2020 Foresight: Mobile Point of Sale Technology

Product Code: VR0909MR Published Date: April 2013

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TABLE OF CONTENTS

TABLE OF CONTENTS 1 Executive Summary ...... 6 2 Mobile Point of Sale Terminals (MPOS) Market Dynamics ...... 8 2.1 Emergence of MPOS ...... 8 2.1.1 Adoption by country ...... 9 2.1.2 Mobile POS framework ...... 10 2.1.3 Product launches ...... 11 2.1.4 Trials and pilots...... 14 2.2 The Technical Side of MPOS ...... 15 2.2.1 The hardware ...... 16 2.2.2 The software ...... 17 3 Global Market Size and Drivers ...... 18 3.1 Market Size and Outlook ...... 18 3.2 Drivers for Mobile POS ...... 20 3.2.1 Business drivers ...... 20 3.2.2 Consumer drivers ...... 22 3.3 Challenges ...... 23 3.3.1 Operational challenges ...... 23 3.3.2 Technical challenges ...... 24 3.3.3 Regulatory challenges ...... 24 4 MPOS Strategies ...... 25 4.1 Customer Targeting Strategy ...... 25 4.1.1 Targeting retail sector to tap into ever growing market ...... 25 4.1.2 Targeting restaurants and hotels to exploit on their specific needs ...... 27 4.1.3 Capitalizing on local transit services...... 27 4.1.4 Targeting payment-on-delivery options ...... 27 4.1.5 Individual service providers ...... 28 4.1.6 Entertainment industry’s need to provide better customer service ...... 29 4.2 Expansion Strategies ...... 30 4.2.1 Organic expansion ...... 30 4.2.2 M&As ...... 31 4.3 Pricing Strategy ...... 33 5 Implementing Mobile POS ...... 34 5.1 Best Practice Framework ...... 35 5.1.1 Security of sensitive information ...... 35 5.1.2 Establishing identity of the merchant and the cardholder...... 40 5.1.3 Validation of the payments ...... 43 5.2 Case Examples...... 44 5.2.1 The Home Depot Inc...... 44 5.2.2 Horny Goat Brewing Company ...... 47 5.2.3 Nordstrom Inc...... 49 5.2.4 Nebraska Book Company ...... 52

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TABLE OF CONTENTS

5.2.5 Gaylord Hotels ...... 55 6 Competitive Landscape and Industry Dynamics ...... 58 6.1 Industry Structure ...... 58 6.1.1 Facilitators and mobile solution providers ...... 58 6.1.2 Solution integrators ...... 58 6.1.3 Component vendors ...... 59 6.2 Motorola Solutions, Inc...... 60 6.2.1 Overview ...... 60 6.2.2 Products and Services ...... 60 6.2.3 Strategy ...... 61 6.3 VeriFone Systems, Inc...... 63 6.3.1 Overview ...... 63 6.3.2 Products and services ...... 63 6.3.3 Strategy ...... 64 6.4 Square, Inc...... 67 6.4.1 Products and Services ...... 67 6.4.2 Strategy ...... 68 6.5 Intuit, Inc...... 69 6.5.1 Overview ...... 69 6.5.2 Products and services ...... 69 6.5.3 Strategy ...... 70 6.6 iZettle ...... 72 6.6.1 Overview ...... 72 6.6.2 Products and Services ...... 72 6.6.3 Strategy ...... 74 6.7 SumUp Ltd...... 77 6.7.1 Overview ...... 77 6.7.2 Products and services ...... 77 6.7.3 Strategy ...... 77 7 Appendix ...... 80 7.1 Methodology ...... 80 7.1 Contact Us ...... 80 7.2 About Timetric ...... 80 7.3 Disclaimer ...... 81

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TABLE OF CONTENTS

LIST OF FIGURES

Figure 1: MPOS Hotspots ...... 9 Figure 2: MPOS Framework ...... 10 Figure 3: MPOS Product Launches ...... 11 Figure 4: Available MPOS Devices ...... 16 Figure 5: Global MPOS Terminals (Units in Millions), 2011−2017 ...... 18 Figure 6: Global MPOS Terminal Penetration, 2011−2017 ...... 19 Figure 7: MPOS Drivers ...... 20 Figure 8: MPOS Challenges ...... 23 Figure 9: MPOS Market Segmentation ...... 25 Figure 10: High Value Retail Industry...... 26 Figure 11: Value Of Online Trade ...... 28 Figure 12: Organic Expansion Strategies ...... 30 Figure 13: M&A Strategies ...... 31 Figure 14: Pricing Strategies ...... 33 Figure 15: Payment Industry on MPOS ...... 35 Figure 16: Best Practices to Protect MPOS Application ...... 36 Figure 17: Best Practices to Protect Transaction Data ...... 37 Figure 18: Best Practices to Protect PAN ...... 38 Figure 19: Best Practices For Handling EMV Chip Transactions ...... 39 Figure 20: Best Practices For Displaying Card Issuer’s Acceptance Mark...... 40 Figure 21: Best Practices To Ensure Legitimacy Of Merchants ...... 41 Figure 22: Best Practices For Cardholder Authentication ...... 42 Figure 23: Best Practices For Providing Cardholder A Valid Receipt ...... 43 Figure 24: The MC75 Device Used By Home Depot ...... 45 Figure 25: Home Depot Case Study ...... 46 Figure 26: The WF35 Device Used By Horny Goats Brewing Company ...... 47 Figure 27: Horny Goats Brewing Company Case Study ...... 48 Figure 28: Modified iPod Touch Used By Nordstrom Inc...... 50 Figure 29: Nordstrom Inc. Case Study ...... 51 Figure 30: iAPS MPOS Solution Adopted by NBC ...... 53 Figure 31: NBC Case Study...... 54 Figure 32: MPOS Solution Adopted By Gaylord Hotels ...... 56 Figure 33: Gaylord Hotels Case Study ...... 57 Figure 34: MPOS Industry Structure ...... 58 Figure 35: Key MPOS Devices From Motorola ...... 60 Figure 36: Key MPOS Devices From Motorola ...... 61 Figure 37: Motorola MPOS Service and Targeting Strategy ...... 62 Figure 38: Key MPOS Solution From VeriFone ...... 63 Figure 39: VeriFone’s Co-branding Strategy ...... 65 Figure 40: Motorola MPOS Service and Targeting Strategy ...... 66 Figure 41: Square Register ...... 67 Figure 42: Intuit’ MPOS Solutions ...... 69 Figure 43: Intuit’s MPOS Pricing ...... 70 Figure 44: iZettle’s MPOS Solutions ...... 73 Figure 45: iZettle’s Strategic Partnerships ...... 75 Figure 46: iZettle’s European Presence ...... 76 Figure 47: SumUp’s Strategic Partnerships ...... 78 Figure 48: SumUp’s European Presence ...... 79

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TABLE OF CONTENTS

LIST OF TABLES

Table 1: Retail Trade (US$ Billion), 2008–2012 ...... 26 Table 2: Online Trade (US$ Billion), 2007–2012 ...... 27

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EXECUTIVE SUMMARY

1 Executive Summary

Initially Mobile point of sale (MPOS) technology was targeted at small enterprises who could not afford a conventional point of sale (POS) solution, either because to financial constrictions or due the mobile nature of their business operation. However, developments in the retail and service sectors suggest that the technology is not only making inroads into large stores but areas not previously outlined for its use. Demand is being driven by the number of benefits the technology offers, such as improved levels of customer service. MPOS solutions process card payments at anytime and in any location. Moreover, the use of smartphones and tablets as base-devices has enabled developers to expand their market share. The positive growth potential offered by the technology has attracted a number of competitors and further innovations are anticipated to take place in the future. This report discusses the emergence, benefits, drivers and challenges of MPOS technology. It also takes into account the various strategies adopted by key competitors and best practice for solution developers. MPOS adoption accelerates in developed economies through mass pilot schemes MPOS technology has a strong presence in countries such as the US, Canada, the UK, Germany and France with emergence of competitors such as Square, iZettle, SumUp, Payleven, PayPal Here and Intuit. Service providers such as 99Bill, Ezetap and PayPOS are considered industry leaders in China and India. All these competitors are running a number of trials and pilot programs in partnership with businesses such as Perry Ellis, Gucci, Saks Fifth Avenue and Aurora Fashions. Large stores such as The Home Depot Inc., Best Buy, Future Shop and Nordstrom have fully adopted MPOS solutions. Restaurants, pubs and hotels such as Horney Goat Brewing Company and The Gaylord Hotels have also successfully adopted the technology. Another area which has embraced the technology is transit systems and taxi services. Global MPOS industry registered significant growth in 2011−2012 The global MPOS industry registered significant growth in terms of the volume of terminals in operation during 2011−2012. The number of terminals grew from XX million in 2011 to XX million in 2012, registering an annual growth of XX%. Competitors such as Square, iZettle, mPowa, SumUp, VeriFone, Intuit and PayPal are aiding the growth of MPOS technology by making it accessible to smaller enterprises. Over the forecast period, the volume of terminals is expected to increase from XX million in 2011 to XX million in 2017, at a projected CAGR of XX%, driven by growth in the retail sector, increased online trade, a rise in smartphone usage and card penetration. Despite the penetration level of MPOS terminals to total POS terminals standing at XX% in 2012, over the forecast period, it is anticipated that this will increase substantially and reach XX% by 2017. MPOS solutions are not free from challenges The advantages of using MPOS solutions are compelling, yet there are several operational, technical and regulatory challenges. Many MPOS solutions have limited features in comparison to conventional POS terminals and these are amplified when implemented by large department stores. Reliability is another area of concern. Consumer-grade smartphones and tablets are not built with strong security features and transactions made through such devices can leave the customer vulnerable to fraudulent activity. Processing payments over a volatile wireless network can also prove to be problematic as well. Being a relatively new technology, the development of a regulatory framework has added an element of uncertainty. For example, due to concerns over security issues, Visa stopped processing payments through the European mobile payments processing app and card readers, iZettle, because it didn’t authenticate cards to Visa standards. iZettle uses digital signatures to verify the cards whereas Visa requires PIN verification.

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EXECUTIVE SUMMARY

Adoption of marketing strategies to expand business Key competitors are developing strategies in order to expand their business. These include customer targeting, organic expansion, mergers and acquisitions (M&As), and pricing strategies. Solution providers are focusing on specific customers according to their target strategy and level of service. Large and established competitors are focusing more on retailers and restaurants by providing customized solutions. Whereas, new ventures such as, Square, iZettle and Payleven are targeting smaller merchants who, at present, do not accept card payments. Expansion strategies include acquiring other platforms, partnerships with financial institutions, telecom companies, stores, taxi services and online retailers, and raising venture capital. Best practices for the implementation of MPOS solutions The adoption of technology requires that both merchants and solution providers are aware of the risks and issues involved. Merchants are required to take steps such as utilizing PCI DSS certified MPOS devices, networks and instruments which offer end-to-end data encryption and the acceptance of EMV Chip-PIN based credit cards. In order to prevent fraud and the loss of sensitive information, MPOS devices and applications should be developed in a way that it doesn’t allow the storage of information on any external memory device and whatever data is stored on servers, should be encrypted. Solution providers and merchants should also arrange for legal valid receipts for cardholders. Digital receipts which may be an email or an SMS should be used only after the consent of the cardholder is gained and the merchant should always be prepared to provide a paper receipt if the situation demands.

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MOBILE POINT OF SALE TERMINALS (MPOS) MARKET DYNAMICS

2 Mobile Point of Sale Terminals (MPOS) Market Dynamics

Technology has revolutionized the way business is conducted and payment mechanisms have undergone a series of developments. Time is a critical factor for consumers and merchants, it is therefore essential that efficient payment solutions are developed. It is due to this that MPOS devices have been developed. The technology has high adoption levels in more developed economies such as the UK, France and Germany with firms such as VeriFone, Square, Intuit, iZettle, PayPal and Motorola leading the charge. Countries in the Asia-Pacific region such as India, China, Malaysia, Singapore, and Hong Kong are now emerging as new destinations for investment in this technology. MPOS solutions do not create a new value chain for payment systems, but positions itself strategically within the existing payment network by utilizing existing technology such as smartphones and tablets, the benefits of which include speed, flexibility and consumer satisfaction. Many leading retailers and restaurants have either adopted the technology or are in the process of adopting it and many others are running pilot schemes in collaboration with providers. Firms are establishing innovative ideas to make adoption simple and cost effective for merchants. Companies are providing simple hardware attachments such as dongle card readers and ‘sleeves’ to convert consumer- grade mobile devices into powerful POS terminals. Specialized devices are also being developed with enhanced services such as real-time data updates on sales and inventory management features.

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MOBILE POINT OF SALE TERMINALS (MPOS) MARKET DYNAMICS

2.1.1 Product launches Increasing technological advancement and opportunities to cash-in on MPOS technology has led to a wave of product launches. Established competitors such as Square and Intuit are expanding their market presence while new competitors such as Bank of America are entering the industry in order to capitalize on the opportunities. The following figure shows some of the key product launches in countries across the globe:

MPOS terminals launched by Visa in the UAE Alongside Synergistic Financial Networks, Visa launched an MPOS system called Mosambee in the UAE during December 2012. Visa will also help facilitate the expansion of this product into other regions. Due to its compatibility with mobile devices, Mosambee is able to plug an essential gap in the payment system. It also offers a high level of security and reliability while handling sensitive information. Mosambee is also the first system in the region that integrates Chip and PIN. Mohanish Agni, Head of Acceptance (MENA) for Visa noted: "This is truly an important event for the UAE and our region as it is for the first time within Asia Pacific, Central Europe, Middle East, Africa and the Americas (MENA) that a full Chip and PIN capable MPOS device is being launched."

O2 commences MPOS services

O2 has partnered with Visa Europe and Global Payments to establish a MPOS service which allows merchants to accept payment through credit and debit cards using smartphones and tablets. The system runs on a free application called eMerit and comprises a Chip and PIN pad accessory. It uses Bluetooth technology to connect with the mobile device and once the transaction is processed, consumers can be sent an e-receipt via SMS or email. At present eMerit is available on Android and Blackberry platforms but an iOS version is also expected soon. MPOS provider Square has expanded into Canada. Square offers merchants a card reader that, once plugged into the headphone jack of an iPhone, iPad, or Android device, allows them to process card transactions. Alyssa Cutright, vice president of international for Square said: "We are focused on making commerce easy for everyone. Square builds free tools for local businesses. We're thrilled to introduce Canadian businesses and their customers to the most seamless and enjoyable way to do business." Square claims that it now processes more than US$8 billion payments annually, for 2 million individuals and businesses in the US. In August 2012, Square signed a deal with AT&T to sell its card readers in AT&T stores, bringing the number of outlets offering the device to over 20,000, including Radioshack Corp, Best Buy and Apple stores.

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GLOBAL MARKET SIZE AND DRIVERS

3 Global Market Size and Drivers

The market size of MPOS technology is growing at a fast pace. The industry recorded a CAGR of XX% in during 2011−2012. Large numbers of start-up organizations are being established due to the affordability and simplicity of the technology and the potential market size that can be targeted. The industry is facing challenges however, some of which include operational feasibility in large stores, technical challenges, security concerns, network issues and regulatory hurdles. These challenges have created doubt in the minds of some merchants about accepting MPOS technology. Despite the roadblocks, growth is forecast to continue as the benefits of the technology outweigh the risks. Moreover, many of the concerns are temporary will be corrected and streamlined in the future. 3.1 Market Size and Outlook The volume of MPOS terminals grew from XX million in 2011 to XX million in 2012. Competitors such as Square, iZettle, mPowa, SumUp, VeriFone, Intuit and PayPal are aiding the growth by making it accessible by small enterprises.

Over the forecast period the volume of MPOS terminals is expected to increase from XX million in 2011 to XX million in 2017, posting a projected CAGR of XX%. The key growth drivers are expected to comprise MPOS- enabled smartphones, investment in MPOS technology in the emerging economies of Asian and Africa, the large-scale adoption of MPOS technology by small enterprises and the clearance of regulatory hurdles.

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MPOS STRATEGIES

4 MPOS Strategies

MPOS solution providers employ various strategies to expand their business. Broadly, these can be divided into three segments: customer targeting strategies, expansion strategies and pricing strategies. Customer targeting strategies revolve around targeting specific business segments to derive strategic value from an existing customer base. Expansion strategies can be further classified into two separate segments: organic expansion strategies and expansion through mergers and acquisitions (M&As). Some strategies solution providers engage in include building partnerships, geographical expansions and the co-branding of products. Although there hasn’t been much activity in terms of acquisition, some competitors have consolidating through this method. Start-up organizations are trying to raise capital in order to expand and companies such as Square and iZettle have been successful in attracting several investors Visa, MasterCard and American Express. Pricing strategies can also be broken down into two broader sections: multiple pricing strategies and single pricing strategies. Multiple pricing strategies are being followed by companies who want to respond to consumers with specific requirements whereas single pricing is adopted by organizations who want to attract customers based on the simplicity of their program. The primary targets of these companies are micro and small enterprises and self-employed service providers. 4.1 Customer Targeting Strategy MPOS solution providers are targeting specific customer segments to expand their market presence. The solution providers have partnered with merchants in key target segments to access a greater customer base. 4.1.1 Targeting retail sector to tap into ever growing market Retail sector is one of the primary target markets of the MPOS solution providers. Everyday millions of payment transactions are held at retail stores across the world, and the numbers of payments done by cards are growing by each day- making it a favorite sector to focus on. Though, most of the startup MPOS solution providers target small retailers, even large retailers have started to realize the potentials an MPOS solution holds for them and have started to adopt this technology in their stores. Large retail stores invest a significant amount of money in POS terminals and floor space which substantially adds to their cost of operations, these stores have found conventional POS terminals inefficient in handling long queues and seasonal demands. Moreover, a fixed POS terminal binds some of the sales staff to one place, reducing the number of associates on the sales floor. MPOS solution providers are trying to exploit these shortcomings. Large retail stores are being targeted by companies involved in the manufacturing of rugged mobile devices, which are designed specifically to handle large volumes of transactions on a daily basis. For example, Motorola is focusing on providing MPOS solutions to retail stores such as The Home Depot Inc., Best Buy and Future Shop and VeriFone has signed a contract with Galeries Lafayette, one of France's largest department store chains to provide a comprehensive payment solutions and services for the next five years.

Table 1: Retail Trade (US$ Billion), 2008–2012

2008 2009 2010 2011 2012 US XX XX XX XX XX XX XX XX XX China XX XX XX XX XX XX Russia XX XX XX XX XX South Africa Source: Timetric analysis © Timetric

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IMPLEMENTING MOBILE POS

5 Implementing Mobile POS

Mobile POS is a relatively new technology and its successful adoption by merchants across the globe depends on several factors, one of the most important of them being the security involved with the MPOS systems. Is the solution safe and secure to process payment transactions? This is one of the basic questions revolving around MPOS technology, the payment industry is trying to answer. Especially engineered rugged devices which are manufactured for processing payments keep necessary security measures in loop while developing the devices while, consumer grade phones are not built according to strict security protocols. Following which the payment industry has abstained itself from certifying consumer grade mobile devices to be used for entering PIN. Moreover, simplicity of the new MPOS devices can also make them vulnerable to the threats of fraudulent activities.

5.1.1 Security of sensitive information Protecting MPOS applications that facilitate transaction MPOS applications allow merchants to configure key information such as the merchant’s name, sales tax and a prompt for gratuity. Apps or software interact with the MPOS solution providers and the acquiring bank’s servers. The reliability of both the MPOS software on the mobile device and any external network that facilitates the transaction is critically important for the security of transaction data. Keeping the sensitivity of the issue in mind MasterCard requires merchants who accept MasterCard and Maestro payments to use only apps which comply with the PCI Payment Application Data Security Standard (PA-DSS) and are listed on the PCI Security Standards Council (PCI SSC) website. The following figure highlights some of the best practices that both MPOS solution providers and merchants should follow in order to secure MPOS applications.

Figure 1: Best Practices to Protect MPOS Application

Source: Timetric analysis © Timetric

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IMPLEMENTING MOBILE POS

5.2 Case Examples This section discusses some of the cases where MPOS solutions have been adopted by retailers. These case examples explain the challenges faced by merchants in the adoption of MPOS technology and their responses to it.

5.2.1 The Home Depot Inc. The Home Depot Inc. was founded in 1978 and operates more than 2,200 retail stores in the US, Canada, Mexico and China. It is the world's largest home improvement specialty retailer and generated US$70.4 billion in revenue during 2011. Home Depot is a publicly traded company, with its stocks listed on the New York Stock Exchange (NYSE: HD). The store’s stocks are also included in the calculation of Dow Jones industrial average and Standard & Poor's 500 indexes. Background So what made world’s largest home improvement specialty retailer want to adopt MPOS technology? Home Depot operates very large stores and soon it became apparent that its customer service was lagging behind compared to its competition. The store noticed that its customers were finding it inconvenient to walk several paces to reach conventional POS terminals for payments. This experience was even more painful during busy hours of the day, when they had to stand in long queues for a considerable amount of time. Also, sales associates were finding themselves less informed when dealing with customers who had access to internet in their pockets. Furthermore, it was becoming cumbersome to check the availability of a product with the back office during busy business hours, every time a customer initiated a query. Marvin Ellison, Home Depot's EVP of the US Stores mentioned that historically Home Depot has not fared well when it comes to checkout procedures in its stores and they wanted to have a quicker, friendlier and more efficient checkout process. Moreover, the store wanted to improve the role of data in inventory management, sales and gross margin analysis.

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COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS

6 Competitive Landscape and Industry Dynamics

For a relatively new technology, the MPOS industry has seen a large volume of competitors entering the market place. The industry is highly fragmented and contains facilitators, acquirers, solution integrators and component vendors. However, a period of consolidation is anticipated in the future. 6.1 Industry Structure This section talks about the broad categories in which the industry can be classified.

Figure 2: MPOS Industry Structure

Source: First Annapolis Consulting, Inc. and Timetric analysis © Timetric

6.1.1 Facilitators and mobile solution providers These are companies providing card payment facilities through mobile phone applications and card reading devices. The service provided by these firms is a complete payment solution and does not require any external device to process payments. As soon as a merchant subscribes to the service, he/she gains access to a standalone MPOS terminal which is transaction-ready. Most MPOS startups such as Square, PayPal Here, iZettle, Payleven, Intuit and SumUp are working as facilitators and target small merchants who do not require complex solutions. 6.1.2 Solution integrators Solution integrators work as a bridge between existing POS systems and MPOS devices. These companies enable merchants to utilize the same business logic as their main POS terminal. This saves merchants time in training sales associates and the cost of replacing the existing system. Solution integrators also connect MPOS applications with CRM, marketing and inventory management software to enhance the functionality of the system. Many apps do not have full integration with the main POS. They merely enable the acceptance of payments via smartphones and tablets. Integrated MPOS communicates with the merchant’s enterprise-wide system and works like any another transaction terminal in its payment network. This is especially beneficial for large merchants who need a similar platform to centralize their payment and inventory management processes.

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COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS

6.2 Motorola Solutions, Inc. 6.2.1 Overview Motorola Solutions offers a range of products and services to enterprise and government customers. Its customer base includes retailers, police stations, secure government offices, public safety agencies, warehouses, hotels and restaurants and other hospitality services. It develops communication infrastructure and apps for public safety government agencies and at manufactures task-specific mobile computing devices. Motorola Solutions manufactures MPOS devices that can be used for daily business activities on a real-time basis. Moreover, the specially designed devices can be used to start pop-up stores to exploit unique business opportunities. 6.2.2 Products and Services Motorola manufactures both standalone devices, which interact with rugged mobile computers via Bluetooth to facilitate transactions and attachments or ‘sleeves’ that can be connected to mobile computers physically for turning it into POS terminal. Some of the important MPOS devices manufactured by Motorola are highlighted in the following figure.

6.2.3 Strategy Motorola MPOS devices are specifically designed to target enterprises. With its customer base spread globally, the company implements various strategies to promote its products both directly and indirectly. Partnerships with leading retailers to optimize payment mechanisms The company works closely with leading retail stores and competitors in the hospitality industry to promote its MPOS devices. The firm allows third-party developers to make apps and payment gateways to extend the life of its hardware.

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COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS

6.3 iZettle 6.3.1 Overview iZettle is a social payments company that creates services for person-to-person and business-to-consumer commerce. The company was founded in Stockholm, Sweden, in 2010 and its first service was launched in Sweden in the summer of 2011. The company now offers its services across Sweden, Norway, Denmark, Finland, The UK, Germany and Spain. Since, its establishment iZettle has attracted investments from Index Ventures, Greylock Partners, Creandum, Northzone, MasterCard, American Express and SEB Private Equity. 6.3.2 Products and Services Its MPOS service includes an app and a mini chip-card reader which allows small enterprises to make secure card payments using their smartphones and tablets. The company offers two MPOS solutions: Chip and Signature and Chip and PIN. iZettle has launched its Chip and PIN card reader after a dispute with Visa, following which iZettle were forced to stop accepting Visa payments.

6.3.3 Strategy iZettle is often touted as the ‘Square’ of Europe and its operational strategies are more or less similar to those of Square. However, there are some differences in terms of business strategies and services offered. For example, Square offers free card reader to its users, whereas, iZettle card readers are priced at EUR25 and EUR49 respectively, depending on the model and functionality.

Low pricing strategy Initially, iZettle used to charge a transaction fee of 2.75% (3.75% for American Express) of the transaction volume and a flat fee of EUR0.15 per transaction. However, it dropped this flat charge in May 2012 to make solutions more affordable for small merchants.

In a press release, Jacob de Geer, iZettle CEO and co-founder said: “iZettle was created to democratize payments – empower small business, service providers and individuals by taking the confusion and cost out of credit and debit chip-card processing”. He also mentioned that this was another step towards making card payments accessible and affordable for everyone irrespective the size of their business and their average transaction. According to the Eurostat, the statistical office of the EU, there are 20 million small businesses in Europe that only accept cash or invoices. Strategic partnerships iZettle has entered into several strategic partnerships with the likes of MasterCard, American Express, DZ BANK, Nordea Bank, Banco Santander, Telia, Deutsche Telekom and EE stores. Backing from such firms instills consumer confidence and adds legitimacy to iZettle’s products.

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APPENDIX

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APPENDIX

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