mPOS is wasted on Micro-merchants. Why this market hasn't grown as fast as expected.

mPOS World 2015, June 30 – July 01, Frankfurt am Main

www.barracloughandco.com

is wasted on micro-merchants

Geoffrey Barraclough

Barraclough & Co

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Strategy | Proposition Development | Insight Experts in Retail Technology & Payments



We’ve been through the

hype

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“We estimate that Mobile POS could

add 5 million incremental POS to the market” -

First Annapolis, 2012



But the initial mPOS logic was not backed by evidence

Stimulate merchants to take

cards

Open micro-merchant market

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8 Reasons why mPOS doesn’t work for micro-merchants

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44

55

66

77

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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



Business case is challenging

Cost to serve € annual

Micro-merchant mPOS break even, 3 year viewAnnual 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 customer

Source: Barraclough & Co analysis

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Traditional card machines are neither hard to get nor expensive

Small grocery shopCard turnover €2000/month

£12.95/month 1.1% 0.495%

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Source: Barraclough & Co mystery shopping of 14 UK payment providers, April 2015



Finding the right customers is hard, banking partnerships are no longer enough

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

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Source: Barraclough & Co analysis


www.barracloughandco.comwww.barracloughandco.com

Use cases still implausible

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“We withdrew our mPOS device because our merchants told us their customers didn’t feel comfortable with

it” - sales agent for UK ISO



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 with confused branding

*Barclays device free to Barclays business banking customers

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Source: Barraclough & Co mystery shopping of 14 UK payment providers, April 2015


www.barracloughandco.comwww.barracloughandco.com

The future of

mPOS starts with enterprise

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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)

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www.barracloughandco.com13

Strategy | Proposition Development | Insight Experts in Retail Technology & Payments

mPOS is wasted on Micro-merchants. Why this market hasn't grown as fast as expected.

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Transcript of mPOS is wasted on Micro-merchants. Why this market hasn't grown as fast as expected.