In our last post we asked ourselves if EMV killed MPOS in Europe before it even started. Thanks for all the sharing and discussion on this topic, we received a lot of feedback (here is an example on linkedin) and appreciate it.
As all of us know there are companies in Europe that already provide EMV MPOS solutions (iZettle, Adyen, …). And there are even more companies who are about to come out with a solution, or at least claim to do so. Interestingly, most of them decided to use Miura Shuttle as the card reader and PIN pad. Of the better known companies, only mPowa seems to use a different hardware, at least from the pictures on their website.
Of all the feedback received it seems that opinions are 50/50 on successful EMV MPOS business cases. Some even question if the Squares out there turn over positive figures. Therefore I went through the numbers and want to quickly share a simple business case.
- … we used the Miura Shuttle or something similar, acquired for EUR 200.-
- … we sold the Shuttle for EUR 100.-. There are some teasing sales campaigns for EUR 50.-, e.g. with Payleven, but the regular price seems to be around EUR 100.-
- … we took 2.75% per transaction
- … we had a deal with a processor for 1.25% per transaction
- … we had marketing/sales and handling costs of approximately EUR 100.- per device
- … our merchants made transactions for an average amount of EUR 80.-
This leaves us with device costs of EUR 200.- that need to be covered by the transaction fees. EUR 200.- (device costs) + EUR 100 (marketing/sales/handling) – EUR 100 (selling price).
With the above fees and average amounts we can take EUR 1.20 per transaction: The breakeven is achieved with 166 transactions per device.
The numbers above are just estimates, although probably not too far off. To me, this does not look like the easiest ball game. I doubt this will bring card payments to the small merchants in the near future, because:
- Device costs are too high. Why should I buy that? My business has been running without this option so far.
- Small merchants aren’t attractive as it’s highly questionable they will bring 166 transactions within a reasonable time.
However, I think this is a real winner for mid-size merchants with door-to-door services such as locksmiths, gardeners and the like. If you look at losses caused by late payments or defaults, enforcing card payments by these merchants could save them a lot of money and hassle, and would justify purchasing the equipment. An Abrantix-internal study (available on request, in German only) suggests this is definitely the case here in Switzerland.
Target industries and merchants are definitely where the successful will part with the unsuccessful MPOS providers. Mpowa seems to be heading in the right direction.
On the other hand, the approach taken by Square is also worth considering. While we are all talking about MPOS they are already a step ahead, trying to create their own payment network. Here is Karen Webster’s interesting article on pymtns regarding this. MPOS was only the foot in the door. With broad merchant acceptance gained by MPOS and a huge number of users gained by the Starbucks deal, they are definitely on the way to becoming a second PayPal. In the future, will Square care about MPOS with credit cards once they are a payment network?
I have three predictions for Europe:
- We will see MPOS for mid-size door to door merchants, but not for small merchants.
- We will not see the creation of a payment network that starts with EMV MPOS, such as with Square, as the target industries are quite specific for the business case.
- There are a huge number of small businesses out there that will not be catered for with EMV MPOS solutions. Hence there is definitely room for other solutions such as the Starbucks App or private label cards, or even bank to bank payment solutions.
Please let us know your opinions and ideas. We are really interested in continuing the discussion on this one.