mpos is dead. long live smartpos
TRANSCRIPT
www.barracloughandco.com
Strategy | Proposition Development | Insight Experts in Retail Technology & Payments
2
www.barracloughandco.com
We’ve been through the hype
“We estimate that
Mobile POS could add
5 million incremental
POS to the market” -
First Annapolis, 2012
3
www.barracloughandco.com
0.5 1 1.5 2 2.5 3
0%
20%
40%
60%
80%
100%
120%
BelgiumBulgariaCzech
Denmark
Germany
Estonia
Ireland
Greece
Spain
France CroatiaItaly
Cyprus
Latvia
Lithuania
Hungary
Malta
NetherlandsAustria
Poland
PortualRomania
SloveniaSlovakia
Finland
Sweden
UK
Size of bubble indicates relative value of total payment card transactions at points of sale
Payment cards per head (2013)
Mobile b
roadband p
enetr
ati
on (
2013)
But the initial mPOS logicwas not backed by evidence
Stimulate merchants to take cards
Open micro-merchant market
4
www.barracloughandco.com
Yet the trends are positive
RegulationInterchange
Rise of the tablets
Big retail moblises
5
www.barracloughandco.com
8 Reasons whymPOS doesn’t work for micro-
merchants
1
2
3
4
5
6
7
8
Business Case doesn’t work
Products not integrated
Prices too high
Initial use cases were implausible
Card machines aren’t hard to get
Cash is resilient
Micro-merchants don’t know they need this
Finding the right partners is hard
6
www.barracloughandco.com
Business case is challenging
20 € 40 € 60 € 80 € 100 €
120 €
140 €
160 €
180 €
200 €
220 €
240 €
260 €
€ -
€ 1,000
€ 2,000
€ 3,000
€ 4,000
€ 5,000
€ 6,000
€ 7,000
€ 8,000
€ 9,000
€ 10,000
204060
Cost to serve € annual
Micro-merchant mPOS break even, 3 year view
Annual merchant turnover € 3,800.00
MSC at 2.75% € 105.07 Interchange € 8.41
Net income € 96.67 3 year total income € 290.00
Cost to serve pa € 40.00
Device subsidy one off € 50.00 Acquisition cost one off € 120.00 3 year total expense € 290.00
Cumulative P&L €0.00
Business failure 15%Churn 15%
Annual sales on cards
Cost to acquire customerSource: Barraclough & Co analysis
7
www.barracloughandco.com
Traditional card machines areneither hard to get nor expensive
Small grocery shopCard turnover €2000/month
£12.95/month 1.1% 0.495%
Source: Barraclough & Co mystery shopping of 14 UK payment providers, April 2015
8
www.barracloughandco.com
Finding the right customers is hard, banking partnerships are no longer
enough
0 2 4 6 8 10 12 14 16 18 20
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
Agriculture
Mining
Manufacturing
Construction
Retail
Transport
Horeca
ICT
Financial services
Real estate
Prof services
Support servicesEducation
Healthcare
Arts
Releative number of businesses
Rela
tive g
row
th r
ate
Structure of UK small businesses New distribution partners needed
ePOS vendors
Accountants
Builders’ merchants
Size of bubble indicates relative value of total sales revenue of sector
Trade bodies
Retailers
Accounting software vendors
Source: Barraclough & Co analysis
9
www.barracloughandco.com
Use cases still implausible
“We withdrew our mPOS device because our merchants told us their customers didn’t
feel comfortable with it” - sales agent for UK ISO
10
www.barracloughandco.com
Single price plan0.35%-1.19% debit, 1.0% - 1.9% credit
One MID
One contract
£9-£22/month
Fixed Portable
GPRS
mPOS not integrated with standard bundles
£12-£29/month
£18-£29/month
£25-£100* up front
New MID
2.5% - 2.85%
New contract
One bill Independent bill
Typical SME bundle mPOS sits apart withconfused branding
*Barclays device free to Barclays business banking customersSource: Barraclough & Co mystery shopping of 14 UK payment providers, April 2015
11
www.barracloughandco.com
A platform for transformation
The best thing about mPOS is not…the m….or the POS…
it’s a state of mind (and an operating system)
13
www.barracloughandco.com
The new segmentationMicro segment comprises 50% B2B, 16% retail, 16% hospitality
Barraclough & Co from iZettle presentation to mPOS 2015
14
Source: Barraclough & Co from iZettle’s presentation to mPOS World, 2015
# of businesses % of GDP
Large
Medium
Small
Micro <€50K sales, < 10 employees
Nano<€5K sales, sole trader
<1%
1%
7%
20%
72%
42%
18%
14%
7%
18%
iZettle new focusSmartPOS bundle
In-store mobility & Fieldforce
Cheap & easy “Does your payment service work with my phone?”
“Does your payment service work with my ePOS?
www.barracloughandco.com
The SmartPOS bundle
From this…
Tablet ePOS vendors work 4:1 with mPOS payment facilitators
Hardware bundle
TabletCash drawer
ScannerPrinter
Software
ePOSE-com platformRelated apps
Payment service (PSP)
Payment terminal
(e.g. mPOS)Gateway
(multi-channel)
Card processing
Merchant account
Transaction processing/sett
lement
High value to merchant
Low value to merchant
• Core bundle, orchestrated by ePOS vendor
• Choice of payment service determined by ePOS vendor
• Choice of card processor determined by PSP
15
...to this
www.barracloughandco.com
Providers need to be in the bundle or commercialise their own
Concardis in theOrder Bird bundle
First Data buildtheir own bundle
16
www.barracloughandco.com
Strategy | Proposition Development | Insight Experts in Retail Technology & Payments
17