Category Archives: Strategy

Note of Retail Week conference – Innovation in Payments

I chaired Retail Week’s Innovation in Payments Conference on 15 September in London.

Here’s my presentation followed by the notes I took of the rest of the event.

UK market facts (Payment Council)

  • 30bn “spontaneous” payments made by individuals every year
  • 49% of these are cash, ten years ago this was 70%

In one month, the average UK consumer makes:

  • 27 cash payments
  • 16 debit card
  • 6 direct debit
  • 4 credit card
  • 2 contactless
  • 1 Faster Payment
  • 5% of consumers rarely pay with cash at all. This number is growing.
  • 4% of consumers rely exclusively on cash. This number is not falling. These people tend to be older and find that using cash allows them to budget effectively.
  • 94% of adults have a debit card. 60% have a credit card.

Contactless payments are growing strongly and will account for 30% of all consumer payments by 2025. Today, contactless payments are mainly in grocery (37%), restaurant/takeaway (16%) and transport (10%.) Contactless usage is higher among ABC1s and younger people.

There are 11bn cash payments which could be replaced with contactless. These are in grocery (21%), confectionary/tobacco/news (14%) and restaurant/takeaway (13%).

Consumers are keen on remote banking. Only 25% are exclusively branch banked. However, just 33% use their bank’s mobile app. This will restrict the utility of “push” payments from bank apps such as Pay By Bank App (PBBA).


UK retail should benefit from £700m reduction in Interchange payments. This is equivalent to just 0.14% of retail sales so there’re really no way of telling if/when it is passed on to consumers.

Android Pay

Now live in the UK, Android Pay has signed a number of card issuers including most of the large banks. A big marketing push is planned for September.

The user experience for POS not quite as elegant as Apple Pay. For example, for a combined payment and loyalty transaction, shoppers need to make two taps of the phone. In-app seems better designed and Google are quoting some nice KPI’s from early customers in the US. One shopping app is receiving 20% of transactions by Android Pay with a doubled conversion rate.

Apple Pay is notoriously hard to speak to. One very large retailer told me that her organisation was offered one 20 minute slot – take it or leave it – with no refreshments provided. Apple Pay won’t even speak at industry conferences so Google will surely pick up some business for Android Pay just by being human. Google’s business model remains advertising based and it doesn’t charge retailers or issuers for Android Pay transactions.

Hillarys Blinds

Good case study from Hillarys which dominates the UK window covering market. Hillarys has over 1,000 agents out in the field measuring windows and providing instant quotes. Obviously, it makes sense for Hillary’s to try and take the money there and then rather than sending an invoice.

It wrote some bespoke software in 2005 for its agents to use to take customers’ card details on via their Hillary-issued mobile phones but this was not really compatible with updated PCI regulations. Instead, it wanted to use an mPOS device. The challenge was that 20% of UK homes do not have a mobile signal so Hillarys needed a device that could take transactions when offline. Adyen has done this with a solution from the airline industry linked to a Verifone E355. £20m of payments annually is going through these devices and customers very much like the idea of paying with chip & PIN in their own homes. Transactions are tokenised so that Hillarys can take balance and staged payments.

Harris & Hoole

This 42 shop chain of specialised coffee shops was owned by Tesco but has recently been sold to Caffe Nero. Harris & Hoole is now on the fourth version of its successful mobile app and can arguably claim to have the most effective on the market. The key components are loyalty, drink preference, payments and deep ePOS integration.

The payment wallet is pre-pay because pay per transaction card processing fees for very small amounts has been uneconomic. This has changed following the Interchange caps and post-pay would now be a viable option.

The app geolocates the customer within the store and prompts the customer to check-in. At this point, the customer’s name/photo/regular drink are passed to the ePOS so the server can say “the regular, Geoff?” If the customer says yes, a push of a button on the ePOS sends the drinks order to a screen above the barrista. If the app is set up for payments, then the stored value account is debited. If not, the server asks for cash/card payment in the normal way.

There is no way of telling for certain the business benefit of the app as H&H don’t know the behaviour of app users before they began using the app. However, H&H did reveal:

  • Orders from the app are processed 20% faster than others
  • 20%-25% of all orders involve the app. At Tooley Street, 46% of all orders are driven by the app including 15% of payments.
  • In 98% of stores >10% of orders come from the app
  • In 25% of stores >20% of orders come from the app
  • The app grew from 6% of orders to 18% when H&H retired the previous paper-based loyalty stamp card. This was a bold move but a successful one.
  • Where Apple Pay is offered to a shopper, it is used in 85% of cases
  • Support has been a headache, especially for Android as there are so many versions


This is a fast growing chain of Thai-inspired casual dining establishments that does a big lunchtime and post-work trade in central London. Table turnover is fast and many parties want to split the bill.

Busaba launched a pay at table app which allows easy bill splitting but also includes its “39 steps to enlightenment” loyalty programme. The app is based on MyCheck. In 2016, 83,000 transactions were made with the app to a value of £2.9m at an ATV of £38. So far this year 70,000 transactions have yielded £2.3 revenue with an ATV of £44.

The app has been downloaded 170K times (75% iOS) with 147K registered users and 100K regular users across 17 restaurants. Apple Pay usage is growing fast and doubled in the last quarter. As well as turning tables quicker, the app gives RFM and other useful CRM data.

The next phase is to add extra features to the app including e-gifting and order at table. The latter is expected to result in additional sales of drinks.


The big trend in grocery is more customers buying more often but buying less. 40% of people don’t know at 4pm what they will be having for dinner. Waitrose customers are increasingly polarised between “fast lane” and “slow lane” behaviour. Its payment strategy focuses on security, choice and ease and is based on a fully tokenised managed PED service from Verifone.

In the “fast lane,” Waitrose introduced QuickCheck, hand-held devices which can be used to scan merchandise before it’s put in the trolley. At the end of the shop, customers go to one of the self-checkout machines, scan a barcode and pay with their card. This has been around for twelve years and have some devoted followers. QuickCheck is being upgraded with new handsets and an alternative in which the shopper can download a QuickCheck app and use their own phone to scan the products.

Click on the image for an explanatory video
Click on the image for an explanatory video

The service is only available to MyWaitrose loyalty members. This ensure that Waitrose knows where you are in-store and can send you relevant communications for the department in which you are shopping. Scanning is the spine around which everything else is built. People still have to use the self-checkout machine at the end because there may be age-restricted items in the basket.

Self-scanning has been quite slow to take off. The move to shoppers bringing their own bags should help – the old bagging process is a major disincentive to self-scan – but Waitrose is also trying to overcome customers’ concerns about not wanting to look like a shoplifter.

Waitrose installed “skinny” self-checkout machines in one London store – no scales, no cash drawer – and improved customer satisfaction from 56% to 72% in a week. Queues fell and the store is doing 2000 extra transactions/week at £12 ATV.

Across its estate, 35% of all transactions are now contactless. This is six seconds faster than chip & PIN. Waitrose has one cash-free store. This is on the Sky TV campus but is a special design due to space limitations. There are no plans for any other cash-free outlets.

Waitrose is piloting the VF355 for queue busting and fulfilling non-standard orders eg picking up a turkey at Christmas. Waitrose is very happy with Verifone as a strategic partner.


London based healthy eating salad bar with 27 stores and ambitious plans.  Its USP is that you order a bespoke salad that is made in front of you. This is a great strength but also a major weakness because choice and customisation slow down operations. These have gone through four iterations.

  1. Order at the salad bar, pay at till – this was very slow and distracted the “tossers” from tossing.
  2. Order at the till and take a ticket to the salad bar – an improvement but was still too slow and resulted in a “mosh pit” of customers milling around the store
  3. Mobile app on which customers could pre-order for collection – nice idea but didn’t fit into how customers really have decide what to eat for lunch.
  4. Replace some tills with kiosks – nobody used the kiosks
  5. Replace all the tills with kiosks and forced the shift to self-service

In a typical store, six manned till points have been replaced with 17 tablet/kiosks, each with a Verifone payment terminal attached. Tossed spent a lot of time on getting the UI right having piloted in their head office canteen. Point One (the ePOS vendor) worked on the project.

The move to kiosk has taken cash out of the organisation completely. Nobody has complained. It has also increased the amount of customisation that consumers ask for which has put some pressure on production. Staff have been reassigned from the tills to production so net labour cost is the same.

This was a theme from the previous day’s Finance Director conference. A combination of Brexit and increases in the minimum wage means that retailers will need to ensure that scarce human resource is directed at things customers care about. In the Tossed example, staff are better employed making the product than with ordering/paymentt.


This is a well-funded mobile wallet that spun out of Imperial College Labs. It began with close loop applications and is present in 35 universities and 66 office restaurant locations. It reckons that 13% of the available spend is made through YoYo today.

Longer term, it wants to enter the High Street – it has signed Planet Organic – and use its consumer insight to combine loyalty, offers and e-receipts.

When a customer want to pay by YoYo, the sales associate hits the YoYo tender type button on the ePOS. The customer opens his phone, opens the app which produces a bar code. This is scanned by a scanner attached to a special YoYo box attached to the ePOS. Merchants are settled by YoYo directly and independently of their merchant acquiring relationship.


DigiSEq is a platform allowing the credentials of any contactless bank card to be provisioned to any piece of wearable technology. It’s a great concept although there are plenty of challenges. I blogged about DigiSeq here.


WoraPay has similar functionality to YoYo but doesn’t want to build its own brand. Instead, WoraPay offers white label payment/loyalty apps to retailers. It is has been picked up by the Lloyds Bank ventures team and is live at the Lloyds Bank staff canteens in which 10.200 man years are lost each year in queues.

At Lloyds, 1 in 3 lunch orders are now paid for by WoraPay. The app works very differently to YoYo. Customers order and pay for their food in advance via the app which gives them a virtual ticket to use when collecting their lunch.

Lloyds Cardnet are now selling WoraPay.

Universal Basket

This is an app that allows you to put any product from any retailer into a single shopping basket and to buy the basket with one payment. Universal Basket stores your details and automatically creates account and fills out the forms on multiple checkout pages behind the scenes.


The app works via screen scraping which means that there are some obvious PCI challenges. UB says it’s managed to meet overcome these and is now in Beta. There are some customer experience ones too – notably that you’ll get asked for your CVV code because UB isn’t allowed to store this. So, you could get multiple 3DS challenges which won’t be a great customer experience. But it’s a neat concept nonetheless and I’ll be keen to see how far Universal Basket gets.


More work for less money. Is this the future of the payments business?

With so much private money flowing into payments, it’s worth examining the public accounts of established businesses for clues about how the market is developing.

PayPoint, listed on the London Stock Exchange, was established to allow people to pay their utility bills at convenience stores. This side of the business is flourishing. However, PayPoint also moved into online payments in 2006/7. Despite booming volumes and an excellent client list including British Gas and MoneySupermarket, this division is struggling and will be sold.

What’s the problem? Despite strong growth in the number of transactions processed, unit pricing has fallen faster with average revenue per transaction now below 10p.

PayPoint Online and Mobile – transactions processed and average revenue per transaction

PayPoint Online and Mobile
Source: Barraclough & Co from PayPoint report and accounts.

With unit prices falling faster than volume is growing, overall revenue is in decline. It fell by 4% in 2015 despite a 10% increase in transaction volume. More work. Less money.

Although divisional profitability is not reported, PayPoint has indicated that the upward growth in transaction volumes is requiring supporting investment that it cannot justify financially. The division is losing money. Parking which accounts for 40% of the transactions, is particularly challenged by higher volumes/lower revenues paradox.

PayPont’s online offer is undifferentiated. Domesticly focused payment service providers (PSP’s) haven’t fundamentally changed their product offer in years. Competition is fierce, customers are demanding and it’s hard to make money as the above chart shows. PayPoint is right to sell but it’s not obvious who the buyer would be.

While domestic payment service providers are struggling, globally focused ones such as Adyen are attracting stellar valuations. International e-commerce can be complex and this gives these PSP’s the chance to build deep client relationships and innovate new propositions that can keep revenue per transaction steady or growing.

UPDATE: Paypoint has announced an updated range of features for its online payment gateway mainly concerning PCI. These will certainly help retain customers but the challenge will be to leverage them to arrest the decline in unit pricing.

European Merchants Services Prospering for First Data

First Data’s IPO filing documents have shed a little light on its European merchant acquiring businesses which are grouped together under Global Business Solutions in its reporting. The issuer facing business, Global Financial Solutions, is larger but I don’t discuss that here.

Europe, Middle East and Africa (EMA) accounts just 14% of Global Solutions total sales. America is where the real money is made.

Nonetheless, EMA revenue has been growing nicely over the past two years, from $453m in 2012 to $554m in 2014. This still still lags behind WorldPay, the European market leader, which records $2bn annual net sales in the UK alone. About 30% of First Data revenue is accounted for by product sales – primarily the rental of card machines, and the remainder by transaction and processing fees.

The filing calls attention to growth in 2013 and 2014 in the EMA mechant acquiring alliances businesses and in direct sales in Ireland, UK and Poland in 2013. The alliance businesses are CardNet (UK), AIB Merchant Services (Ireland), European Merchant Services (Benelux) and BNL POSitivity (Italy).

The product line was flattered in 2014 by a one-off item of $12m for the sale of a merchant portolio in Poland.

First Data EMEA merchant facing business

First Data EMEA Merchant Facing Businesses
Source: First Data IPO filing, 2015

First quarter performance in 2015 wasn’t so impressive at first sight as reported dollar revenues fell by 6% to $119m. In constant currency, sales were up 10% so the dip is more a reflection of the Euro’s woes than the health of First Data’s businesses.

Source: First Data IPO filing, 2015
Source: First Data IPO filing, 2015

mPOS is dead. Long live SmartPOS!

The mPOS hype is over. Micro-merchants proved an elusive market so the industry is taking its technology upmarket in partnership with the burgeoning tablet EPOS sector. That’s my main conclusion from two days in Frankfurt participating in mPOS World 2015. The new approach has already been named SmartPOS.

In 2012, the payment world went wild for mPOS. The success of Square in the US, sparked an investment frenzy in Europe. Analysts forecast an additional 5m merchants would begin taking money on cards for the first time thanks to these cheap and flexible devices. One hardware manufacturer reported receiving 30 enquiries/day as interest peaked.

European mPOS market forecasts
European mPOS market forecasts

Although the reality didn’t meet the hype, the proposition has made steady, if unspectacular, progress.

Miura, alone, claims to have shipped more than 1m mPOS devices worldwide although First Annopolis estimate that just 350K, from all manufacturers, are active in Europe. Only a handful of service providers have more than 5K units in the European field of which it is estimated that 200K are supplied by iZettle with most of the remainder by Payleven and SumUp.

The banks and traditional merchant acquirers have made very little impact although many have launched products. All Spanish banks have an mPOS proposition but have sold a total of 500 units between them. There are 82 mPOS services available in Italy but with collectively negligible market impact. See here for my presentation to the conference which explains some of the background to this disappointing performance.

Yet, mPOS is growing, albeit at a measured pace, supported by several major trends:

  • The steady march of regulation is diminishing the attractiveness of cash. For example, certain French and German towns are now forcing taxi drivers to accept plastic. Italy requires electronic payments to be provided as an option for all transactions over €30.
  • The cost of taking money with cards is falling as reductions in Interchange pass through the system. Longer term, charges will be closer to 1% than 3%.
  • Tablet based electronic point of sale systems (EPOS) are beginning to take significant share and these often include mPOS as standard
  • High street retailers are beginning to use mPOS as part of a technology tool kit that helps to improve customer service by getting more staff talking to customers and taking orders on the shop floor

Responding to these factors, and with a consensus that servicing the very smallest merchants is not economically viable, the industry segmentation model has evolved to focus on larger customers which normally have both staff and premises. Here’s how iZettle (and its competitors) are now viewing the world:

New mPOS segmentation
New mPOS segmentation

From single outlets upwards, many retailers/restaurants are seeking to replace traditional fixed payment terminals and cash registers with tablets linked to mPOS devices – a combination we’re now calling SmartPOS. These merchants require:

  • a rich software platform (with APIs allowing people with no knowledge of payments to integrate payments into their business applications),
  • docking capabilities,
  • easy connections to a range of peripherals
  • personalisations such as bright colours with branded designs to match a particular retailers’ environment

Tablet based EPOS is cheaper and more flexible than a Windows-based till system and is now proven to be reliable in the field. Innovation hasn’t been slow in arriving and ther are now over 100 start-ups commercialising tablet based EPOS for retail and hospitality. Of course the established vendors haven’t stood still and many of them are now offering their software on tablets of various kinds.

The excitement for parts of the payment industry is that integrating an mPOS device to Android/iOS app on a tablet, to create a SmartPOS, is much easier than integrating a traditional payment terminal with Windows based EPOS software. This allows the tablet EPOS vendors to make integrated payments available to large volumes of SMEs who, hitherto, would have bought a till system and payment service separately.

The new SmartPOS bundle looks like this:

From mPOS to SmartPOS - the new SME bundle
From mPOS to SmartPOS – the new SME bundle

The EPOS software is the element of the bundle that delivers the most value and its selection drives the merchant’s choice of which SmartPOS bundle to purchase and when to buy it. Merchants need a till with a payment terminal attached; not the other way around, and this has serious implications for the payment industry:

  • mPOS-focused PSP’s need to partner with the tablet EPOS vendors to ensure their service is embedded as standard in as many SmartPOS bundles as possible
  • The EPOS vendor owns the customer relationship. PSP’s will become trade brands and shouldn’t be investing in direct-to-merchant above the line activity unless they really believe in the nano-merchant opportunity
  • EPOS vendors need to focus on their user experience. To succeed, PSP’s will need to innovate to keep pace with evolving merchant expectations – form factor, periperhals etc – but also ensure that payments does not intrude into the standard processes of retailing. A demonstration by iZettle that showed the screen-flow on an iPad EPOS provided by Inventorum that switched back and forth between the two applications was, in my view, not meeting these standards.
  • Banks/acquirers with large estates of stand-alone payment terminals are vulnerable. As the market shifts to tablets/mPOS devices, merchants will direct their processing to providers offering the best deals via the PSPs, possibly sold as part of the SmartPOS bundle. Banks/acquirers will lose their direct relationships with merchants unless they can offer something beyond a mechant account and a card machine. They need to be in the SmartPOS bundle or to offer their own one. Two good examples: First Data commercialises its own SmartPOS with the Clover proposition; Concardis is inside Order Bird’s SmartPOS bundle with a jointly branded mPOS device linked to a merchant account.
Concardis/Orderbird mPOS device
Concardis/Orderbird mPOS device

To conclude:

A nano-merchant will ask “will your payment service work with my phone?”

A larger merchant will ask “will your payment service work with my tablet EPOS?”

Banks, acquirers and PSP’s need to decide which market they want to be in and which question they want to anwer.

mPOS World – Vendor Commentary and other Notes

My notes from the mPOS World conference in Frankfurt, July 2015.

Tablet EPOS Vendors

I Love Velvet – French start-up that hitherto focused mainly on the US market but is now looking for customers in Europe. It has designed a wonderfully Gallic set of peripherals that are reminiscent of a 1980s Citroen. Target market is large retailers.

I Love Velvet iPad stand
I Love Velvet iPad stand

Shopkeep. This is a very fast growing US based tablet EPOS vendor focused on small retailers which already claims 16K customers including 50 in the UK. Jason Richardson, its CEO, was good value. “There are thousands of different payment devices but they all do the same thing,” he said. “There are hundreds of payment gateways and they all do the same thing too. They just compete on price.”
To win his attention, vendors will need to underline their service credentials. Shopkeep wins business because of its reliable telephone support and PSP’s will need to make this easier, not harder, to manage.

Jason was negative on app stores linked to payment or EPOS services as he didn’t think volumes were yet sufficient to attract good quality third party developers. He was also negative on anything that adds complexity to the point of sale as it slows down the checkout process. “People are flumoxed by new form factors,” he said, refering to some of the cool new payment terminal concepts. Keep it simple.

Touch Bistro. Like Shopkeep, Touch Bistro is a fast growing iPad EPOS app but, as its name suggests, it’s focused on the hospitality trade. Alex Barrotti, the CEO, claims to be the #1 food and beverage app on the Apple Appstore and his software is now powering 3.000 venues, mainly in North America. Most are small but there is one with 65 iPads running simultaneously.

Touch Bistro sells on its ease of use (80% of installations are done online) and significant price differential with a conventional Windows based Micros-style set-up. The iOS apps are also more attractive to the younger demographic of waiting staff and require less user training. Integrations, to reservation services such as Open Table, or to food delivery providers, hitherto provided at the whim of large software vendors become straightforward. Inputing an order directly to the kitchen from the waiter’s device at table saves 7 minutes per party.

New restaurants are an easy sell. Switchers, especially large venues, are harder to convince.

Touch Bistro only uses Apple devices as there are so few that the support staff can know them in detail. With Android, you never know quite what you’re getting, it appears, and that makes for a diminished customer experience. iZettle had a similar complaint. Its free card reader uses the headphone jack to communicate with the merchant’s smartphone but “it’s a nightmare dealing with 100 Android handsets, each with a different configuration.”

Order Bird. Another German iPad EPOS for the catering market, Order Bird services 4.000 venues with an average of 1.6 iPads/restaurant and claims 10% of the market for new installations in Germany/Switzerland/Austria. Order Bird sell on their customer service and employ only ex-restaurant staff on their helpdesk. mPOS has been helpful more because of its scalability in a seasonal business than because of its price. Concardis, a German acquirer/PSP, has taken invested €6m for a stake in Order Bird, and has launched a combined proposition that includes a merchant account with a lean onboarding process and a jointly branded mPOS device. This being Germany, 70% of transactions processed are still cash, of course.

Concardis/Orderbird mPOS device
Concardis/Orderbird mPOS device

Nobly, a London based tablet EPOS vendor targeting quick service restaurants and cafes with turnover around €1000/day. It claims activities in 40 countries and offers a standard Ingenico card machine, the PayLeven and iZettle mPOS services. Nobly has taken the brave decision to supply its software only on PowaPOS hardware.

mPOS service providers

SumUp – claims to have been the first European mPOS player and is now present in 13 countries and differentiates by keeping the whole value chain in house – hardware, PSP and regulatory licenses. This allows it to make a profit on the sale of card readers while its competitors lose money on reselling them. It also makes entering new markets easier.

SumUp began with a direct sales force but now finds most new customers sign up online. It has signed distribution agreements with banks in Spain, Switzerland and Germany. Banks have struggled to sell mPOS but micro-merchants are a segment for which banks have little new product so should use mPOS as a footfall driver to get new customers into the branches.

SumUp claims 300K customers but won’t disclose any other details. Its CEO says most customers are small as its proposition (card reader + card processing) is cheaper than a bank terminal for any business taking < €5k per annum. Half of its customers are new to cards; half switch from a bank terminal.

Larger merchants are now showing an interest based not on price but on the elegant form factor and enhanced reporting capabilities. These need to be dealt with via the EPOS partners as they have complex requirements SumUp has no interest in developing EPOS features, this is done well by the specialists and it will stick to doing the payment part really well.

GoSwiff – Singapore based with distribution via banks and mobile operators in the Middle East, South East Asis and Latin America. There is a large acceptance gap in these markets – there are a great many cards issued but relatively few places to use them – which means merchants are keen to buy. In contrast to Europe, banks have the credibility to sell the product.

iZettle – growing swiftly thanks to (1) a free card reader and (2) high spending on advertising, iZettle (like its competitors) didn’t give sales figures but did introduce a new concept in segmentation. It has redefined micro-merchants as nano-merchants and created a new micro-merchant definition of €5K-€50K turnover, the upper part of of which would normally be recognised as an SME by a UK mechant acquirer.

The implication of the new segmentation is that iZettle needs partners to sell into micro-merchants and these will be the tablet EPOS vendors. One interesting point. iZettle has hired ten analysts from Klarna who have developed the automated decision on whether to accept a new merchant. 85%-90% of customers are accepted with no human intervention.

Respect to PayLeven for bring a customer along. Sabine Seitz, who runs an art gallery in Frankfurt called Fotographie Forum, explained that wanted to replace the cash register but didn’t want Windows as Microsoft wasn’t cool enough for a art venue. She came across Inventorum, a German EPOS start-up, who convinced her that an iPad based option was least risk. After all, if you don’t like the software, you can always find something useful to do with a spare iPad. Inventorum comes with PayLeven as standard. Sabine was very happy with the payment service too but this underlines my earlier point that PSP’s need to embed themselves with the EPOS vendors and not the other way around.

Adyen – mainly known for its e-commerce payment gateway, also commercialises an mPOS device but sells based on its ability to link up sales from all channels through a single payment gateway aimed at larger retailers. The key advantge of this approach as highlighted at the mPOS conference is the ability to tokenise cardholder details in one channel and take actions based upon this token in another.

This can allow a retailer to offer much improved customer service but the use cases are rather too specialised to make a large market. For example, Miliboo, a French furniture retailer, uses the service to take an authorisation when people want to buy in the shop but uses the token to put the transaction through only when the goods are shipped.

Market specific commenatry

Spain – Verliana Ivanova from ITOS Technologies explained how the Spanish mPOS market had evolved. All major banks and the two largest PSPs have launched products based on a common template provided by ITOS using Datecs devices. BBVA and Santander went further and invested in SumUp and iZettle respectively although the involvement seems to be purely financial so far.

None of the propositions have been successful. According to Verliana, less than 500 units have been sold to micro-merchants in Spain. Banks now believe that mPOS is wasted on micro-merchants and that a more rewarding strategy will be to target large retailers and businesses with large, mobile fieldforces.

Italy – the numbers looked positive for mPOS in Italy. Only 15% of SME’s take money on cards yet card payments are growing at 4% pa. Even better, a new law required retailers to offer the option of electronic payment for transactions >€30 sparked the launch of no fewer than 83 mPOS services in the Italian market.

Andrea Nardi from Telecom Italia Mobile (TIM) spoke about his launch of a white labeled mPOS service from PayLeven. TIM’s proposition looks interesting – free device + 1.95% for all transactions bundled with a €10/month SIM. Like many other providers across Europe, TIM has found that reality hasn’t met the hype and less than 1.000 units have been sold.

Telcom Italia mPOS proposition
Telcom Italia mPOS proposition

Italians have preferred to keep using cash and the Government has not backed up its law with any sanctions for non-compliance. And TIM has discovered that it takes a few conversations to explain card payments to a merchant new to the subject. Sales have been disappointing and TIM is working with Olivetti (owned by Telecom Italia) to integrate the mPOS service with Olivetti’s EPOS. This would produce an Italian SmartPOS bundle that sells, I assume, through Olivetti’s normal channels.

Field Force

The second new opportunity for mPOS lies with large enterprise field forces. Self employed tradespeople haven’t taken to mPOS but employers of large mobile workforces understand the value of taking money on the move. A good example cited was the UK TV Licence enforcement whose representatives have an mPOS device. Field forces may struggle to use consumer orientated smartphones and tablets to generate and track tasks and payments.

Instead, a new range of ruggedised handhelds running Android and linking to mPOS devices will develop. GMX YouTransactor has some interesting ones aimed at 15m potential users worldwide. Its CEO suggested that the largest opportunities are in logistics, utilities, lottery agents and onboard selling on planes and trains. These devices are designed to be integrator and VAR friendly.

Micro or nano-mechant opportunities

Meanwhile, the interesting micro-merchant opportunities are in emerging markets such as Brazil rather than mature European ones. The focus is on small, robust and cheap devices that are typically the merchant’s first electronic payment device and have been helped by public policy initiatives to reduce cash usage. iZettle has shown some courage in moving to offer a free device albeit one that connects in the old fashioned way through the headphone jack. This is a good way of gaining a great many customers quickly but risks attracting the wrong kind of customer – infrequent, low users.

Some case studies from MasterCard highlighted some nano-merchant success stories:

  • A Stockholm food truck cut staff from three to two but introducing mPOS. In Sweden, you’re not allowed to handle both cash and food for hygeine reasons so the move to 100% electronic money cuts operational costs. This use case might struggle in the UK where food truck chefs typically wear blue latex gloves which prevent them operating a smartphone or tablet while cooking.
  • A beautician in South Africa who travels to peoples’ home to cut hair, cut debts from 10% to 0% by using mPOS to offer card payments to people who hadn’t enough cash to pay the bill.
  • A pharmacist in India used mPOS to take payment on delivery via card from elderly patients who don’t get out much and are often short of cash. His customers now have the means to buy a wider range of items and his sales are up 14%.

There was some anecdotal evidence presented that distribution costs fall as communities of smaller merchants are seeded with the product. Shopkeep mentioned this.

Other questions

Security – mentioned by very few participants although one said that fraud on mPOS devices was still very low because “organised crime hasn’t got round to it yet.”

Contactless – the card schemes laudable drive to increase usage of contactless has slowed the mPOS market. In Europe all new payment terminals must be shipped with contactless capability from January 2016 but adding this feature increases costs and puts extra strain on the sometimes under-powered batteries. Consquently, fewer new products being launched in recent months as manufacturers focus on the challenge ahead. The insistence on contactless has baffled some in the mPOS industry as the devices are unsuited for high volume retail usage where contactless is demanded by shoppers.

Equally annoying (and costly) is the continuing requirement to include a magnetic strip reader. With the Americans belatedly moving to chip and PIN in 2015, these will be needed for a few years yet, it seems.

Are traditional payment terminals dead? The consensus at the conference was that mPOS and standard desktop machines will coexist. I think this is only partially true. Many retailers will still prefer a chunky card machine sitting on the counter but that’s not to say that they will keep faith with an old fashioned Ingenic/Verifone machine. A new wave of terminals is arriving which capture the spirit and innovation of mPOS but in a more usable format for retail. Poynt is a good example; so is Clover from First Data and Albert from Wincor Nixdorf.

Mobeewave – defying classification, this Canadian start-up has found a way of turning a smartphone into a contactless card reader. The conference pitch didn’t do the idea justice and its CEO was rather battered by his fellow panellists who focused on obstacles (there are many) rather than the opportunities. By entirely removing the need for a card reader, Mobeewave could reduce the cost of card acceptance still further but there’s a way to go to convince a sceptical industry audience.

MasterCard index

MasterCard’s new mPOS index showed 78m transactions globally in the first five months of 2015 with an average transaction value (ATV) of $50 and a highest transaction of $129K. The index is brand new so doesn’t yet show clear trends and only covers transactions processed centrally by MasterCard. Nevertheless, it will become a welcome source of facts in an industry characterised by andecdotes.

According to MasterCard, the top merchant categories globally for mPOS are barber/beauty, office supplies, restaurants, fast food and bars, dentists/doctors/pharmacists and insurance sales. Top markets are US, Australia, Canada, Sweden and Brazil but ATVs are highest in Middle East and Asia Pacific.