Most countries in Europe have benefitted from a well-established card payments infrastructure for a long time. Although European citizens enjoyed the advantages of cashless transactions early on, some innovations have been rolled out at a much faster pace in other developing areas of the globe that are now enjoying the benefits of this leapfrog development. These include the mainstream use of QR payments in China, Brazil, India, etc., but also the massive deployment of next-generation acceptance points in the Americas and Asia, at a time when traditional POS terminals still prevailed on the old continent.

With the rise of SumUp and Zettle, Europe experienced a disruption in proximity payments over the past few years. Their new POS offers reached new business segments, such as taxis and doorstep services, that were previously untapped. And with Covid acting as a catalyst toward a cashless economy, we can expect a similar pace of innovation to continue in the coming years, as well as increased competition between historical and Fintech POS distributors.

Understanding the EU Market

As upcoming payment facilitators in the likes of SumUp launched their first point-of-sales terminals in Europe, there were 3 main reasons they could challenge the well-established players successfully. Firstly, their modern and lightweight POS terminals offered the same functionalities and the same level of security while including some additional features, such as mobility, enhanced connectivity, and a better user experience, that were lacking in the traditional POS terminals. Secondly, these new payment facilitators made merchant onboarding and KYB (Know Your Business) a very seamless process, thus encouraging more businesses to start accepting card payments and having them all set in just 48 hours. And lastly, these players defined a clear and transparent pricing strategy, with no hidden charges and low fixed costs for the merchants.

Contrary to eCommerce solutions, the pace of innovation on the field in proximity payments has been somewhat sluggish over the last decade. However, acceleration has been observed in the past couple of years, notably with the use cases that have surfaced in light of the sanitary crisis, such as home delivery and click-&-collect. As the demand from customers to move to cashless and digital solutions has been continuously rising, the need to revamp cashless and omnichannel payment solutions has been reinforced.

To address this emerging trend of cashless payments, the demand from the merchants’ side was reflected by the increased volumes of mPOS terminals over the past five years. As the number of mPOS device shipments increased by 53% globally, Europe saw a growth of 23% between 2015 and 2019. On the other hand, the traditional POS terminals were expected to face an attrition rate of 30% in 2018 alone, as the number of mPOS terminals surpasses the number of traditional POS devices. This put the new players of the industry in a position of significant advantage, since the European market, clearly, has a lot of potential for further penetration.

Market Segmentation

Different segments of distributors operate field implementations of evolutionary Next-Gen point-of-sales:

• Payment facilitators- the pioneers of mPOS, with offers characterized by modern designs, lower fixed POS costs, and packages tailored for SMBs.

• Acquirers- the traditional players who provide the EFTPOS (Electronic Fund Transfer POS) to the merchants, while supporting local payment schemes and certifications.

• POS service providers - comprehensive POS services for mid-size businesses, including 1-day replacement and repairs. Expanding their EFTPOS portfolio to next-gen POS.

• Neobanks- 100% online services, now expanding into face-to-face payment acceptance. 

• Integrated Software Vendors (ISVs)- offering integrated Android POS/ Smart POS, or mPOS dongles to complement their hardware and software offers.

• Payment Service Providers (PSPs)- focused on providing omnichannel payment options for all segments of merchants, whether online or offline.

• Marketplaces- with a broad range of digital commerce services to merchants, ranging from online orders management to in-person payments. An example would be Amazon’s plan to enter the domain of proximity payments. Behind that move, the goal is to help their SMB customers to unify their efforts for online and offline sale channels.

Focus: Europe

In Europe, there is certainly room for growth. Pioneered by leading actors such as SumUp and Zettle, the European market, still has lower penetration of next-gen POS of only 25% - as opposed to 50% globally- and underserved SMB categories. This has made the market very attractive for new players who are now challenging this duopoly with differentiating value propositions. 

Among the new generation payment facilitators, French player Smile&Pay offers high-end POS at lower processing fees by supporting Cartes Bancaires, thus focusing on businesses with more recurring transactions.

Neobanks, such as Revolut, Starling, Qonto, and Anytime, are also rising quickly in this through a tailored service portfolio or businesses. These players have developed a vast B2B customer base of 300k up to 1 million corporate accounts. So far, neobanks had partnered with payment facilitators to provide proximity payment services, but some are now rapidly moving towards providing their own branded POS offers.

Leading ISVs are now expected to expand their role in the value chain. The recent acquisition of Tiller by Sumup in 2021 serves as proof of developing synergies between cashier management systems and payments.

Even the traditional acquirers like La Banque Postale have stepped up their game. In response to the intense competition from Fintechs, they are investing in competitive offers and leveraging branch footprint and merchant proximity to facilitate distribution at a larger scale.

Conclusion

With 88% of bank cards capable of supporting contactless payments, the region is spearheading the change towards NFC-based transactions. Additionally, many countries increased their contactless transaction limits. Even merchants adapted to incorporate the latest trends, by implementing new checkout experiences, switching to contactless-enabled POS terminals and accepting even the smallest of payments by contactless cards and wearables. 

The proximity payment industry is now advancing at a steady pace in Europe, not only giving way to payment facilitators to dynamically disrupt the market but also creating opportunities for more players to enter the game of NextGen Point-of-sale and innovate.