Payment Hardware Companies Are Pivoting To Deflect The Threat From Mobile Card Reader Startups

Legacy payment hardware companies already have tremendous market share in developed markets.

But payments startups are forcing these businesses to become more than terminal providers. They are increasingly becoming full-service providers of sales, analytics and mobile products.

Ingenico, one of the largest payment terminal providers worldwide, is rebranding itself to communicate its evolution into a "seamless payment services provider," the company said in a release.

The reason for the pivoted focus is that the market for payment terminals in developed markets has stalled, in part, because of the availability of mobile point-of-sale systems that transform smartphones and tablets into credit and debit card readers.

In a new report from BI Intelligence, we take an in-depth look at the global payment terminal market. We examine which regions are driving growth and how market share is shaping up in different regions. We also take a look at the three ways mobile technology could eventually kill the legacy payment terminal and assess how big a threat mobile really poses.

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Here are some of the key elements from the report:

• We forecast global payment terminal shipments will grow 73% in three years, increasing to 35 million in 2015, up from 20 million in 2012. That's healthy growth in spite of the growing adoption of mobile card readers by many merchants.

• But growth varies sharply between geographic regions. The U.S. and Europe are stagnant, and all the dynamism is in emerging markets. Asia-Pacific and Latin America will see triple-digit growth in from 2012 through 2015. During the same period the U.S. market will only grow 3% and Europe 9%.

• Two companies have dominated the payment terminal market since the mid-90s. While Ingenico and VeriFone have lost market share in recent years, they have also been able to simultaneously increase the distance between themselves and their next closest competitor through acquisitions. This is likely the strategy they will adopt in emerging markets where local competitors have distinct advantages.

• Low or negative terminal shipments growth in Europe and the U.S. is a sign of lackluster growth in bricks-and-mortar retail, and payments industry disruption. Retailers now have the option to adopt mobile point-of-sale systems that transform smartphones and tablets into credit and debit card readers. This trend will continue, especially as the U.S. migrates to EMV chip cards.
• In the longer term, beyond 2015, BI Intelligence believes the greatest disintermediation threat to the terminal business is the convergence of bricks-and-mortar retail and mobile commerce. Apps like Uber and OpenTable allow users to conduct physical world transactions entirely within their phones. No need for a terminal or a mobile card reader at all.

In full, the report:

• Forecasts global terminal shipments with breakdowns of how growth will shape up in each region.
• Explains how two players emerged as a quasi-duopoly in the payment terminal business and why breaking up the two companies' dominance won't be as easy as some think.
• Gives a snapshot of the market share of the key players in each region and finds that Asia-Pacific is the region with most opportunity for growth as well as the stiffest competition.
• Examines why growth has stagnated in the U.S. and Europe and what this means for the top payments companies.
• Concludes that while mobile card readers have caused some disruption and mobile payments are likely to take off, it will be mobile commerce that could inevitably kill the legacy payment terminal.

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