A Crisp Report on Transforming US Point-of-Sale Payments

LTP has come up with another crisp, three-page report on the US’ point-of-sale transformation which analyzes the changing regulation, technology and growth forecasts of the market.

The POS terminal market has witnessed considerable growth in recent years owing to the ease of use and improved return on investment offered by these systems. Advanced POS systems offer higher durability and reliability compared to traditional counterparts such as cash registers; this has significantly reduced the total cost of ownership (TCO), thus increasing POS terminals market demand in small and medium-size businesses (SMBs).

Installed Base of POS Terminals in US (2015):

The US Retail and Hospitality sector has 6.57 million merchant establishments, excluding 23 million micro-merchants.

- Others segment is the largest segment of retail establishments in the US

- Hotels, restaurants, and motels are the second largest segment with more than 6% of establishments within this category.

- Departmental Stores account for about 1% of the total retail market

In a study conducted by the research team at LTP, the installed base of POS terminals is estimated to be approximately 12.7 million, excluding mobile POS. The installed base of POS terminals with tier I and II retailers is around 4 million. However, tier I and II retailers contribute to 75% of the retail payments transaction. Out of 12.7 million POS terminals in the US, the number of EMV POS terminals is only 2.1 million. The study also showed that a large number of big and small retailers are willing to upgrade their POS terminals to EMV and NFC.

The study illustrates that the highest adoption of EMV is in the specialty, mass merchants & grocery segment. Although the segment leads in EMV adoption, there are still more than 450,000 POS terminals that need to be upgraded to EMV. There are other segments that still have a much lower EMV adoption rate, for example, convenience stores & gas stations, hotels, restaurants and motels. The findings clearly illustrate the fact that there is a lot of opportunity for POS manufacturers.

Market Trends:

POS hardware that accommodates all credit and debit cards (chip cards) manufactured under the Europay/MasterCard/Visa (EMV) standard: While installing EMV-capable hardware is not mandatory, its benefits will implement a notable POS trend in subsequent months, like enhanced security and the ability to avoid the financial fallout from data breaches and fraudulent activity, all of which can run into millions of dollars. Moreover, not only does EMV-enabled POS equipment use near-field communications (NFC) technology to read chip cards, it also uses the enabling technology for Apple Pay and other emerging technology methods.

Market Players:

Although the POS terminal market in the case of big retailers is dominated by players like Toshiba (previously IBM), NCR, Fujitsu and HP, there is no clear market leader when it comes to small retailers. First Data terminals are widely used by small and micro-merchants. Now, with the major game change happening in small and micro-merchant segments, it would be interesting to watch how big and small players strategize. Strategies by bigger players like NCR and VeriFone in the last year clearly indicate that they would leave no coin unturned. The small and micro-merchant segment looks to be a sizable opportunity for all POS manufacturers. In the next few months, we might witness some strategic M&A in the card acceptance segment.

Although EMV POS terminals have reached around 16% of the total POS terminals in the US, another major factor that is impacting POS terminals is contactless payments. The number of NFC terminals in the US is still significantly low. Less than 1% of the terminals in the US have NFC. This number is also poised to grow rapidly in the next few years as contactless payments gain momentum after the launch of Apple Pay, Samsung Pay and Android Pay.

Table of Contents:

  1. Industry Insights
  2. Installed Base of POS Terminals in the US (2015)
  3. Estimated Installed Base of POS Terminals in the US (2018)
  4. Adoption of POS Terminals
  5. Market Trends