Emerging POS Terminals Market Landscape In The US

The payments landscape in the US is changing rapidly as contactless payments gather steam. Moreover, EMV adoption in the US is also growing at a phenomenal pace before the liability shift of October, 2015. The major data breach that happened last year at Neiman Marcus, Target, Sally Beauty, Michaels and The Home Depot is also propelling EMV adoption. The shift from conventional POS to EMV will have a huge impact on POS terminal manufacturers.

The shift to EMV had been slow till 2013 but has gained momentum in the last year. With only a few months to go before retailers hit a major deadline for upgrading their credit card machines at the checkout counter, the research team of GrowthPraxis feels that many merchants will not complete the switch in time. In the US, there are more than 33 million merchant establishments (single business location of a company which is engaged in a single activity); a major portion of these merchants are viewed as vulnerable to miss the October, 2015 deadline. It seems that micro merchants will be taking at least two more years to reach the halfway mark in terms of adoption.

In a study conducted by the research team at GrowthPraxis, 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. Now the burning question is, Are the POS manufacturers ready for the sudden surge in demand that is expected to come in the next few months?

The study illustrates that the highest adoption of EMV is in 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.

Now the question is, Which are the major players that will be impacted?*

  • Specialty, mass merchants & grocery: Toshiba (previously IBM) has the largest market share of around 33%, followed by NCR, Fujitsu and HP.
  • Convenience stores & gas stations: Dresser Wayne has the largest market share (more than 30%), followed by NCR, Radiant and VeriFone.
  • Pharmacies and drug: Toshiba (previously IBM) has the largest market share of around 68%, followed by NCR and Wincor Nixdorf.
  • Departmental and warehouse: Toshiba (previously IBM) has the largest market share of around 68%, followed by NCR and Fujitsu.
  • Hotels, restaurants and motels: Toshiba (previously IBM), Logic Controls, MICROS, NCR, ParTech Inc. are the major players
  • Entertainment: Fujitsu, Toshiba (previously IBM), HP, and NCR are the major players.

*Tier I and II retailers have around 4 million POS terminals.

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. Research by GrowthPraxis shows that 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.

It is clear that there will be a huge replacement demand in the next couple of years because of EMV and NFC. Now, it will be interesting to watch which players benefit from these shifts. Will it be the traditional POS manufacturers or will some new player emerge as the market leader?