LevelUp's Success Is A Clear Sign The Era Of The Countertop Card Reader Is Coming To An End

Mobile payments company LevelUp recently announced that it would integrate Bluetooth low energy technology and beacon capability into its products.

Retailers can use the new feature to deliver hyper-targeted offers to customers while they shop. This should incentivize consumers to use the app and spend more at the retailer.

The company boasts that retailers who have already used the new hardware saw a 22% increase in customer spend among those using the LevelUp or white-label app.

Mobile payments hardware, like that offered by LevelUp, is still just a blip on the radar in terms of the volume of offline purchase volume, but the looming question is what's going to happen to legacy countertop card readers when these businesses really start to take off?

Demand for these legacy terminals is already stagnant in developed markets, but it's still quite strong in developing markets which are just beginning the transition from cash to electronic payments. But even with this demand, the era of the countertop payment terminal is coming to an end. Legacy terminal companies are increasingly integrating new features into their hardware and software and creating new products to compete with the threat from mobile payments startups.

In a new report from BI Intelligence, we take an in-depth look at the market for countertop payment terminals from both a global and regional perspective. We also at three major threats that legacy terminals face, and explain why we think will the trend to mobile payment adoption will ultimately seal the demise of the countertop terminal.

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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 between 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 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 the most opportunity for growth, as well as the market with 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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