mobile pos in europe in 2012
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First Annapolis ConsultingTRANSCRIPT
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.
Prepared for: A Recap on Mobile POS in Europe in 2012
Dramatic Activity, But No Clear Winners Yet
21 December 2012
Not For Redistribution
First Annapolis Consulting, Inc. | Confidential | 2
Mobile POS in Europe
21 December 2012
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 | 3
Mobile POS in Europe
21 December 2012
Mobile POS solutions have appeared in Europe at a rapid pace this year.
May 2011 iZettle launches
in Sweden
May 2010 Square
launches in USA
Elavon offers mPOS in the UK
MasterCard issues mPOS
best practices
May June July Aug Sep Oct Nov Dec
StreetPay launches
in Germany
payleven launches
in Germany
WorldPay pilots "Pay as You Go"
Visa Europe updates mPOS best practices
JUSP (Italy) exits "stealth
mode"
O2 launches mPOS in UK
handpoint pivots to offer services direct to merchants
Intuit expands to UK from US
Adyen launches Shuttle mPOS
January 2012
SumUp launches
mPowa (UK) exists "stealth mode"
payleven expands globally
iZettle expands
to UK, DE
European Mobile POS Activity
Feb
Ingenico takes control of Roam Data
Mar
PayPal Here launches
(not in EU)
Apr
First Annapolis Consulting, Inc. | Confidential | 4
Mobile POS in Europe
21 December 2012
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.
First Annapolis Consulting, Inc. | Confidential | 5
Mobile POS in Europe
21 December 2012
Early case studies demonstrate strong demand for mobile POS, even in highly developed cards markets.
0
10
20
30
0 2,000 4,000 6,000 8,000 10,000 12,000
Annual Transactions per POS Terminal
PO
S te
rmin
als
per
1,0
00
peo
ple
Finland
Holland Belgium
UK
Denmark
Canada
Sweden USA
Estonia
Australia
Hong Kong
France
Portugal
Mexico
Poland
Argentina
Spain
Japan
Germany
Brazil Italy
Greece Turkey
Taiwan
Russia
S. Africa
India China
Card Market Maturity
Existing Terminals ~200,000
New Mobile POS ~25,000
Market Expansion 12.5%
Existing Terminals ~10 million
New Mobile POS ~2.5 million
Market Expansion 25.0%
and others
• In 2012, iZettle expanded to Norway, Denmark, Finland, the UK, and Germany.
• iZettle signed 10,000 users at launch in Norway, an 8% expansion of that market.
• 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
• Square dominates the U.S. market with over 2 million users; Intuit (who just entered the U.K.) is a strong #2
First Annapolis Consulting, Inc. | Confidential | 6
Mobile POS in Europe
21 December 2012
We project strong demand for mobile POS in Europe and around the world.
• Europe is still early in its development (for mobile POS) with about only 150,000 users across the EU
• Mobile POS in Europe is likely to grow rapidly, to about 3 million users by 2017
• The opportunity is spread across micro-merchants (who require a Square/iZettle-like solution) and traditional acceptors (i.e., larger merchants)
– Most players should focus on a particular merchant segment or product niche because business requirements and relevant distribution tactics are very different
• Mobile POS will cannibalize traditional POS terminals (and traditional acquiring services) to some degree
– Anecdotes suggest that up to 20% of SME attrition at traditional U.S. acquirers is now caused by Square
11
26
34
39
1 8
14
18
250 267
286 304
2011 2013 2015 2017
Addressable Market Actual Adoption Total Businesses
Global Adoption Forecast for Mobile POS Millions of Users (businesses, not units)
Source: First Annapolis Consulting estimates and analysis
First Annapolis Consulting, Inc. | Confidential | 7
Mobile POS in Europe
21 December 2012
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.
• 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.
Square App (Mobile Card
Terminal, Mag Stripe)
Square Register (Tablet ePOS)
iZettle (Mobile Card Terminal,
Chip-and-Signature)
payleven (Mobile Card Terminal,
Chip-and-PIN)
LevelUp (cloud-based Mobile POS)
Punchd (Mobile Loyalty)
Passbook (Mobile Coupons)
QuickBooks Tablet (ERP Software)
Pay with Square (Mobile Wallet)
GoPago (Mobile Ordering)
PayPal (Alternative Payments,
Cloud Wallets)
Likely Mobile POS Product Evolutions
First Annapolis Consulting, Inc. | Confidential | 8
Mobile POS in Europe
21 December 2012
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.
• 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
• Apple has been using mobile POS for a decade (originally via a bespoke device)
• EasyPay app enables customers to use their own device to self-checkout
• Purchases are billed to the customer's iTunes account, if they have a domestic card on file
Major Merchants Using Mobile POS
• A 2011 study of 32 large U.S. retailers found that 63% were using mobile POS or planning to do so by 2012.
• JCPenney (a mass market U.S. chain with 1,100 department stores) announced that it planned to migrate its entire in-store POS estate to mobile POS and self-checkout in 2013.
• Nordstrom (an upmarket U.S. department store chain with $8.6 billion in sales) executives recently said, "[we] believe the future of our point-of-sale systems is completely mobile."
• Starbucks recently converted its 11,000 U.S. stores (and their $8 billion in sales) to Square/Chase Paymentech, but Starbucks will continue to use its MICROS ePOS system.
Case Study: Apple Store
First Annapolis Consulting, Inc. | Confidential | 9
Mobile POS in Europe
21 December 2012
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
Indicates negative industry action
Indicates neutral industry action
Indicates positive industry action
PCI Council decertifies all
mobile payment applications
Visa Inc. releases Best Practices for Mobile Payment Acceptance
PCI Council re-certifies purpose-built mobile
acceptance devices but not mobile POS apps
Visa invests in Square, gains Board seat; tells
Square to add encryption before going international
PCI Council establishes Mobile
Working Group
Visa announces requirement for US
processors to support merchant acceptance of chip transactions
by April 2013
Nov 2010
Early 2011 April 2011
April 2011 June 2011
August 2011
Schemes grant waivers from some rules in Europe to foster mobile POS
Late 2011
Mobile POS Best Practices issued by PCI, MasterCard,
Visa Europe*
May 2012
future
Visa and MasterCard prohibit the use of
non-compliant payment applications
Early 2013
Visa Europe to stop issuing waivers at year-end, enforce chip-and-PIN rules
July 2012
MasterCard invests in iZettle
June 2012
Note: (*) Visa Europe best practices version 2 released in September 2012
American Express invests in iZettle
October 2012
First Annapolis Consulting, Inc. | Confidential | 10
Mobile POS in Europe
21 December 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
First Annapolis Consulting, Inc. | Confidential | 11
Mobile POS in Europe
21 December 2012
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 • Were slow to move (due
to legacy tech and risk /compliance worry) but now investing in mPOS
• Can just clear for others, but usually want to "own the merchant"
• Doing nothing risks disinter-mediation or marginalization
Gateways (PSPs) • Well suited for wholesale
"solution integrator" role
• New products, channel convergence create investment demands for gateways
POS OEMs • Well suited to provide reader hardware, though VeriFone
and Ingenico using mPOS to move into services (as solution integrators)
• Opens door for second-tier, low-cost, or foreign players
Schemes • Visa Inc. and MasterCard
have both invested in start- ups – and allow chip-and-sign
• PayPal has developed its own SME solution to make the leap offline – a major strategic evolution for them and a threat to acquirers
Business Software Developers • View mobile POS (especially
tablet ePOS) as a platform to deliver business software/services
• Both Sage and Intuit now offer mobile POS in the UK
Startups • Europeans (iZettle, payleven,
etc.) have been fast followers of Square and first movers in the EU
• Most act as payment facilitators, some focus on a wholesale "solution integrator" role
Positive Implication Negative Implication
First Annapolis Consulting, Inc. | Confidential | 12
Mobile POS in Europe
21 December 2012
First Annapolis can help to analyze the mobile POS market, to develop your strategy, and to support implementation to get you into the market.
Opportunity Assessment
Strategy Development
Go-to-Market Support
Review & Improve Operational Processes
Establish Partnerships
Benchmark the Competition
Analyze Your Strengths and Weaknesses and the Market
Opportunity and Threats
Evaluate / Select Vendors (RFP)
Product Landscape
Market Sizing
Product / Proposition Design
Develop the Business Case
Customer Needs Analysis
Distribution Strategy
Pricing Strategy
First Annapolis Areas of Assistance
Relevant Experience
• Developed a pan-European mobile POS strategy for a large merchant acquirer
• Evaluated potential mobile POS partners / vendors for a European bank acquirer
• Assessed the disruptive potential of mobile technology on acceptance for multiple private equity investors and one of the world's largest POS terminal OEMs
• Advised a multi-national payment processor on opportunities in mobile POS (and mobile payments more broadly)
• Studied the mobile commerce activity of the top retailers in the U.S. and U.K.
• Extensive strategy, sourcing, and M&A experience over the past decade in acquiring, mobile, and alternative payments
First Annapolis Consulting, Inc. | Confidential | 13
Mobile POS in Europe
21 December 2012
First Annapolis is a leading payments consultancy and M&A advisory firm.
Proven
• Founded in 1991 • Global HQ in Washington, D.C.;
European HQ in Amsterdam
Professional Expertise
• Focus exclusively on payments • Circa 90 employees • Balanced combination of industry,
functional, and consulting experience
Market Leadership
• Advise market leaders: ‒ Financial institutions ‒ Payment schemes ‒ Transaction processors ‒ Technology providers ‒ Retailers and leading global brands
Acceptance & Acquiring
Credit Issuing & Retailer Services
Deposit Access (Debit)
Commercial Payments
Mobile & Alternative Payments
Me
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Acq
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Man
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Sou
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Partn
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Service Offerings
Global Coverage
Company Summary
Full Se
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dviso
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FA Offices Representative Clients
EXPERIENCED COMMITTED
Baltimore - Washington, D.C. | Amsterdam
OBJECTIVE
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.
Prepared for:
First Annapolis Consulting | M&A Advisory
http://www.firstannapolis.com
Keizersgracht 313-I 1016EE Amsterdam The Netherlands Phone: +31 20 530 0360 Fax: +31 20 530 0369
900 Elkridge Landing Road #400 Linthicum, Maryland 21090 United States of America Phone: +1 410 855 8500 Fax: +1 410 855 8599
Joel Van Arsdale, Partner [email protected] +31 20 530 0363 +1 410 855 8512
Ben Brown, Consultant [email protected] +31 20 530 0364 +1 410 855 8510