The mid-market is strong too. Sanderson said that it expected full year revenues (pdf) to be up 15%, and that sales at its OneIota business would grow an impressive 75%. OneIota specialises in bringing enterprise software to life on customer-facing store technology such as the iPads at SuperDry. Its acquisition is looking to be a smart move from Sanderson.

K3’s retail division reported full year revenues up 18% (pdf) as its mid-market fashion customers continued to spend on software upgrades.

Elsewhere, there’s still no sign of the new tablet-based ePOS vendors gaining traction in the mid-market. BT Expedite (Aptos) has won at Hobbs (replacing Prologic) and Futura at 99p Stores, replacing a DOS based Torex system.


October 2015 Newsletter

Disintermediation and price transparency

Up to 30% of the revenues that banks/acquirers generate from payments are under serious threat from disintermediation and price transparency, says McKinsey in its 2015 Global Banking Report. Merchant acquirers searching for a response should read this piece by Glen Williams, the Bain Capital partner responsible for WorldPay.

Disintermediation is coming from the convergence of point of sale software and payment services. Small retailers (the industry’s profit engine) are increasingly likely to buy payments in a bundle with their tablet based ePOS software and related hardware. We call this SmartPOS.

A good example is Lightspeed, a Canadian SmartPOS vendor serving retail and restaurants that is live at 25K outlets in 100 countries with total annual transaction value of $10b. Lightspeed has announced a partnership with iZettle (see below) for its restaurant customers to supplement an existing relationship with Adyen.

Unsurprisingly, many bank/acquirers are considering constructing their own SmartPOS bundles. For example, Nordea Bank, with over 500K business customers across the Nordic region, has announced a partnership with local ePOS specialist Shopbox.

Price transparency is the second threat to acquires but, in the UK market at least, clarity is good news for retailers. HandePay, a leading ISO has switched its supply relationship from WorldPay to EVO and is now offering a remarkably simple, low cost offer including zero authorisation fees and the end of PCI charges.  Meanwhile, Cardswitcher, a price comparison site, claims to have made over 12K quotes for merchant accounts from its panel of payment suppliers.

What’s more, the UK Government’s response to its consultation on the EU’s Interchange reductions has put the figures 0.2% (debit) and 0.3% (credit) firmly into the public domain. The reductions will benefit UK merchants to the tune of £483m annually and retailers might wish to remember this this when it comes to next year’s vote on leaving the EU.

Interesting innovation

We’ve heard a great deal about wearable technology for shoppers but Halfords is trialling it for their staff. Working with Red Ant, the Halfords team in Leamington Spa will be equipped with smart watches that alert them when a customer enters the shop to pick up a click and collect order. 90% of Halford’s e-commerce sales are collected from stores so getting the workflow right is essential to delivering a great customer experience.

Halfords pilot wearable technology for the staff
Halfords pilot wearable technology for the staff

It gives an indication of how slowly the payment industry moves that Sage Pay’s announcement of a chip & PIN machine that does dynamic currency conversion, prints the documentation for tax free shopping, integrates with ePOS systems AND accepts China Union Pay cards is a piece of genuine innovation. But it is. And respect to Sage Pay for being first.

Reassessing multi-channel profitability

Two new pieces of research shed an uncomfortable light on omni-channel retailing. Firstly, JDA report that only 19% of CEO’s say they can supply omni-channel demand profitably (pdf). Next, a new survey from RSR (below) shows that the proportion of retailers saying their multi-channel customers are their most profitable ones is diminishing each year. This second finding rather calls into question the whole premise of multi-channel CRM so I’d be keen to hear if it’s been confirmed by researchers elsewhere.

RSR multichannel
Source: RSR Research

Start-ups to watch

With people increasingly shopping brands, not channels, online-only retailers can sometimes appear a little old fashioned. Cardflight provides an interesting solution. It has raised $4.2m to commercialise a developer kitbag to extend e-commerce platforms into a bricks and mortar environment. A mobile payment terminal is included.

The convergence of on and offline marketing is inspiring a number of start-ups to look at how mobile can drive retail footfall. One example is Shopfully, an Italian app that has raised a total of $20m for its app that consolidates “flyers” from multiple retailers into a geo-located set of push messages. It claims 13m downloads.

There’s a risk that beacon-inspired marketing quickly becomes spam. The Regent Street app is a cautionary tale (see my blog) but Knomi may have a solution. Working at the other end of the market from Shopfully, this app has signed 70 high-end fashion retailers in London with the ambition of knowing the specific items its shoppers are looking for and only alerting when they are in the vicinity of outlets that have them in stock. There’s a social networking dimension too. Obvs.

Investors still can’t get enough of global payments

Adyen, specialising in cross-border payments, has raised yet more capital, this time at a $2.3b valuation. It expects to make $45m profit this year on $45b transactions processed. It’s growing fast but is still well behind (and half as profitable as) WorldPay’s e-commerce division which records $247m EBITDA on $131b processed.  Adyen sells strongly on its unitary technology stack: “our strength in having one platform is very dear to us, so we’re unlikely to follow a strategy where we end up with 30-50 platforms like some others have.”

Meanwhile, Klarna, itself valued at over $2b, finally went live in the US and has promised that some major UK customer announcements are imminent. Klarna’s strategy has evolved from simply providing a credit option to seeking to take over the entire checkout experience for an online retailer. Have a look at Alex and Alexa and you’ll see what they’re up to. The change in strategy explains why it’s taken so long for Klarna to go live with new, large retailers. Replacement of the whole checkout is a serious project for retailers and is not undertaken lightly.

Apple Pay

Apple Pay has begun to slide gently from its peak of inflated expectations. Customer satisfaction remains high and users say that it encourages them spend more but fewer than 1% of US retail transactions are Apple Pay and the figure is lower in the UK. TFL revealed at the Retail Week Conference that, while many had tried Apple Pay on the tube, few had persisted once the novelty wears off.

Where Apple Pay really scores is with in-app payments, although opportunities to use it have been rare as many payment gateways don’t yet support it. One exception is Judo Payments. I tried its integration with the Harris & Hoole app and it works like magic. Forget tap and pay, the transformative effect of Apple Pay will be in-app.

Apple Pay integration in the Harris & Hoole app
Apple Pay integration in the Harris & Hoole app

Zapp *sighs and drums fingers on table*

While the UK still waits for the launch of much delayed Zapp/PayByBankApp, banks on the continent, such as Denmark’s MobilePay (2m downloads) or Luxemourg’s DigiCash are already allowing their customers to make retail payments from their mobile banking app.

Zapp has been tightlipped about its roadmap and recently refused to confirm a hard launch date to Retail Week (£), whose readership may tire of waiting. Sainsbury is quoted as saying “Zapp is not something we are looking at right now. We are focusing on rolling out contactless payments.”

Zapp admitted to being “behind where we want to be” and could not give a launch date.“Integrating the system is a complex process and has taken longer than we expected.” Our best guess is that Zapp is stuck in development queues at most of the UK’s retail banks but may be losing the battle for prioritisation with other projects that give a quicker ROI. I hope not: the UK needs Zapp.

In the US, it’s not the banks but the retailers themselves that have stitched together a ubiquitous mobile payment/loyalty app. CurrentC (as it is now called) is live as a pilot in Colombus Ohio but has attracted a mere 1 star rating on Google Play. Shoppers hate the requirement to upload their drivers license and bank details but respected blogger Tom Noyes says CurrentC is not so bad. It provides the rails but the experience should be judged on what retailers, like Target, do with it. Here’s his video of Target’s integration with CurrentC – judge for yourself.


Are investors tiring of payments? This month, I was surprised to find that mPOS start-up Kashing, failed to get close to its £474K target on Crowdcube. Previous payment ideas such as Cake have attracted a substantial following on the platform. I was equally astonished to see Verifone launching a $200m stock buyback. While it’s good to see Verifone returning to financial health, it’s disappointing that the shareholders want their capital returned rather than re-invested in innovation.

And finally, oldPOS fights back

Despite the remarkable level of investment funding going into the new tablet ePOS software vendors, enterprise customers are still buying from established players who have deep domain expertise.

Universe Group has signed a £4.3m deal (pdf) to provide a full retail suite including ePOS and payment infrastructure to the delightfully named Bargain Booze across 650 outlets. Elsewhere, outdoor specialist Trespass extended its deal with Eurostop to include 150 stores across Europe rather than contract with one of the slew of new software vendors.

Research from IHL (below) shows that over half of retailers plan to upgrade their ePOS software in the next three years. There’s probably room for everyone in this market at the moment – established and start-up.

Source: IHL Group
Source: IHL Group