Equity Research
2 August 2023
European Fintech & Payments Primer - Volume 18
In-store payments, the new
battleground
The next wave of European payment disruption is going to be
in-store, with mobile wallets and invisible checkout
fundamentally shifting the consumer experience. Next-gen
payment vendors are displacing incumbents with verticallyfocused, functionality-rich, integrated point-of-sale payment
and software offerings.
FOCUS
European Software & IT Services
James Goodman
+44 (0)20 3134 1038
james.goodman@barclays.com
Barclays, UK
Orson Rout
+44 (0)20 3555 0636
orson.rout@barclays.com
Barclays, UK
Sven Merkt, CFA
+44 (0)20 3134 1254
sven.merkt@barclays.com
Barclays, UK
Alice Jennings
+44 (0)20 3134 9087
alice.jennings@barclays.com
Barclays, UK
Americas Payments, Processors & IT
Services
Ramsey El-Assal
+1 212 526 7144
ramsey.el-assal@barclays.com
BCI, US
European Food Retail
The disruption narrative in payments over the past few years has focused on the evolution of
online acceptance, and the share shift observed from legacy acquirers to the tech-first vendors.
We believe a new era of in-store disruption will shape the coming years, from SMB through to
enterprise. The lines are blurring between checkout and payment, between card-present and
card-not-present, between offline and online; as friction reduces in payments to the point of
invisibility, and software becomes the key differentiator, only the tech-forward vendors will be
able to compete successfully. To explore these topics with a number of companies discussed in
this report, please register for our 19 September virtual European Fintech & Payments
Conference.
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
This research report has been prepared in whole or in part by equity research analysts based
outside the US who are not registered/qualified as research analysts with FINRA.
Please see analyst certifications and important disclosures beginning on page 35 .
Completed: 01-Aug-23, 15:59 GMT Released: 02-Aug-23, 04:10 GMT
Restricted - External
James Anstead
+44 (0)20 3134 6166
james.anstead@barclays.com
Barclays, UK
Barclays | European Fintech & Payments Primer - Volume 18
The consumer payment experience to become dominated by mobile wallets and invisible
checkout: In digitally advanced payment markets, the transition from cash to card is largely
behind us, owing in no small part to the ‘cash killer’ that is contactless payments, which
accounts now for ~60% of in-store card transactions. We are now entering a new era, where the
lines between online and in-store transactions are becoming blurred. Card-based mobile
wallets, notably Apple Pay and Google Pay, are gaining significant traction and set to become
the leading form-factor in Europe for payments still made at the point of sale, in our view. In
addition, invisible checkout use-cases are proliferating, and a decreasing proportion of
payments made in the future will require a financial handshake at all.
SMB merchants are spoilt for choice, with functionality-rich, vertically-focused offerings
becoming the norm: SMB merchants are rapidly realising that functionally superior payment
solutions are being made available by newer vendors, and the adoption of vertical-specific,
integrated POS offerings is accelerating. At the same time as heritage mobile POS (mPOS)
providers such as SumUp and Square are rapidly expanding their software offerings, next-gen
electronic POS (ePOS) providers are working to embed payments seamlessly. Both groups are
heavily tailoring their software, hardware configurations and go-to-market strategies by
vertical, from bakeries to golf courses. As if this were not enough of a headache for the
traditional in-store acquirers, such vendors are making these solutions available with complete
price transparency and, crucially, more favourable contractual terms.
In enterprise, checkout and payments are merging: Innovation in enterprise in-store has
been focused on the checkout experience (self-service tills or roaming sales assistants with
iPads), but has been lagging SMB innovation on the payments side. We now see an opportunity
for the payment process to become more embedded in the retail checkout experience, with
technologies such as just walk out, self-scan with mobile and advanced loyalty solutions to
accelerate the move towards invisible payments. These developments are acting as a catalyst
for enterprise merchants to revisit their payment partnerships and target a truly unified
payment experience across channels. In high-touch verticals, we are increasingly seeing the
consumer payment experience between online and offline transactions merging, with new
Android-based hardware allowing merchants to customise their in-store checkout experience.
Once again, this plays into the hands of the disruptors, and will see enterprise in-store –
arguably the most stable of any of the merchant categories – begin to shift loyalties.
Disruption well under way in digitally advanced markets, the rest to follow: In certain
markets, including the UK, the rise of alternative in-store payment providers is already widely
evident, with modern hardware visible from barbers to restaurants. Other European markets
have been more protected, due in part to later entry by the tech-first competitors, but also to
entrenched payment habits and more of a focus on bank distribution. While this provides more
of a grace period to adapt, it by no means changes the trend, and we see the disruption of instore payments as another risk to listed incumbents such as Nexi, Worldline, Worldpay (FIS) and
PayPoint, and an opportunity for the disruptors such as Adyen, Block (Square), Fiserv (Clover)
and Lightspeed in the listed space, as well as privates including SumUp and Stripe.
The private companies mentioned in this report are not under coverage by Barclays Research.
Information about these companies is being provided for informational purposes only and is not
and should not be considered an investment recommendation by Barclays Research.
2 August 2023
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Barclays | European Fintech & Payments Primer - Volume 18
CONTENTS
Barclays European Fintech & Payments Conference . . . . . . . . . . . . . . . . . . . . . . . . 4
Consumer payments in Europe to become dominated by mobile wallets
and invisible checkout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Card-based mobile wallets to become the dominant form-factor for transactions made at the
point of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Bank-to-bank mobile wallets are widespread in Europe online, though a move in-store looks
challenging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Invisible payments reducing the need to pay in-person at all . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SMB merchants have more choice than ever ... integrated POS
threatening the in-store bread and butter of the legacy acquirers . . . . . . 15
Next-gen payments vendors are integrating ePOS ... and providing a superior SMB offering... . 15
... while next-gen ePOS vendors are integrating payments, pressuring the incumbents ... . . . . . 20
... and both are doubling down on verticalisation and partnerships to differentiate . . . . . . . . . 20
Tap on Phone will drive further adoption, with payment hardware moving into the background
22
Next-gen vendors competing not just on offering, but on contractual terms . . . . . . . . . . . . . . . . . 23
SMB space remains fragmented and is becoming competitive across the board . . . . . . . . . . . . . . 25
Enterprise merchants implementing next-gen checkout and payments
solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Modern checkout to usher in new age of invisible payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
A truly unified payment offering to become key for high-end verticals . . . . . . . . . . . . . . . . . . . . . . 29
2 August 2023
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Barclays | European Fintech & Payments Primer - Volume 18
Barclays European Fintech & Payments Conference
Tuesday, 19 September 2023
FIGuRE 1.
The conference will be held virtually.
We are pleased to invite you to the Barclays European Fintech & Payments Conference, to be
held on Tuesday 19 September 2023. All meetings and plenary sessions will take place virtually
this year.
Presenting at our 12th instalment of this conference will be a combination of public and private
companies across the Fintech & Payments sector. The format will be keynote presentations,
fireside chats and panel discussions, with a schedule of one-on-one and small group investor
meetings running in parallel. Companies confirmed thus far include:
10x Banking, Adyen, Alfa Financial Software, Barclaycard, Bunq, Crédit Agricole Payment
Services, Darktrace, Edenred, GB Group, GoCardless, Mambu, Network International, Nexi, OFX,
Paymentology, PPRO, Qred, SumUp, Temenos, Thought Machine, Thredd, Wise, Worldline, Zopa
Please note that the registration deadline is Thursday, 24 August 2023. We hope you will be
able to join us.
To register your interest for the event, please click here.
For further information, please contact: Lucy Ferrara / Kozo Matsuzawa
Events and Corporate Access
lucy.ferrara@barclays.com / kozo.matsuzawa@barclays.com
This invitation is strictly and solely for the benefit of the intended recipients. By registering for
this event, you confirm you have read and understood the Barclays Events Terms of Service and
the Barclays Events Privacy Information.
2 August 2023
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Barclays | European Fintech & Payments Primer - Volume 18
Consumer payments in Europe to become dominated
by mobile wallets and invisible checkout
In digitally advanced payment regions, relative cash usage has roughly halved in less
than ten years, to less than 20% of value today. In the most digital markets, such as
the UK or the Nordics, cash usage is down to close to 5%. The ‘cash killer’ –
contactless payments – accelerated this transition, accounting for 58% of cardpresent transactions for Mastercard globally in 1Q23, up from just 22% in 2018, with
European markets ‘jumping ahead in the rankings’. Mobile wallets are set to become
the most prevalent form-factor of contactless payments, with card-based wallets such
as Apple Pay and Google Pay set to dominate over the coming years in card-centric
markets, in our view, reaching >30% of European in-store payments by 2030E.
At the same time, mobile wallets are contributing to further reducing payment
friction, and we are at the beginning of a new era, whereby the line between online
and in-store is becoming blurred. No longer must an in-store checkout be linked to a
card-present (CP) transaction, with an increasing proportion of in-store activity
shifting towards card-not-present (CNP) transactions owing to invisible payments.
Card-based mobile wallets to become the dominant form-factor for
transactions made at the point of sale
Mobile wallets are the next phase of contactless payments
Card-based mobile wallets, most notably Apple Pay and Google Pay, operate as a wrapper
around the existing payment ecosystem, storing card data on the mobile, communicating with
the terminal via NFC and incorporating strong customer authentication (SCA) into the
transaction. We believe these solutions are set to be the next dominant form-factor in
transactions made at the point of sale.
FIGuRE 2. The evolution of the dominant card-present form factor
Magnetic strip
Chip and pin
(EVA)
Contactless
Card-based
mobile wallets
Source: Barclays Research
Accounting for 32% of global in-store transaction value in 2022 (up from 16% in 2018, according
to the FIS Global Payments Report), the growth of mobile wallets has been accelerated by the
rise in contactless card acceptance and penetration of NFC-enabled terminals. COVID-19 was a
driving force behind contactless adoption, as many cash-only businesses started accepting
digital for the first time and some businesses switched to digital-only. Mastercard noted a >40%
increase in contactless transactions globally in the first quarter of 2020, while even in the UK,
which was an early adopter of contactless, COVID accelerated the trend, as demonstrated by the
36% contactless growth in 2021 (UK Finance). By 2026, FIS estimates that >40% of in-store
transactions will be from mobile wallets, roughly the same size as credit and debit cards
combined. Europe will continue to migrate away from cash and, in markets where cards are the
predominant payment method, we see the move towards card-based mobile wallets as the
natural next step, with the share set to at least double over the next four years, according to FIS.
We believe that by 2030, in Europe, mobile wallets will be the largest single form-factor
category, at >30%.
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Barclays | European Fintech & Payments Primer - Volume 18
FIGuRE 3. Digital wallets already dominate globally...
FIGuRE 4. ...and are set to double in Europe
42%
39%
43%
32%
26%
24%
23%
19%
20%
21%
22%
20%
15%
16%
10%
10%
4% 5%
4% 4%
Digital wallet Credit card
Debit card
2022
Cash
Digital wallet Credit card
Other
Debit card
2022
2026
Source: FIS Global Payments Report
Cash
Other
2026
Source: FIS Global Payments Report
Mobile wallet penetration varies significantly by region, and global adoption is heavily skewed
by very high penetration in China, where digital wallets represented 56% of POS payments in
2022, as the country leapfrogged cards, moving directly from cash to non-card-based mobile
wallets. In Europe, where there is already high adoption of cards, the lower friction afforded by
NFC-enabled, card-based wallets such as Apple and Google Pay suggests to us that this will
become the dominant form-factor, with contactless payment habits now deeply ingrained after
the pandemic.
Case study: Denmark an early adopter of contactless, with penetration close to
100% for small transactions
An interesting case study is Denmark, which was already ahead of the trend in terms of
contactless adoption pre-pandemic, with the value of transactions from contactless
exceeding chip-and-pin in 2019 and contactless approaching 60% of value at the beginning
of 2020. The gap between contactless and chip-and-pin has continued to widen since the
pandemic, with contactless now accounting for 66% of transaction value. Accounting for the
contactless limit, which is set at ~€47 in Denmark, the data indicates close to full adoption of
contactless payments on small transactions.
FIGuRE 5. Two-thirds of transaction value in Denmark is contactless
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
66%
34%
1Q16
1Q17
1Q18
1Q19
Contactless cards
1Q20
1Q21
1Q22
1Q23
Chip cards
Source: Danmarks Nationalbank, Barclays Research
2 August 2023
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Barclays | European Fintech & Payments Primer - Volume 18
Denmark has also seen an exponential uptick in mobile wallet use in recent years. The share
of payments from mobile wallets has more than doubled in just two years to ~20% of value,
with both Apple Pay and local P2P wallet MobilePay driving adoption.
Behavioural changes in payments are driven primarily by reduced friction, explaining the rapid
adoption of mobile wallets. The most obvious removal of friction is that the consumer no longer
needs to carry a physical wallet, though enhanced security and authentication are also
important benefits. Under PSD2, the biometric authorisation on a phone removes the need ever
to enter a pin, allowing for contactless payments on large transactions. In 2022, only 7% of
organisations reported fraudulent activity from mobile wallets (attempted or actual), compared
to 36% from credit cards, with the growth of mobile wallets contributing to the decline of fraud
attacks since 20181.
In the UK, Gen-Z has clearly been most willing to adopt mobile payments, with UK Finance
finding that 60% of those aged 16-24 are registered to use mobile wallets. In a survey, Marqeta
similarly found that consumers under 24 are comfortable leaving their wallets at home across
geographies, with older generations more hesitant.
FIGuRE 6. COVID led to a jump in mobile wallet adoption in the uK...
15%
18%
10.2
20%
11.2
21%
12.0
22%
23%
24%
12.7
13.3
13.9
FIGuRE 7. ... with the shift driven by Gen-Z (proportion registered for
mobile payments)
60%
44%
36%
8.2
29%
22%
12%
2019
2020
2021
2022
2023
Mobile payment users (m)
2024
2025
% of population
Note: Mobile payment users specifically for device-present transactions
Source: eMarketer, Barclays Research
65+
55-64
45-54
35-44
24-34
16-24
Proportion registered for mobile payments
Source: UK Finance, Barclays Research
Apple Pay volumes have increased sixfold over the last four years, with Google Pay
likely to see more growth to come
For card-based mobile wallet payments specifically, Apple Pay is leading by far, outpacing
competitors such as Google Pay and Samsung Pay. In the US, a consumer survey conducted in
June 2022 found that ~50% of smartphone wallet payments in-store used Apple Pay,
approximately triple the share of Google Pay (see Apple Pay Deep Dive, 07/06/23). A study from
eMarketer forecasts Apple Pay to add 14m users in the US between 2020 and 2025, compared to
Google Pay and Samsung Pay, which are estimated to add 10m and 2m, respectively. Our US
colleagues forecast purchase volumes for Apple Pay to increase to $1.8tn in CY24, with volumes
estimated to have already increased sixfold over the last four years.
1
2 August 2023
https://www.jpmorgan.com/content/dam/jpm/commercial-banking/insights/cybersecurity/download-payments-fraudSurvey-key-highlights-ada.pdf
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Barclays | European Fintech & Payments Primer - Volume 18
FIGuRE 8. Apple estimated transaction volume ($bn)
2,000
FIGuRE 9. Number of users in the uS in 2021 (m)
1,770
1,800
1,571
1,600
Samsung Pay
16.3
1,283
1,400
1,200
1,000
800
633
600
400
200
Google Pay
781
25.2
446
208
Apple Pay
43.9
0
2018
2019
2020
Source: Barclays Research estimates
2021
2022
2023E
2024E
0
10
20
30
40
50
Source: eMarketer, Barclays Research
Globally, the story looks similar, with Apple widely reported to have >500m users (e.g. Global
Payments, 26/04/22), while Google reported 150m users in an earnings call a year ago. Apple’s
dominance comes despite Google being the leading seller of hardware, and both wallets largely
offering the same core features. Globally in 2022, Apple sold ~225m devices, while almost seven
times as many Android devices were sold, demonstrating that market share of wallets is not
driven by the relative penetration of the hardware itself.
Google Pay users have to actively download the app and turn on the NFC payment function
within their phones to begin using it. The user is also less tied into the ecosystem of the OS, with
most Android phones allowing the choice between a variety of apps (e.g. Samsung Pay, Google
Pay). Google Pay has also not been supported by all card issuers, with Barclays as an example
only starting to enable Google Pay earlier this year. One reason for the hesitancy of issuers to
enable Google Pay is likely the fact that banks could theoretically introduce their own,
competing NFC-enabled apps on Android, which is not the case within Apple’s ecosystem. At the
same time, Apple has invested in creating a suite of financial products such as a credit card,
savings account and BNPL offering, all of which complement the in-built wallet and may explain
some of the outperformance.
Given the popularity of Android devices, we see scope for the adoption of Google Pay to
increase at a faster pace than that of Apple Pay, but acknowledge that Apple will likely remain
the leading vendor for some time, based on the more frictionless user experience. In addition,
we see wearables as primarily an extension of card-based mobile wallets. IDC expects
shipments of wearable devices to grow at a 5.4% CAGR between 2022 and 2027, and these
devices are not limited to watches, but extend to rings, cufflinks and caps, or even payment
implants under the skin, the first of which was launched by Walletmor in 2021. Functioning in
the same way as card-based mobile wallets, wearables store payment information and enable
contactless purchases through NFC technology. We are sceptical that any form-factor other
than watches will gain significant scale, although we do see the trend as further embedding the
adoption of card-based mobile wallets.
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Barclays | European Fintech & Payments Primer - Volume 18
Bank-to-bank mobile wallets are widespread in Europe online, though a
move in-store looks challenging
Several alternative payment methods have gained traction, though use-cases
weighted to online and P2P
Some of the more digitally advanced payment markets in Europe, notably the Nordics, have
seen strong adoption online of alternative, non-card-based payment methods, many of which
gained significant traction initially in P2P payments. However, with, as we argue above, cardbased mobile wallets set to dominate the point of sale in Europe, we believe this will make it
very challenging for Europe’s non-card-based alternative schemes to move successfully instore, most notably because of the convenience advantage of NFC for card-based wallets,
versus the additional hardware (such as QR) and payment friction typically associated with
bank-to-bank-based wallets.
FIGuRE 10. Examples of non-card-based digital wallets and alternative payment methods
Scheme
Number of customers (m)
Region
Klarna
150
Global
iDEAL
15
Netherlands
Vipps MobilePay
11
Nordics
Swish
8
Sweden
Payconiq
7
Belgium
Twint
5
Switzerland
Satispay
3
Italy
Source: Company documents, Barclays Research
While the ambitions of many schemes appear similar today, it is worth considering that most of
the schemes originated with specific heritage use cases. Dutch business iDEAL, for example,
which has recently been acquired by the European Payments Initiative, emerged with a focus on
the merchant domain, and was created to allow consumers to complete online transactions.
Satispay was also formed with the intention of allowing merchants to accept consumer
payments, although in this case both in-store or online via bank-to-bank transfer. In contrast,
Vipps MobilePay (recently merged) and Swish in the Nordics gained success in P2P transactions,
and have since expanded to allow merchant acceptance both online and in-store. At the same
time, fintechs like Revolut originated to provide FX services, and have shifted their business
model to include P2P payments, while most recently also moving into payment acceptance.
Similarly, Wise is reportedly testing payment acceptance capabilities for its SMB customers.
Elsewhere, Buy Now, Pay Later (BNPL) companies such as Klarna allow shoppers to spread
payments over multiple instalments, though the vast majority of Klarna volumes are tied to
online payments.
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Barclays | European Fintech & Payments Primer - Volume 18
FIGuRE 11. European alternative schemes with heritage in P2P, FX and BNPL are moving into the
merchant domain
P2P heritage
FX and �ntechs
Swish
Vipps MobilePay
Twint
Blik
Merchant
focused
Satispay
iDEAL
Trustly
GoCardless
Sofort
Revolut
Wise
Klarna
Clearpay
Scalapay
BNPL
Source: Barclays Research
Despite the evident success of especially P2P schemes such as Swish, Vipps MobilePay and
Twint, we are sceptical as to the likelihood of a truly successful transition of these schemes into
the in-store merchant domain in Europe. So far, the transition from online P2P payments to instore has been driven predominantly by very small merchants that would otherwise typically
take cash due to additional infrastructure required for card acceptance. To pay in-store,
customers can either a) scan a QR code, b) tap a phone via Bluetooth or an NFC tag for Android
phones, or c) enter the payee and amount in an app. While all of the above categories of
vendors have found success in their respective heritage fields, there have not been any vendors
that have taken meaningful share in-store, and we expect this to remain the case.
Case study: Swish’s in-store volumes are still <1% of total spending in Sweden
Swish, launched in 2012 as a peer-to-peer (P2P) mobile platform, has become one of the
leading P2P payment solutions in Europe with over 8m users, or ~95% of Swedes aged 1565. This has allowed for a digital P2P system that has largely displaced cash, with people
using Swish for specific use cases such as splitting a bill and paying money to family, with
transactions accounting for €42bn in volume in 2022. Technology relies on pass-through
processing, as the account must be connected to a bank account of one of the 11
participating banks, while a second mobile app for security and electronic ID must also be
downloaded by the user. Swish has extended to allow merchant acceptance for both online
and offline payments, with €11.5bn of 2022 volumes (or ~30% of Swish volumes) relating to
commerce, compared to ~2% in 2017. While this has rapidly grown as a share of the
business, it still represents <1% of total digital spending in Sweden2. The proportion of this
€11.5bn that is in-store is not reported by Swish, but we expect it to be minimal and to relate
primarily to very small organisations that would usually accept cash.
2
2 August 2023
https://www.riksbank.se/en-gb/statistics/statistics-on-payments-banknotes-and-coins/statistics-on-payments/
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Case study: Switzerland’s Twint has gained traction beyond P2P, but still losing
relative share to card-based wallets
The Swiss mobile payments app Twint (private, not covered) tends to get less attention than
the Nordic apps due to the fact that it was launched several years later, with banks first
allowing direct account connection from 2017 onwards. However, the app has quickly
gained traction, with >5m users, or close to ~90% of the population aged 16-64. In 2022, the
number of transactions grew 80% to 386m, or 77 annual transactions per average user,
demonstrating that the Swiss population ‘Twints’ roughly 1.5 times per week. Although its
heritage lies in P2P payments, the company announced that in 2022, 65% of transactions
were commercial (as opposed to P2P), with most transactions occurring in-store. Merchant
acceptance has become widespread, with 77% of physical stores, and 76% of online stores
in Switzerland accepting Twint. Smart use-cases have accelerated the growth of commercial
transactions, with many utilising Twint, for example, as a method to pay for parking, with
the advantage that overpaid money is returned to the user on departure when using Twint.
Twint is also going beyond pure payments, offering comparison options on purchases, or
the ability to take out an insurance policy.
Despite this successful shift beyond a P2P app towards an ever more impressive commercial
app, the Swiss Payment Monitor 2023, conducted by the University of St. Gallen and ZHAW,
comes to the clear conclusion that in 2022 the relative share of Twint declined, while cardbased mobile wallets including Apple Pay, Samsung Pay and Google Pay grew
disproportionately. Including P2P transactions, Twint’s share of mobile wallet transactions
has declined from 80% in 2H20 to just under 50% in 2H22, with the likes of Apple Pay, Google
Pay and Samsung Pay all more than doubling their share in the same period. On a combined
basis, these three card-based mobile wallets accounted for 32% of mobile transactions in
2H22, up from 9% just two years ago. The same data set reveals that, despite the success of
Twint, account-linked mobile wallets (primarily Twint, but some volumes from Alipay,
Wechat Pay, etc.) account for only 3.5% of in-store volumes (compared to already ~6% for
card-based mobile wallets).
FIGuRE 12. Twint has lost share in terms of total number of mobile transactions (incl. P2P)...
11%
7%
15%
20%
26%
9%
4%
12%
1%
2%
4%
1%
19%
18%
5%
6%
22%
14%
80%
52%
2H20
1H21
Twint
Apple Pay
61%
61%
2H21
1H22
Samsung Pay
Google Pay
49%
2H22
Other
Source: Swiss Payment Monitor 2023, Barclays Research
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Barclays | European Fintech & Payments Primer - Volume 18
FIGuRE 13. ... and has only a low-single-digit percentage share of in-store volumes
6%
3%
2%
3%
3%
3%
6%
3%
2%
3%
5%
24%
25%
22%
23%
30%
27%
28%
24%
36%
41%
39%
41%
2H20
1H21
Physical debit card
Card-based and in-app mobile
2H21
Physical credit card
Twint and other A2A
1H22
4%
5%
6%
4%
23%
29%
33%
Cash
Other
2H22
Source: Swiss Payment Monitor 2023, Barclays Research
Elsewhere in Europe there has been an attempt to disrupt the in-store market more directly, as
opposed to moving into this space after proving success in P2P. As an example, users of
Satispay (private, not covered) in Italy deposit money into the app directly from a bank account,
and make payments in-store either by scanning a QR code, or searching for a merchant in the
app, and subsequently making a transfer. This process is by no means seamless, exhibiting
considerably higher friction than card-based mobile payments, in our view. While Satispay has
offered attractive bonuses to consumers for signing up, helping the company reach 3m
customers, we see the primary benefit of Satispay being in its budgeting tool and cashback.
Clearly, budgeting and cashback are not unique features of alternative payments, with most
credit cards offering similar features. The real benefit is for a merchant, who can benefit from
lower fees (a fixed fee of €0.20 for transactions above €10), in addition to accepting digital
payments without the requirement to invest in a payment terminal. Due to the added consumer
friction, we struggle to see companies such as Satispay substantially disrupting the in-store
payments market.
European Payments Initiative has become more of a consolidation play, but consumer
adoption far from given
Initially launched in 2020 with ambitions to challenge Visa and Mastercard as a pan-European
payment system, the European Payments Initiative (EPI) has substantially scaled back plans,
and is now focusing on A2A instant payments and mobile payments (as opposed to creating a
new card scheme). From the onset, we viewed the plans and timeline as rather ambitious, with
the initial goal to be operational in 2022 (see Fintech & Payments primer vol. 15: European
Payments Initiative: a bold ambition but expect an uphill struggle, 14/9/23). When 20 banks (out
of a total of 33 participating institutions) – including all Spanish members as well as Germany’s
Commerzbank and DZ Bank – pulled out of the project in early 2022, the Initiative looked on the
brink of failure. However, in recent months, the EPI has seen a surprising, more focused
resurgence, acquiring the popular Dutch A2A payment method iDEAL and the Benelux-focused
mobile payments app Payconiq.
Now, the aim is to allow direct and instant payments between bank accounts in Europe, with a
P2P pilot in Germany and France to launch by the end of 2023, and a wider roll-out across
Belgium, France and Germany planned for next year. The long-term goal is still to move into
online payments and POS acceptance, though, to execute, the EPI will likely have to see some
initial success in the P2P domain. Historically, the European P2P and alternative A2A schemes
have been relatively fragmented, with this consolidation having the potential to lead to a more
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unified alternative landscape in Europe. iDEAL is already extremely popular in the Netherlands,
with 1.1bn transactions completed in 2021, leading to €99bn of volumes. More than two-thirds
of Dutch e-com payments are made using iDEAL, though more than half of iDEAL’s transactions
are now outside of traditional e-com, with mobile payment requests (P2P), traffic fines, taxes
and account balance top-ups also done via iDEAL, and some QR-based payments (e.g.
restaurant payments or donations).
Despite this success in the Netherlands, it is not a given that iDEAL would see the same
consumer uptake should the EPI decide to introduce it in Germany or France. iDEAL was
introduced in the Netherlands in 2005, when e-commerce was still in its infancy and consumers
had not yet developed solidified payment behaviours. Especially following the pandemic, the
move towards digital payments has accelerated, even in historically cash-heavy countries such
as Germany, with contactless card payments, as well as other alternative payment methods
(e.g. Sofort by Klarna) having become widespread and deeply ingrained. Thus, it is unclear to us
whether the EPI’s attempt to join up fragmented local schemes and create a unified panEuropean solution for A2A payments will be a success, as the key factor will be user adoption.
Invisible payments reducing the need to pay in-person at all
For transactions still being made physically at the point of sale, we argue that card-based
mobile wallets will become the dominant form-factor. However, in an increasing number of
transactions the need for a ‘financial handshake’ will disappear entirely; in-store payments are
gradually becoming invisible, resulting in the in-store experience being paid for as a CNP
transaction. Certain industries have already been highly disrupted by the emergence of invisible
payment use-cases, including taxis (Uber) and meals (Deliveroo, Just Eat), and, with consumers
having increasingly become used to a more seamless, next-gen payment experience, we are
now at the forefront of invisible payments becoming relevant across all verticals, including
retail.
FIGuRE 14. Invisible payments becoming prevalent in several verticals
Travel
Retail
Restaurants
Taxi journeys (Uber)
Walk out stores
(Amazon Go, Tesco GetGo)
Delivery services
(Deliveroo)
Gas stations (Z Energy)
Booking (OpenTable)
Toll roads
(London congestion
charge)
Source: Barclays Research
In fact, the increasing prevalence of card-based payment wallets, such as Apple Pay and Google
Pay, will only accelerate the move towards payments becoming invisible, in our view. Apple Pay
saw its initial success in-store, though more merchants have started to integrate Apple Pay as
an online payment method over time, as well. This is making the process more seamless then
ever. As an example, historically a consumer using a food delivery company would have to add
their card details when first signing up, with the vendor able to store the card details for future
transactions. With card-based wallets, friction is removed from the sign-up, as an iPhone user
can sign up for the platform without ever having to type in card details, as Apple Pay merely
requires authentication (via fingerprint or facial recognition).
This move towards invisible payments will effectively see many historical in-store, CP
transactions become CNP, opening up the range of alternative payment methods (APM)
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consumers can use to pay, including BNPL and account-to-account (A2A) payments. Although
we do not see APMs taking significant share in card-present settings (e.g. NFC, QR code, etc.),
where we expect card-based mobile wallets to dominate, we do view this parallel movement
towards invisible payments as a backdoor through which APMs can gain market share.
With A2A, instead of inputting card details to register with a merchant, customers can
alternatively input their bank account details. Critical to the success of fast and secure A2A
payments is open banking, which provides consumer banking information to third-party
financial institutions and currently has 7 million users in the UK (FT, 21/04/23). While adoption in
the UK has been ticking up, adoption elsewhere in Europe has been somewhat subdued, with a
mere 5-7% of Europeans using open banking (Sifted, 05/04/22). Nevertheless, some A2A
payment methods have started gaining scale, such as Trustly.
Case study: Trustly set to benefit from the invisible payments trend
Trustly (private, not covered) was founded in 2008 as an instant payout service, allowing
money to be transferred directly between a customer and merchant bank account, utilising
an intra-bank network and instant payment schemes. Trustly can also be used to pay online
for goods/services, though from speaking to the company, we understand this is a smaller
part of the business. While the company is exploring in-store payments (for example, by
facilitating QR payments in casinos and betting shops), the core focus is on the online
business, with management commenting that a greater opportunity is in an omnichanneltype solution. Since Trustly has already scaled significantly, reporting >$230m of revenue
and ~$34m of EBITDA in FY22, coupled with connectivity to 6.3k banks and 8.1k merchants
adopting the APM, it appears to be in a position to capitalise on the invisible payments
trend.
Case study: New invisible payment uses cases appearing all the time
Paying for a toll road no longer means drivers having to stop a vehicle to make a payment;
electronic road pricing automatically takes payments from drivers who have pre-registered
their details. Similar technology has been drawn upon in low emission zones. For example,
drivers in London can register their details to pay seamlessly for the congestion charge,
eliminating the requirement to pay the charge separately on each occasion. Similarly, one of
the top three fuel companies in New Zealand, Z Energy, allows customers to ‘pay-by-plate’ in
petrol stations since 2020. Customers first register by downloading the Z App, and enter
their number plate and credit card details, before using the service across 62 sites. When a
customer arrives at a pump they are recognised based on their registration plate, and can
then authorise the transaction without the need for a wallet or mobile after filling up, with
the cost of the fuel charged automatically to a registered payment method after the
customer leaves the station.
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SMB merchants have more choice than ever ...
integrated POS threatening the in-store bread and
butter of the legacy acquirers
There was a time when the high-street was dominated by traditional acquirers. In
digitally advanced payment markets like the UK, this is no longer the case; the
adoption of vertical-specific, integrated POS offerings is accelerating. Integrated POS
offerings – defined as the seamless integration of point-of-sale software with payment
acceptance, using modern hardware – are proliferating. On the one hand, the heritage
mPOS providers such as SumUp (private, not covered) and Square (Block) are
becoming software businesses such that, in many cases, a tablet-based till system is
ushering in completely new hardware setups – a trend that will only be further
accelerated by the emergence of Tap on Phone. On the other hand, the next-gen ePOS
providers such as Lightspeed are moving in the other direction, and embedding
payment acceptance into their offerings. Both groups of companies have realised that
to further extend their differentiation from the incumbents, heavily tailoring their
software, hardware configurations and branding to specific verticals, from bakeries to
golf courses, and providing integrations with industry-specific third-party apps to
further broaden capabilities, is key.
As if the above were not enough of a headache for the legacy in-store acquirers, such
vendors are also offering all of the above at highly attractive take rates, on
unrestrictive contract terms and, crucially, with total price and contract transparency.
This adds up to a very tough competitive dynamic in-store over the coming years,
potentially resulting in disruption on a level only seen in the online space to date. In
digitally advanced markets like the UK this is already evident, with legacy providers
such as Worldpay starting to significantly slow in UK in-store; it will take longer to
manifest across broader European markets, given less of a focus from the
competitors, entrenched cultural payments habits and more significant bank
distribution of payment services. This gives the incumbents more time to react, and it
slows the trend in these markets, but it certainly doesn’t change it.
Next-gen payments vendors are integrating ePOS ... and providing a
superior SMB offering...
mPOS vendors have scaled significantly and democratised payments
As smartphones started to gain critical adoption by the early 2010s, payment vendors such as
Square, iZettle and SumUp started to emerge, offering mPOS payment acceptance devices. Very
cheap and simple hardware devices were often given away free, with the hardware a slave
device to be connected to a smartphone. Coupled with a transparent flat-rate fee structure, this
allowed merchants to cut costs significantly versus certified, WiFi and cellular capable
traditional devices from the near duopoly of Ingenico (private, not covered) and Verifone
(private, not covered) at the time. These new mPOS vendors were not merchant acquirers,
rather they were early in becoming what are now broadly referred to as PayFacs, or
intermediaries that enable businesses to accept payments by acting as a single merchant
account provider for multiple sub-merchants (see PayFacs: Putting the ‘Fin’ in Fintech, 16/12/20).
This was the beginning of digital payment acceptance for the micro-merchant (think food trucks
or a self-employed plumber), and today such devices are commonplace and continue to drive
ever greater adoption.
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FIGuRE 15. Sumup’s range of readers
Source: SumUp company website, Barclays Research
Zettle (PayPal) and Square have very similar line-ups. Zettle offers the Reader 2, priced at £29 +
1.75%, and a more advanced terminal, priced from £149 upward with a 1.75% transaction fee.
Square sells its 2nd Gen reader costing only £19, with a 1.75% transaction fee, with a more
advanced terminal available for £149 and 1.75%.
Many readers may be surprised to learn that today, by merchant number, SumUp is, with >4m
customers, the largest payment acceptance provider in Europe, and bigger than Nexi (~2.3m)
and Worldline ~1.4m) combined. Of course, the volume per merchant is likely to be drastically
lower, though the rough doubling of merchants within two years from the onset of the
pandemic is notable and demonstrates that the uptake of digital payments has accelerated
significantly. From IPO documents of iZettle prior to the company being acquired by PayPal,
when iZettle had ~413k active users, we find that its annual volume per customer (VPC) was
around ~€8.6k. We note that iZettle and SumUp share similar customer profiles, and applying a
similar VPC to SumUp’s merchant base of >4m would point to annual volume for SumUp of
>€30bn. This would still be small compared to the in-store acquired volume of Nexi (~€230bn in
FY21) and Worldline’s total acquired volume (€320bn in FY22); however, on a combined basis,
we think the volume share of companies such as SumUp, Block and Zettle presents a growing
threat to the incumbents. Moreover, from a revenue perspective, such companies are likely to
make up an even larger percentage of the market due to the higher take rates associated with
micro merchants.
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FIGuRE 16. Sumup’s number of merchants (millions) has more than doubled since COVID-19
5
4
3
2
1
0
1H19
2H19
1H20
SumUp
2H20
1H21
Worldline
2H21
1H22
Nexi
Source: Barclays Research, company releases, company websites
mPOS vendors have been moving up-market and integrating ePOS, disrupting
incumbents
While the above details the broad accessibility and adoption of electronic payments for micro
merchants, it has largely involved white space and not been hugely disruptive to the exiting
ecosystem. That is now changing, primarily as the heritage mPOS providers discussed above
move away from mPOS and into more sophisticated offerings. These offerings are a
combination of point-of-sale software and more capable, modern hardware (often including till
systems). This is enabling slightly larger merchants – e.g. a barber shop or restaurant – to avoid
the need for a traditional electronic point-of-sale till system with accompanying payments, and
to benefit from the combination of the two in a low-cost, integrated set-up. Square’s Gross
Payment Volume by seller size clearly demonstrates this move up-market, with the percentage
share of sellers with a GPV of <$125k per year more than halving over the last eight years to 33%
of GPV. The largest merchant category (39%) processes >$500k of annual GPV.
FIGuRE 17. Square’s mix has radically shifted to larger merchants (GPV mix by seller size)
10%
24%
67%
2014
13%
26%
61%
2015
17%
27%
57%
2016
<$125k annualised GPV
20%
28%
52%
2017
24%
28%
28%
30%
28%
30%
37%
39%
29%
29%
48%
44%
40%
34%
33%
2018
2019
2020
2021
2022
$125-$500K annualised GPV
>$500k annualised GPV
Source: Company data, Barclays Research
Square’s data also demonstrates that the company has moved away from pure mPOS payments
to integrated POS payments. In 2016, US gross profit from transactions where sellers enter an
amount on the keypad and hit charge, without use of any additional software, accounted for the
majority of Square’s gross profit. By 2021, more than twice as much revenue came from
Software & Integrated Payments, becoming the largest gross profit driver for the division. At the
same time, merchants using four or more products went from <10% of revenue in FY15 to close
to 50% in FY21. Some of the European legacy acquirers have in the past been somewhat
dismissive of Square, stating that it is still very small in Europe. While this has been true in the
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past, Square’s international gross profit has grown at a >50% four-year CAGR, with gross profit
increasing more than fivefold, from ~$50m in FY18 to $283m in FY22. While only roughly a
quarter of this international segment is UK and Europe, the revenue pool there is increasing
significantly.
FIGuRE 18. Integrated payments now by far the largest gross profit
pool for Square in the uS ($bn) ...
FIGuRE 19. ... while International gross profit is expanding
significantly ($m)
283
>1.5
220
2015
2016
2017
2018
2019
Software & integrated payments
2020
2021
2015
2017
2018
Australia & Japan
Sidecar payments
Source: Company documents, Barclays Research
2016
2019
Canada
2020
2021
UK & Europe
2022
ROW
Source: Company documents, Barclays Research
From the table below it is evident that Square still has several large European geographies into
which to expand. Therefore, even if the company is small today, there is much more potential
for Square, and other neo-SMB payment vendors, to disrupt the legacy providers.
FIGuRE 20. Plenty remaining European geographies for Square to expand into
Year of entry
Sumup
Square
Zettle
Germany
2012
NA
2012
UK
2012
2017
2012
France
2012
2021
2015
Italy
2012
NA
2015
Spain
2012
2022
2012
Netherlands
2012
NA
2014
Switzerland
2014 (in partnership with
UBS)
NA
NA
Poland
2014
NA
NA
Sweden
2015
NA
2011
Belgium
2012
NA
NA
Source: Barclays Research, company documents
Fiserv’s Clover increasingly competing with the mPOS vendors – European expansion
ongoing
In addition to the heritage mPOS providers that have started to move up-market, another nextgen payments provider, namely Clover (acquired by Fiserv), has long focused on this integrated
POS approach, and we see Square and SumUp as increasingly overlapping with Clover for this
reason. As outlined in Fiserv: Software Has Become Clover’s Lucky Charm, 11/4/23, merchants
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within the Clover ecosystem have access to an extensive collection of vertical-specific software
and apps through the Clover App Market. Clover offers a large variety of bundles, with those
that opt for a hardware + software bundle likely to use the Clover Terminal as a business
management tool, as opposed to a standalone payment terminal. Since Fiserv has made
increased investments into Clover, we believe that merchants have started to shift to view
Clover as a go-to choice due to its software capabilities, increasing ARPU and reducing churn.
Clover now is in a unique position in that it has developed a quality software platform that is
being actively sought out by merchants, while also being able to rely on Fiserv’s distribution
channels. Our US team’s working model estimates that Clover’s revenue has grown at a 26%
three-year CAGR to $1.7bn in FY22, accounting for 23% of Fiserv’s acceptance revenue (up from
14% in FY19).
FIGuRE 21. Clover’s merchant decision-making tree
Source: Barclays Research
In Europe, we are particularly interested in the JV between Deutsche Bank and Fiserv in
Germany. Given that Germany has been a key battleground for Nexi and Worldline, the fact that
Clover may be sold into Deutsche Bank’s ~800k SME merchants poses a real disruption threat.
Case study: Fiserv increasing Clover footprint in Germany via Deutsche Bank JV
In June 2021, Deutsche Bank and Fiserv announced a JV for payment acceptance in
Germany, with the announcement specifically focusing on combining Clover with Deutsche
Bank’s banking services for SME customers. From the onset, the partnership announced that
it would process payments for several thousand Deutsche Bank clients, with the potential to
sell Clover into Deutsche Bank’s ~800k SME client base. In October 2022 the JV officially
launched the Vert brand, which currently sells Clover Flex devices, in addition to more
simple PAX terminals. On recent earnings calls, Fiserv has sounded bullish on the German
opportunity and the international expansion of Clover will play a large part of the projected
path to >$3.5bn in Clover revenue by 2025.
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... while next-gen ePOS vendors are integrating payments, pressuring the
incumbents ...
At the same time as the heritage mPOS providers are adding the point-of-sale software to their
offerings (and thereby creating integrated payment offerings), a number of next-generation
electronic point-of-sale (ePOS) providers that set out to disrupt the incumbent software market
have seen the opportunity for integrated payments from the other side and are rapidly
becoming PayFacs themselves, embedding payment acceptance into their offerings (most
notably, Lightspeed and Toast). The end result is a somewhat comparable integrated payment
offering. While the payment vendor offerings are perhaps more seamless in that the hardware is
already payment hardware, the heritage-software providers have more powerful software
solutions, but with a slightly more defined separation from the payments technology (i.e. an
Adyen-branded, more traditional terminal being used by the merchant).
Lightspeed, as an example, launched its in-house payment solution in 2019, and the payments
penetration has increased rapidly since launch. ARPU tends to roughly double at locations
where the customer adds payments, and Gross Payment Volume has increased more than
ninefold in the last two years, reaching $15bn, or a 17% penetration rate of Gross Transaction
Volume. Our US Software team expects this penetration to increase further towards the high20s% by FY25E, as payment adoption continues to ramp.
FIGuRE 22. Lightspeed’s payment penetration has more than tripled and is set to increase further
($bn)
200
180
160
140
120
100
80
60
40
20
0
27%
23%
25%
20%
17%
34 5%
2
FY21
100
93
86
73
15%
10%
11%
Gross Transaction Volume
21
28
FY24E
FY25E
15
8
FY22
30%
5%
0%
FY23
Gross Payment Volume
Payment penetration
Source: Company documents, Barclays Research estimates
Lightspeed is using Adyen in Europe on the back end, and Stripe (private, not covered) in the
US. We find this is interesting in itself, as it shows that the next-gen software vendors are
increasingly looking for sophisticated back-end payment offerings, arguing against the view
that payments is becoming entirely commoditised in the PayFac setting. At the same time,
however, our long-held view that the majority of the value in payments delivery will accrue to
the vendor in the chain that owns the customer relationship, does speak to significant further
take rate dilution on volume such as this where Adyen, and others, cede control of the merchant
relationship to the software vendor and become the back-end.
... and both are doubling down on verticalisation and partnerships to
differentiate
The trend of verticalisation – that is, of tailoring the software and the hardware configuration in
both of the above sets of offerings – is part and parcel of the functional superiority of the newer
integrated payment offerings. All of the above vendors discussed have many different such
configurations for a whole host of industries from bakeries, to coffee shops, to counter and fullservice restaurants to health and fitness to golf courses and even sports stadiums. This is
resulting in far more specialised and functionality-rich offerings, with the whole branding of the
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websites and customer marketing also significantly tailored to the industry in question.
Strategies do differ, with Toast (TOST, not covered), as an example, focused primarily on
restaurants, bars and coffee shops, while Lightspeed takes a very granular approach into
subsegments of retail, restaurants and golf courses.
While SMB retail and hospitality are the hotly contested verticals addressed by all of the vendors
discussed, some niche verticals have also opened up. SumUp, for instance, has very quickly
built a footprint with large venues, focused on sports stadiums and arenas. The company is on
track to be represented in many UK Premier League stadiums, with the new SumUp Kiosk being
a key differentiator (pictured below).
FIGuRE 23. Sumup’s new Kiosks key to addressing stadiums and large
venues ...
FIGuRE 24. ... while software can be tailored to specific verticals such
as hospitality
Source: SumUp company website
Source: SumUp company website
In addition to developing their own software and hardware configurations for an everincreasing number of specific verticals, these vendors are further broadening their reach and
applicability with an app-store-like approach, whereby their open APIs and pre-build
integrations allow merchants to select from an increasing number of third-party apps which
sync seamlessly with both the point-of-sale software and the payment experience. Examples
include third-party accounting software, stock management, HR and staffing, delivery services,
e-commerce/website builders, customer loyalty, customer marketing and booking/scheduling
engines. Some are even allowing integration with other payment providers.
Of the incumbent payment providers, Fiserv is at the forefront of innovation and verticalisation
with its Clover product. However, some other incumbents have also invested in verticalisation.
Nexi acquired Orderbird in May 2022 for ~€130-140m, a German start-up providing ePOS
products to 14k clients in the hospitality vertical. At the time, Toast was reportedly also looking
at taking a stake in Orderbird (TechCrunch, 12/05/22). Nexi also offers a range of smarter
terminals, SmartPOS, which allow for integration of vertical-specific apps.
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Tap on Phone will drive further adoption, with payment hardware moving
into the background
Though SoftPOS, which describes a phone or tablet becoming a payment terminal, has been
around for over a decade, interest has risen exponentially in the last 12 months after Apple
announced Tap to Pay on iPhone, with providers like Stripe, SumUp, Square and Adyen some of
Apple’s notable partners. Others such as PayPal have also moved into the space, through
Android-based SoftPOS systems. Frontrunners in the market include Mobeewave which was
launched in 2011 (and acquired by Apple in 2020), while MyPinPad (private, not covered)
followed a year later.
Crucially, however, the SoftPOS market has been shaped, and indeed constrained, by
regulation, with regulatory standards set by the PCI Security Standards Council (PCI SSC). In
2018, SPoC (Software-based PIN entry on Commercial off-the-shelf) allowed pin entry on a
mobile device, but still required a dedicated secure card reader, providing limited benefits
beyond existing mPOS offerings. CPoC (Contactless Payment on Commercial off-the-shelf) in
2019 allowed contactless payment acceptance on an NFC-enabled device (i.e. smartphone or
tablet), effectively transforming a phone or tablet into a contactless POS terminal, eliminating
the requirement for a merchant to have separate hardware for accepting payments. While this
was beneficial for small ticket items, use was limited to transactions below the contactless limit
(as low as €20 in some European markets), and clearly problems arose from the PSD2
requirement for a pin to be input every five contactless transactions. We are now at a turning
point, with the MPoC (Mobile Payments on Commercial off-the-shelf) regulation in November
2022 effectively merging prior regulation, allowing both contactless payment acceptance, and
PIN entry without the requirement for additional hardware.
FIGuRE 25. Newest MPoC regulation now allows for true Tap on Pay
SPoC 2018
CPoC 2019
$
$
$
$
$
$
MPoC 2022
Approved
1
4
7
2
5
8
0
3
6
9
Card read by phone?
Pin entry on phone?
Transactions above
contactless limit?
Source: Barclays Research
As Tap on Phone becomes widespread, this will further erode barriers to merchant payment
adoption. While a mobile phone or tablet is typically more expensive than a payment terminal,
with 88% of the UK population owning a smartphone in 2021 (USwitch, 01/02/23), in most cases,
small merchants will not have to bear the cost of additional hardware. Merchants can also
instantly accept card payments, and use the same device to take payments as they use for other
business operations, such as recording inventory. Especially for micro merchants that first
adopt digital payments, Tap on Phone may be used before investing in more expensive
hardware, simplifying the process of digital adoption. We therefore in some ways view Tap on
Phone as most relevant for micro-focused vendors including SumUp, Square, or Zettle. Onlinefirst businesses that use platforms such as Shopify are also starting to offer Tap on Phone to
diversify to in-person payments (via partnership with Stripe), while the mobility may be handy
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in specific verticals including food delivery. Finally, Tap on Phone will likely be used by both
SMBs and enterprises as a back-up, if terminals break or go offline.
While mobile wallets are dominated by Apple, the company was relatively slow to enter the
SoftPOS market, only launching Tap to Pay on iPhone in February 2022, following its $100m
acquisition of Mobeewave in 2020. At the time of the acquisition, Mobeewave’s solution was
limited to Samsung devices due to rules around the protection of sensitive data and processing
of card payments, with Apple effectively purchasing the technology to replicate on NFC-enabled
iPhones. At the launch of Tap to Pay on iPhone, Stripe was the first platform to offer the service,
with this later expanding to include Adyen and Square, and the solution only launching in the
UK in recent weeks. Other companies creating a solution compatible with Android devices
include Visa, which launched a solution in 2020, while Viva Wallet and myPOS Glass charge
1.16% and 1.6% + £0.07 per transaction, respectively. Traditional terminal providers are also
investing in the space, with Ingenico acquiring SoftPOS provider Phos in March. Worldline has
also invested in the space, acquiring 55% in SoftPos, a Polish vendor.
Case study: Adyen partnering on Tap on Phone on a case-by-case basis
Adyen partnered with NewStore and New Black for Tap on iPhone technology in the US, and
the company has more recently expanded the solution to include Tap to Pay on Android in
the US and Singapore. The Android launch includes a partnership with Oracle Food and
Beverage, which provides POS systems to >350k restaurants and entertainment venues,
with Adyen for Platforms supporting the company in enabling its merchants to accept
payments via Tap to Pay on Android.
Case study: Stripe bringing Tap to Pay on iPhone to Shopify sellers
Shopify and Stripe’s long-standing partnership has also moved in-store, with Stripe now
enabling Shopify sellers to add Tap to Pay on iPhone to their payment solution. This allows
sellers that are focused primarily on online channels to move into in-person verticals as
well, enabling selling at local events, or enabling curbside payment acceptance. Sellers can
easily integrate the Stripe Terminal Software Development Kit via their existing Stripe
integration, making the onboarding fast and easy.
Next-gen vendors competing not just on offering, but on contractual
terms
As if the above pressure on functionality from the next-gen payment and ePOS software
providers were not enough, these vendors are also ushering in a new era of transparency for
merchants on both pricing and contracting terms. Historically, when payment acceptance was
still conducted via banks or bank-like entities, the onboarding process was cumbersome and
opaque. Traditional acquirers would run manual processes to assess the underlying risk of the
merchant, in itself actually resulting in many merchants in many industries being outright
turned down for payment acceptance – something that is far rarer today from the new vendors.
Pricing would be on a customer-by-customer basis, with no transparency in price lists on
websites. It would also be complex, with monthly fees such as for the expensive terminal rental,
as well as bundled or interchange ++ pricing on acquiring fees, complex charges for dispute
management, etc.
The early mPOS offerings were simply a nominal fee upfront for the hardware (today starting for
example at £19 plus VAT one-off) and then one flat (admittedly high) fee for all payments
processed (today in the UK typically ~1.75%). The other big advantage of this was in contractual
terms. Typically, contracts would previously be for multiple years, with the independent reseller
organisations (ISOs) sometimes locking customers in for periods of up to five years. In the event
a merchant folds after six months with the modern provider fee structures, no more payments
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are taken and no more fees are paid. In the prior scenario, merchants could be forced to pay
until the end of their contract, at a cost often running into hundreds if not thousands of pounds
or euros. Incidentally, this is exactly what the recent PSR review in the UK sought to address,
finding that SMEs in the UK were not shopping around or renegotiating sufficiently with their
suppliers. The three specific areas of concern identified by the PSR review were as follows:
1. Acquirers and resellers (ISOs) were not publishing prices for their services, and complexity of
pricing was making it difficult for merchants to compare vendors.
2. Contracts with undefined duration were a barrier to merchants shopping around for better
deals.
3. Contract structures for terminal rental were preventing merchants from switching acquiring
providers.
This is forcing the incumbent providers to adapt – a good thing for merchants – and we are
seeing increased price transparency in more digitally advanced markets. While this is not yet the
case in some European markets, we do expect pricing and contractual transparency to trend in
this direction over time. More important than regulation per se, however, is the fact that new
vendors including the mPOS providers have used proactive price transparency as a USP,
differentiating versus legacy vendors and taking market share. The combination of more
transparent and better contractual terms with the software developments discussed above
creates a compelling alternative to the incumbent merchant acquirers, hence we think the pace
of disruption in the all-important in-store SMB will continue.
Even so, we note that some incumbents have been able to gain significant market share by
offering more transparent pricing themselves. In the UK, Paymentsense (private, not covered),
which was one of the UK’s largest ISOs, has rebranded as Dojo, taking control of more of the
value chain by becoming an acquirer as opposed to relying on First Data for the product. In
addition, the company has started to offer much more transparent pricing and contract terms
(in line with the PSR review), while offering an Android-based PAX terminal that can integrate
with ePOS systems. The business has taken an aggressive sales approach, targetting specifically
the hospitality vertical. As a consequence, volume of the UK holding company almost doubled
in FY22 (ending March) to £21.6bn, while gross profit also increased 36% y/y to £93m. However,
losses before tax also increased to £141m (from £118m the previous year).
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SMB space remains fragmented and is becoming competitive across the
board
With mPOS vendors moving up-market, ePOS providers starting to offer integrated payments
and incumbents defending their share, the SMB payment market is becoming fragmented and
highly competitive. While the precise competitive dynamics are highly dependent on
geography, we illustrate in the following chart the key vendors discussed above in each
segment.
FIGuRE 26. How mPOS and ePOS providers fit into our pricing model for merchant acquirers
Source: Barclays Research
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Enterprise merchants implementing next-gen
checkout and payments solutions
The checkout experience at large retailers is evolving, with self-scan technology
continuing to scale, and increasingly moving to mobile. In time, developments in
hardware and AI will see ‘just walk out’ technologies achieve more of their so far
unrealised early promise. Such advancements will enable merchants to reduce costs
and improve the shopping experience for the consumer. At the same time, these
technologies are bringing the checkout process and the payment experience closer
together, and a clearer view of the consumer will enable merchants to advance their
loyalty offerings. Finally, such advancements are acting as a catalyst for merchants to
review their payment strategies and partnerships more holistically.
In higher-touch verticals, such as luxury or high-end fashion, new Android-based
payments hardware is enabling a truly unified payment experience. While next-gen
providers Adyen and Stripe have already started to gain market share by offering a
fully integrated back-end, and one view of the customer, we believe that new
terminals and software will enable the front-end, consumer payment experience
between channels also to become harmonised. In other words, the in-store payment
will increasingly look like a customised, next-gen online checkout. The real
differentiator is the software integration and development kits provided by the
payment providers, allowing merchants to customise their payment experience instore.
Modern checkout to usher in new age of invisible payments
Frictionless checkout holds the potential to eliminate traditional supermarket queues
In pursuit of maximising sales, minimising costs and enhancing consumer experiences, food
retailers have long been seeking ways to innovate at checkout, with self-checkout machines
having become widely adopted. Now, the combination of camera technology with AI has
become a key discussion point in the slowly evolving food retail space, and frictionless checkout
is becoming a reality. Amazon especially has been making headlines in recent years, with its
Amazon’s Just Walk Out (JWO) stores allowing consumers to shop without the need for
traditional checkouts, as the technology automatically detects and charges the consumer for
the items they take. At the heart of such major frictionless checkout solutions is computer
vision, a field of artificial intelligence that trains computers to identify and classify objects in
digital images and then react based on that information. Deep learning enables computers to
teach themselves in pattern recognition, mitigating the risk of theft, for instance.
Technology providers in the frictionless checkout space rely primarily on computer-vision and
sensor technology as their input, with some taking a vision-purist approach, while others are
using multi-sensory methods. When the customer checks in, their journey is typically tracked
via computer vision, with each item monitored as their basket is built. When the customer
leaves the store, the system recognises the completion of the journey, with the transaction
processed. Radio Frequency Identification (RFID) tags are an attractive theoretical alternative
technology, with every individual item being tagged and scanned as the consumer exits the
store. While many grocers already use RFID in some aspects of their logistics and inventory
management, the downside is that a retailer would have to persuade all of its suppliers to apply
RFID tags in the manufacturing process. Therefore, over the medium term, camera-based
systems appear to be the most pragmatic approach, in our view, with the steady improvements
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in processing power and the improved intelligence of the systems making frictionless stores
increasingly possible.
FIGuRE 27. Several technological approaches lead to a frictionless checkout
Vision-purist
Multi-sensory
RFID Tags
Frictionless checkout
Source: Barclays Research
Although the success of Amazon has been mixed, with some of Amazon’s JWO stores shutting
down (e.g. PaymentsJournal, 16/05/23 or CNN, 06/03/23) and others converting into hybrid
stores, allowing for both frictionless checkout and traditional checkout, we note that the
technology is still in its infancy. Hardware is likely to become cheaper and more accurate over
time, while the cost of labour is likely to continue to rise. Furthermore, Amazon is not the only
innovator in the space, with start-ups such as Aifi (private, not covered) and Trigo (private, not
covered) already winning some impressive food retail customers between them (incl. Aldi UK,
Rewe, Carrefour and Tesco). Despite Amazon’s recent set-backs in JWO technology, there are
several factors that are supportive of the frictionless checkout trend and we expect increased
adoption over the next decade.
From a payments perspective, this should further ingrain invisible payment habits for
consumers. At Amazon’s JWO stores, customers scan a QR code when entering into the store,
with the user’s card or wallet linked to their Amazon account. When the consumer exits the
store, their wallet is automatically charged, without the need for a financial handshake between
the merchant and the consumer. This technology will likely be adopted in the most digitalised
payment markets, including the US, UK and Nordics first, where consumers already rarely use
cash for groceries. Considering digital inclusion and the fact that some parts of society will likely
be reliant on cash for many years to come, it is possible that more hybrid shopping systems will
emerge, allowing consumers to also pay in a more traditional way.
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Case study: Amazon at the forefront of just walk out innovation
The first Amazon Fresh store opened in 2020, enabling customers to shop without a queuing
system. The company’s Just Walk Out technology detects that products are taken from, or
returned to shelves, removing the need for scanning completely. Customers can scan a QR
code when walking into the shop, enabling them to then walk out without queuing, with the
user’s card linked to the Amazon account charged instead. Amazon’s JWO technology is live
in >50 Amazon stores, with the company also looking to license the technology to other
retailers including Sainsbury’s, WHSmith and Hudson. Amazon’s success in licensing its
technology has been fairly limited, with concerns over data-sharing and sharing revenue
streams with a large, disruptive competitor, though there are other technology providers
operating as pure B2B players (e.g. Aifi and Trigo). In addition to JWO, which is a fusion of
computer-vision and sensor technology and supports new builds as well as retrofitting of
existing stores, Amazon has also introduced adjacent technology to enable seamless
checkout. Amazon One is a biometric system allowing customers to use their hand palm to
enter a store and identify themselves, as well as make a payment. This can help mitigate the
additional friction in entering the store that is currently associated with JWO technology.
Although Amazon’s initiatives have not been a out-and-out success so far, their technology
has kick-started an industry movement towards frictionless checkouts, with almost all large
food retailers starting to explore new options.
Scan-as-you-go solutions could lead retailers to evaluate payment partnerships
Not all in-store innovation in food retail will be as radical as just walk out technology. For
instance, scan-as-you-go solutions offer hand-held terminals – or increasingly just the
customer’s own smartphone – to scan individual item barcodes as customers walk through the
stores. This enables the customer to eliminate the final checkout process and, while adoption
has been more limited than traditional self-checkout, retailers can potentially enjoy more
substantial cost savings, especially if the consumer uses their own smartphone. In many
instances, customers still have to check out at dedicated terminals, though, increasingly,
smartphone-based options are enabling customers to pay directly in-app, circumventing the
traditional checkout and queuing.
From a payments perspective, even smaller in-store innovations could lead to interesting shifts,
as they present an opportunity for retailers to re-evaluate their payments strategies. The recent
Sainsbury’s SmartShop / Checkout.com partnership is an example of a traditional retailer
experimenting with a new checkout type and consequently reinventing their overall payments
strategy. With these new solutions are currently less commoditised than traditional, terminalbased payments, we see scope for them to drive a significant volume share shift from legacy
acquirers to next-gen acquirers in retail.
Case study: Sainsbury’s new SmartShop led to overall evaluation of its
payments strategy and a broader partnership with Checkout.com
Through the recent partnership between Sainsbury’s and Checkout.com announced in
November 2022, Checkout.com will provide the payments capabilities for Sainsbury’s instore SmartShop app, helping Sainsbury’s to modernise its omnichannel strategy. Via
SmartShop, consumers can make in-store purchases, scanning the items and paying on-thego via app. While scan-as-you-go has been in place for many years (usually via separate
hardware), Sainsbury’s is now turning the customer’s phone into a scanning device and
allowing the customer to pay in-app, with a plan to roll out this feature across hundreds of
stores. This should allow the shopper to save time by circumventing the checkout process at
the end of the shop, making for a more seamless shopping experience. In addition to
SmartShop, Checkout.com now also runs payment orchestration for Sainsbury’s in-store as
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well as processing digital wallet transactions for Sainsbury’s (incl. Apple Pay and Google
Pay). In our view, this case demonstrates how the competitive dynamics are shifting as
payments become increasingly invisible, with Checkout.com considered largely an onlineonly provider.
Reward programs a potential driver towards invisible payments
Especially with more gradual routes towards invisible payments, such as scan-as-you-go
solutions, retailers could benefit significantly by minimising hardware investments and costs.
The key factor, however, that in many cases remains unsolved, is consumer up-take of these
solutions. The time saving that is enabled through such new shopping methods is in itself
meaningful, though personalised product recommendations and targeted promotions to
incentivise consumer up-take may be necessary. Rewards programs already allow retailers to
gather more customer information, including detailed purchasing behaviour and frequency of
shopping. This, in turn, helps retailers to tailor specific promotions and advertisements, and
could easily be integrated within scan-as-you-go shopping apps. Over the long term, scan-asyou-go apps could also start embedding product descriptions or reviews, while AI integrations
may be used to enhance shopping recommendations for the consumer.
In other verticals, including fast food and coffee takeaway, we are also observing a move to
invisible, app-based payments, with targeted discounts and advertisements a key driver. Brands
such as Starbucks have long been known for their rewards programs and cards, though today,
in many instances, rewards are being coupled with a move towards in-app, invisible payments.
This can improve the consumer experience by shortening queuing time, while the brand can
collect much more granular payments data.
A truly unified payment offering to become key for high-end verticals
Next-gen vendors on the verge of unifying consumer payment experiences across
channels
Since the early 2010s, merchants have increasingly recognised the importance of an
omnichannel payment strategy on the back end – that is to say, integrating payment
acceptance systems across in-store, online, mobile and other channels. Changes in payment
behaviour through COVID only accelerated this trend. Not only are omnichannel customers
more valuable to merchants, shopping 1.7x more often (McKinsey, 24/04/22), but harmonising
the payment acceptance can offer the merchant better customer insights and commercial
negotiating terms. However, while most payment vendors promise merchants the above, the
reality is that only a select few vendors have the gateway technology – typically developed
through their online heritages – to truly offer a fully integrated back-end and a single view of the
customer. It is precisely for this reason that the likes of Adyen and Stripe are now gaining instore share at such a rapid pace.
Adyen specifically has offered data unification and one view of the customer to merchants since
moving in-store, with the company set to process >€150bn of in-store volume in FY23. Stripe
only moved in-store in 2018 (two years after Adyen), but the company has been adopting a
similar strategy, attempting to offer merchants a unified back-end. Most recently, Stripe
disclosed that it has deployed 173k terminal devices, with the in-store business growing quickly.
Stripe has announced wins with both enterprise customers (e.g. River Island) and platforms for
in-store payments (e.g. WooCommerce, Shopify, Mindbody, Lightspeed). From a merchant
perspective, this unification of data on the back-end has been a real differentiator for these
next-gen vendors, and a key reason for merchants to switch to Adyen and Stripe.
However, from a consumer perspective, the payment experience across channels has not
evolved at the same pace, even when using next-gen vendors, and we believe we are now set to
see a true unification of the consumer payment experience at the front-end. Both Adyen and
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Stripe continue to invest in the in-store domain, with Adyen starting to design its own in-house
terminals. Stripe has gone down an alternative route, acquiring terminal provider BBPOS at the
beginning of 2022 and signalling its intention to invest in hardware.
These new terminals are typically based on a modern Android operating system, which allows
for more customisation on the merchant’s side, as well as integration with business
applications. As we show in the table below, though, from a pure hardware perspective, both
Stripe’s S700 and Adyen’s AMS1 are not particularly differentiated versus some of the most
upmarket models of Ingenico, PAX or Verifone. While the modern hardware is a nice-to-have and
somewhat of an aesthetic improvement for merchants, the real differentiator is the software
integration and development kits provided by Adyen and Stripe in particular. APIs, which
describe protocols allowing different software applications to communicate and exchange
information with each other, allow the merchant to integrate various payment methods, for
instance, while Software Development Kits (SDK) offer development tools and resources to
enable the creation of custom applications. These tools can be used by merchants for
integration and development, but they also can help in creating a user experience that feels
more consistent with other channels such as online.
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FIGURE 28. Stripe and Adyen’s hardware is up there with the best, but not the key differentiator
Connectivity
Speed / performance
Interface
Battery life
Weight
Integration capabilities
Adyen
AMS1
Wifi (5GHz, 2.4GHz), 4G, Bluetooth 4.2BLE
Quad-core 1.3GHz processor, 2GB/16G
memory
4” color touchscreen
display, 480x800 px
2,600mAH / 4.4V Li-ion
rechargeable (made to last at
least a business day)
170g
Adyen Terminal API cloud or local
integrations, with access to Adyen’s
plugins
Stripe
S700
Wifi (5GHz, 2.4GHz), Bluetooth 5.0
NA
NA
4,950 mAh, 3.87V
320g
Pre-built Stripe elements, or running POS
directly on the reader
4,000mAh, up to 5V Li-ion
rechargeable
220g
Custom integrations with existing systems
Verifone
Carbon
Mobile 5
Wifi (5.8GHz, 2.4GHz), G LTE, 3G, Bluetooth
4.2BLE
Quad-core 1.1GHz processor, 1GB RAM 5” HD LCD touchscreen,
(option 2GB), 8 GB Flash (option for 16GB)
1280x720 px
Verifone
T650p
Wifi (5GHz, 2.4GHz), 4G LTE, Bluetooth 4.2
low energy
Quad-core 1.1GHz processor, 2 GB / 16GB
RAM; optional 1GB/8GB, 32GB Micro-SD
memory expansion
5.5” HD LCD touch
screen, 1280x720 px
2,600mAh x2 cells, 5,200mAh
total
363g
Verifone Cloud Services integrate a host of
business solutions
Ingenico
Axium
EX8000
Wifi (5GHz, 2.4GHz), 4G, Bluetooth 4.2BLE
Quad-core 1.3GHz processor, 16GB Flash
memory, 2GB RAM, with option for 32GB
Flash memory and 4GB RAM
6” HD+, 1440x720 px
4,040mAH / 3.85V
290g
APIs enable single integration for all
devices, allowing connection to partner
network
Ingenico
Axium
EX6000
Wifi (5GHz, 2.4GHz), 4G, Bluetooth 4.2BLE
Quad-core 1.3GHz processor, 8GB Flash
memory, 1GB RAM, with option for 16GB
Flash memory and 2GB RAM
5” HD, 1280x720 px
2,930 mAh / 3.85V
261g
APIs enable single integration for all
devices, allowing connection to partner
network
5,400 mAh / 3.8V
372g
Little information on API connections
5,150 mAh / 3.8V
240g
Little information on API connections
PAX
A6650
Wifi (5GHz, 2.4GHz), 4G, Bluetooth 5
PAX A77 Wifi (2.4GHz), 4G + Bluetooph 4.0 (optional
MiniPOS+
Wifi 5GHz) and Bluetooth 4.2
Quad-core 2.0GHz processor, 3GB + 32 GB,
6.5”, 1600x720 px,
optional 4GB + 64GB
optional 2480x1080 px
Cortex A53 , 16GB Flash + 2GB RAM
5.5”, 720x1440 px
Source: Barclays Research, company documents
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Instead of relying on off-the-shelf terminal software, merchants can build their own checkout
experience. In an online setting, this has been the case for over a decade and has been one of
the reasons why next-gen providers have been able to differentiate versus more legacy
offerings. For Stripe in particular, its developer-friendly products have been a key selling point,
and the business is taking a similar approach in-store, offering pre-built elements, while also
enabling the needed customisation for merchants.
Ultimately, we believe this move towards Android-based, customisable in-store payment
experiences has the potential to unify the front-end payment experience for consumers across
channels. In other words, the in-store payment experience should become more akin to an
online payment in terms of design standards. With the convergence of design and increased
customisability to now become more relevant in-store, we view next-gen payment providers as
best-placed to differentiate their offerings. Although more mature payment vendors such as
Worldpay, Nexi and Worldline also offer some degree of customisation, we would expect
especially Stripe to offer more developer-friendly tools. We also note that many of the legacy
providers do not promote high-end Android terminals extensively. Adyen and Stripe both list
their newest, Android-based models as the first choice on their website. In contrast, most Nexi
and Worldline brands, for instance, continue to promote primarily non-Android-based
terminals.
FIGuRE 29. The move towards a truly unified shopping experience, where the in-store experience
feels more consistent with online
Source: Barclays Research
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Case study: Stripe’s in-house S700 terminal is merging the online and offline
experience
Stripe recently introduced its new in-house designed and manufactured S700 terminal line,
which follows the acquisition of terminal manufacturer BBPOS in early 2022. This device
goes beyond taking payments, allowing businesses to run their full POS applications on the
device and build customised checkout experiences via APIs and Stripe’s pre-built
components. This allows merchants to incorporate the same design standards as in an
online purchase setting. In our view, most noteworthy is that the checkout customisation
allows the customer experience to feel very similar to an online checkout experience. This
provides the consumer with a more unified experience across in-store and online at the
front-end of the payment transaction.
Due to the fact that the back-end is also unified, a customer’s data is retrievable from the
terminal. For instance, if the customer recalls having looked at a certain product online, but
cannot seem to remember what the exact model was, an employee of the store can look up
on the S700 terminal the customer’s online basket history. Furthermore, customer details
(such as addresses, email, etc.) will automatically be stored if the customer has already
purchased an item at the merchant (online or in any store), allowing a receipt to be sent
directly via email without any details being re-entered (similar to that offered in the SMB
space by, for example, Block). More impressively, business software can be run directly on
the terminal, allowing for diverse use cases. For example, a fitness studio using Stripe can
sign customers up for memberships directly on-terminal, while a cinema could likely install
a custom app for seat selection.
Case study: Adyen is also looking to differentiate in-store with in-housedesigned terminals
We attribute the rapid adoption of Adyen’s in-store POS solutions to date largely to the
differentiation of unified back-end processing of data and the resultant single view of the
customer. Now Adyen is also looking to differentiate the consumer payment experience;
when Adyen first announced that it would move into the domain of designing its own
terminals last summer, it came as somewhat of a surprise, due to the fact that hardware is
widely viewed as a commoditised part of the payments value chain. The company has now
released two terminals, NYC1 and AMS1. NYC1 is a very simple mobile reader comparable to
offerings from SumUp and is tailored to customers that have already invested in hardware
like tablets, POS devices etc. It does not have a screen and is designed to be paired with
another device (such as phone or tablet), with a built-in magnet allowing the NYC1 to be
mobile and attached to a device such as a tablet. The AMS1 is the more advanced device,
comparable to Stripe’s recently released S700 (detailed above), allowing merchants not only
to accept payments, but also to run their business applications. Like Stripe’s newest model,
this allows for a much more unified customer journey across channels than traditional
terminals would, with customisability also key.
Front-end unification most important in high-end verticals, as payments and business
software increasingly integrated
Terminals becoming more customisable, with design-standards between online and in-store
merging, will be most relevant in high-end, high-touch verticals, in our view. While in grocery
retail settings, we expect new technology to remove friction, the same does not hold for hightouch verticals such as luxury or up-market fashion. In these verticals, customers value and
frequently seek out advice from a sales person, which makes for a very different checkout
experience. Sales associates in high-touch verticals often carry a tablet to record client
information (e.g. for measurements, contact details, receipts, reward programs), as well as a
legacy terminal. New terminal technology, such as Stripe’s S700, combines the properties of a
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tablet (recording client data such as address, name, rewards) with the payment technology,
enabling stores to move towards a single device. Alternatively, Tap to Pay (on phone or on
tablet) could also become an alternative solution for high-touch merchants to accept payments
on an existing device, such as a tablet, on which they currently record client information.
However, the fact that Tap on Phone only takes contactless payments may be a hurdle for
higher-value purchases where authentication is required and the consumer is using a card as
opposed to a mobile wallet. Therefore, we see a real opportunity in these verticals for next-gen,
Android-based terminals to be used beyond payments, with the user interface increasingly
looking like the online gateway provided by the same brand.
Stripe has also launched an app marketplace, allowing merchants to integrate business
applications from a variety of partners, from accounting software, to marketing & sales tools
(e.g. ticketing) and compliance. Over the long term, we believe there could be some
consolidation, with payment providers potentially able to broaden their footprint in the valuechain by acquiring software that is used in the checkout experience. Looking at some of Adyen’s
in-store blog case studies, we note that frequently, in-store digital transformation requires not
only the payment provided by Adyen, but also adjacent software solutions (for example, order
management systems provided by a third party).
In the future, as in SMB, offering payments alone will no longer be enough, in our view.
Increasingly, vendors will compete on software differentiation – and the more invisible the
payment, the better.
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Materially Mentioned Stocks (Ticker, Date, Price)
Adyen (ADYEN.AS, 28-Jul-2023, EUR 1674.00), Equal Weight/Neutral, FA/FB/J
Alphabet Inc. (GOOGL, 28-Jul-2023, USD 132.58), Overweight/Positive, CD/CE/E/J/K/L/M/N
Other Material Conflicts: One of the analysts in the Equity-Linked Research Team (and/or a member of his or her household) has a long position in the
common stock of Alphabet, Inc (GOOGL).
Amazon.com, Inc. (AMZN, 28-Jul-2023, USD 132.21), Overweight/Positive, A/CD/CE/D/E/J/K/L/M/N
Apple, Inc. (AAPL, 28-Jul-2023, USD 195.83), Equal Weight/Neutral, A/CD/CE/D/E/J/K/L/M/N
Other Material Conflicts: One of the Research Analysts on the fundamental equity coverage team (and/or a member of his or her household) has a long
position in Vanguard Information Technology Index Fund (NYSEARCA:VGT) which primary holding is in Apple Inc. (NASDAQ: AAPL).
Block, Inc. (SQ, 28-Jul-2023, USD 78.36), Overweight/Positive, CD/CE/E/J/K/L/N
Fidelity National Information Services (FIS, 28-Jul-2023, USD 59.65), Equal Weight/Positive, CD/CE/D/E/J/K/L/M/N
Fiserv, Inc. (FI, 28-Jul-2023, USD 124.99), Overweight/Positive, CD/CE/J/K/M/N
Global Payments Inc. (GPN, 28-Jul-2023, USD 108.89), Overweight/Positive, A/CD/CE/D/E/J/K/L/M
Lightspeed Commerce Inc. (LSPD, 28-Jul-2023, USD 17.21), Overweight/Positive, CE/J
Mastercard Inc. (MA, 28-Jul-2023, USD 392.96), Overweight/Positive, A/CD/CE/D/J/K/L/M/N
Network International (NETW.L, 28-Jul-2023, GBp 388), Equal Weight/Neutral, FA/J
Nexi (NEXII.MI, 28-Jul-2023, EUR 7.80), Equal Weight/Neutral, CD/D/E/J/K/L/M
PayPal, Inc. (PYPL, 28-Jul-2023, USD 73.98), Overweight/Positive, CD/CE/D/E/J/K/L/M/N
PayPoint (PAYP.L, 28-Jul-2023, GBP 4.89), Underweight/Neutral, J/K/M/N
Visa Inc. (V, 28-Jul-2023, USD 235.75), Overweight/Positive, CD/CE/E/J/K/L/M/N
Wise (WISEa.L, 28-Jul-2023, GBP 7.78), Equal Weight/Neutral, J/K/M/N
Worldline (WLN.PA, 28-Jul-2023, EUR 35.85), Overweight/Neutral, CD/E/J/K/L/M/N
Other Material Conflicts: Barclays Bank Plc and/or an affiliate is providing Investment Banking services to Apollo Global Management Inc on their
potential acquisition of the Terminals, Solutions & Services (TSS) business from Worldline SA. The rating, price target and estimates (as applicable) on
Worldline SA as issued by the Firm’s Research Department do not incorporate any such potential transaction.
Barclays Bank PLC and/or its affiliates is acting as sell-side advisor to Eurobank S.A. in relation to the divestiture of their merchant acquiring business.
The rating, price target and estimates (as applicable) on Worldline SA as issued by the Firm’s Research Department do not incorporate any such
potential transaction.
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Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the last
available closing price at the time of publication.
Disclosure Legend:
A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of the issuer in the
previous 12 months.
B: An employee or non-executive director of Barclays PLC is a director of this issuer.
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by this issuer.
CE: Barclays Bank PLC and/or an affiliate is a market-maker in equity securities issued by this issuer.
CH: Barclays Bank PLC and/or its group companies makes, or will make, a market in the securities (as defined under paragraph 16.2 (k) of the HK SFC
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or more than 1% of this issuer’s market capitalization, as calculated in accordance with HK regulations.
GD: One of the Research Analysts on the fundamental credit coverage team (and/or a member of his or her household) has a long position in the
common equity securities of this issuer.
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O: Not in use.
P: A partner, director or officer of Barclays Capital Canada Inc. has, during the preceding 12 months, provided services to the subject company for
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Q: Barclays Bank PLC and/or an affiliate is a Corporate Broker to this issuer.
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S: This issuer is a Corporate Broker to Barclays PLC.
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u: The equity securities of this Canadian issuer include subordinate voting restricted shares.
V: The equity securities of this Canadian issuer include non-voting restricted shares.
Risk Disclosure(s)
Master limited partnerships (MLPs) are pass-through entities structured as publicly listed partnerships. For tax purposes, distributions to MLP unit
holders may be treated as a return of principal. Investors should consult their own tax advisors before investing in MLP units.
Disclosure(s) regarding Information Sources
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purposes only, does not constitute investment advice and is not warranted to be complete, timely and accurate. Sustainalytics’ information and data is
subject to conditions available at https://www.sustainalytics.com/legal-disclaimers/
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Bloomberg® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”) and the Bloomberg Indices are
trademarks of Bloomberg. Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or
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to be obtained therefrom and, to the maximum extent allowed by law, Bloomberg shall have no liability or responsibility for injury or damages arising
in connection therewith.
Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below)
relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the “industry coverage universe”).
In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or Negative (see
definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the
entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment
horizon.
Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to
comply with applicable regulations and/or firm policies in certain circumstances including where the Investment Bank of Barclays Bank PLC is acting in
an advisory capacity in a merger or strategic transaction involving the company.
Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
Negative - industry coverage universe fundamentals/valuations are deteriorating.
Below is the list of companies that constitute the “industry coverage universe”:
Americas Payments, Processors & IT Services
Accenture, Inc. (ACN)
Affirm Holdings, Inc. (AFRM)
Automatic Data Processing, Inc. (ADP)
AvidXchange Holdings, Inc. (AVDX)
Block, Inc. (SQ)
Cognizant (CTSH)
DLocal Limited (DLO)
EPAM Systems (EPAM)
Fidelity National Information Services (FIS)
Fiserv, Inc. (FI)
Fleetcor Technologies (FLT)
Global Payments Inc. (GPN)
Green Dot Corp. (GDOT)
Marqeta, Inc. (MQ)
Mastercard Inc. (MA)
PagSeguro Digital Ltd. (PAGS)
Paychex, Inc. (PAYX)
PayPal, Inc. (PYPL)
Rackspace Technology, Inc. (RXT)
Remitly Global, Inc. (RELY)
Repay Holdings Corp. (RPAY)
Riskified Ltd. (RSKD)
StoneCo Ltd. (STNE)
TELUS International (Cda) Inc. (TIXT)
Upstart Holdings Inc. (UPST)
Visa Inc. (V)
Western Union (WU)
Ahold Delhaize (AD.AS)
Carrefour (CARR.PA)
Casino (CASP.PA)
Colruyt (COLR.BR)
Jeronimo Martins (JMT.LS)
Metro AG (B4B.DE)
Ocado (OCDO.L)
Rallye (GENC.PA)
Sainsbury (J) plc (SBRY.L)
Sonae (YSO.LS)
Tesco (TSCO.L)
WEX, Inc. (WEX)
European Food Retail
European Software & IT Services
Adyen (ADYEN.AS)
Alfa (ALFAAL.L)
Amadeus (AMA.MC)
Bytes Technology Group (BYIT.L)
Capgemini (CAPP.PA)
Computacenter (CCC.L)
Dassault Systèmes (DAST.PA)
FDM Group (Holdings) (FDM.L)
Funding Circle (FCH.L)
GB Group plc (GBGP.L)
Hexagon AB (HEXAb.ST)
Nemetschek (NEKG.DE)
Netcompany (NETCG.CO)
Network International (NETW.L)
Nexi (NEXII.MI)
PayPoint (PAYP.L)
Sage Group (SGE.L)
SAP SE (SAPG.DE)
Softcat (SCTS.L)
Software AG (SOWG.DE)
TeamViewer (TMV.DE)
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Temenos (TEMN.S)
Wise (WISEa.L)
Worldline (WLN.PA)
Apple, Inc. (AAPL)
Arista Networks, Inc. (ANET)
Axon Enterprise, Inc. (AXON)
CDW Corp. (CDW)
Ciena Corporation (CIEN)
Cisco Systems, Inc. (CSCO)
Corning Incorporated (GLW)
Dell Technologies Inc. (DELL)
F5, Inc. (FFIV)
Garmin (GRMN)
Harmonic, Inc. (HLIT)
Hewlett Packard Enterprise Company (HPE)
HP Inc. (HPQ)
Juniper Networks, Inc. (JNPR)
Keysight Technologies, Inc. (KEYS)
Logitech (LOGI)
Motorola Solutions, Inc. (MSI)
NetApp, Inc. (NTAP)
Nutanix, Inc (NTNX)
Pure Storage, Inc. (PSTG)
TD Synnex (SNX)
1stDibs Inc. (DIBS)
Activision Blizzard, Inc. (ATVI)
Airbnb Inc. (ABNB)
Alphabet Inc. (GOOGL)
Amazon.com, Inc. (AMZN)
Booking Holdings Inc. (BKNG)
Chewy, Inc. (CHWY)
Compass Inc. (COMP)
Corsair Gaming, Inc. (CRSR)
DoorDash, Inc. (DASH)
Duolingo, Inc. (DUOL)
eBay, Inc. (EBAY)
Electronic Arts, Inc. (EA)
Etsy Inc (ETSY)
Expedia Inc. (EXPE)
GoDaddy Inc. (GDDY)
Groupon, Inc. (GRPN)
IAC/InterActiveCorp (IAC)
LegalZoom.com, Inc. (LZ)
Lyft, Inc. (LYFT)
Match Group, Inc. (MTCH)
MercadoLibre (MELI)
Meta Platforms, Inc. (META)
NerdWallet, Inc. (NRDS)
Nerdy, Inc. (NRDY)
Outbrain, Inc. (OB)
Peloton Interactive, Inc. (PTON)
Pinterest, Inc. (PINS)
Rent the Runway, Inc. (RENT)
Revolve (RVLV)
Roblox Corporation (RBLX)
Shopify (SHOP)
Snap, Inc (SNAP)
Spotify Technology S.A. (SPOT)
Squarespace, Inc. (SQSP)
Stitch Fix (SFIX)
Take-Two Interactive Software (TTWO)
ThredUp Inc. (TDUP)
Tripadvisor Inc. (TRIP)
Uber Technologies Inc. (UBER)
Unity Software Inc. (U)
Wix.com Ltd. (WIX)
Yelp, Inc. (YELP)
Ziff Davis Inc (ZD)
Zillow, Inc. (ZG)
8x8 Inc. (EGHT)
Adobe Inc. (ADBE)
Alarm.com Holdings, Inc. (ALRM)
Alkami Technology, Inc. (ALKT)
Ansys, Inc. (ANSS)
Appian Corporation (APPN)
Atlassian (TEAM)
AudioCodes Ltd. (AUDC)
Autodesk Inc. (ADSK)
Bandwidth Inc. (BAND)
BigCommerce (BIGC)
Braze Inc. (BRZE)
CCC Intelligent Solutions (CCCS)
Ceridian HCM Holding Inc. (CDAY)
Check Point Software Technologies Ltd. (CHKP)
Confluent, Inc (CFLT)
Couchbase (BASE)
CrowdStrike Holdings, Inc (CRWD)
CyberArk Software (CYBR)
Datadog, Inc. (DDOG)
Definitive Healthcare Corp (DH)
Descartes Systems Group (DSGX)
DigitalOcean (DOCN)
DoubleVerify Holdings, Inc. (DV)
Dynatrace, Inc. (DT)
Elastic N.V. (ESTC)
Everbridge, Inc. (EVBG)
EverCommerce Inc. (EVCM)
Five9, Inc. (FIVN)
Fortinet, Inc. (FTNT)
Freshworks Inc. (FRSH)
Gen Digital Inc. (GEN)
GitLab Inc. (GTLB)
HubSpot, Inc. (HUBS)
Integral Ad Science Holding Corp. (IAS)
Intuit Inc. (INTU)
Jamf Holding Corp. (JAMF)
Lightspeed Commerce Inc. (LSPD)
LivePerson, Inc. (LPSN)
MeridianLink, Inc. (MLNK)
Microsoft Corp. (MSFT)
MongoDB, Inc. (MDB)
nCino, Inc. (NCNO)
OpenText Corp. (OTEX)
Oracle Corp. (ORCL)
Palo Alto Networks (PANW)
Paycom (PAYC)
Paylocity Holding Corp (PCTY)
IT Hardware and Communications Equipment
Ubiquiti, Inc. (UI)
u.S. Internet
ZipRecruiter, Inc (ZIP)
u.S. Software
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Pegasystems, Inc. (PEGA)
PowerSchool Holdings, Inc (PWSC)
Procore Technologies, Inc. (PCOR)
PTC Inc. (PTC)
Rapid7 (RPD)
RingCentral, Inc. (RNG)
Salesforce.com Inc. (CRM)
SAP SE (SAP)
SecureWorks (SCWX)
SentinelOne, Inc. (S)
ServiceNow, Inc. (NOW)
Similarweb Ltd. (SMWB)
Skillsoft Corp. (SKIL)
Smartsheet Inc. (SMAR)
Snowflake Computing (SNOW)
Splunk Inc. (SPLK)
Sprinklr, Inc. (CXM)
Sprout Social, Inc. (SPT)
Tenable Holdings Inc (TENB)
Teradata Corp. (TDC)
Twilio Inc. (TWLO)
Tyler Technologies, Inc. (TYL)
UiPath, Inc. (PATH)
Varonis Systems, Inc. (VRNS)
Veeva Systems Inc. (VEEV)
VMware Inc. (VMW)
WalkMe Ltd. (WKME)
Workday Inc. (WDAY)
Zeta Global Holdings Corp. (ZETA)
Zoom Video Communications, Inc. (ZM)
ZoomInfo Technologies Inc. (ZI)
Zscaler, Inc. (ZS)
Distribution of Ratings:
Barclays Equity Research has 1736 companies under coverage.
50% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 47% of companies
with this rating are investment banking clients of the Firm; 67% of the issuers with this rating have received financial services from the Firm.
34% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 42% of
companies with this rating are investment banking clients of the Firm; 65% of the issuers with this rating have received financial services from the Firm.
15% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 26% of
companies with this rating are investment banking clients of the Firm; 52% of the issuers with this rating have received financial services from the Firm.
Guide to the Barclays Research Price Target:
Each analyst has a single price target on the stocks that they cover. The price target represents that analyst’s expectation of where the stock will trade
in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst’s price target over
the same 12-month period.
Types of investment recommendations produced by Barclays Equity Research:
In addition to any ratings assigned under Barclays’ formal rating systems, this publication may contain investment recommendations in the form of
trade ideas, thematic screens, scorecards or portfolio recommendations that have been produced by analysts within Equity Research. Any such
investment recommendations shall remain open until they are subsequently amended, rebalanced or closed in a future research report.
Barclays may also re-distribute equity research reports produced by third-party research providers that contain recommendations that differ from
and/or conflict with those published by Barclays’ Equity Research Department.
Disclosure of other investment recommendations produced by Barclays Equity Research:
Barclays Equity Research may have published other investment recommendations in respect of the same securities/instruments recommended in this
research report during the preceding 12 months. To view all investment recommendations published by Barclays Equity Research in the preceding 12
months please refer to https://live.barcap.com/go/research/Recommendations.
Legal entities involved in producing Barclays Research:
Barclays Bank PLC (Barclays, UK)
Barclays Capital Inc. (BCI, US)
Barclays Bank Ireland PLC, Frankfurt Branch (BBI, Frankfurt)
Barclays Bank Ireland PLC, Paris Branch (BBI, Paris)
Barclays Bank Ireland PLC, Milan Branch (BBI, Milan)
Barclays Securities Japan Limited (BSJL, Japan)
Barclays Bank PLC, Hong Kong Branch (Barclays Bank, Hong Kong)
Barclays Capital Canada Inc. (BCCI, Canada)
Barclays Bank Mexico, S.A. (BBMX, Mexico)
Barclays Capital Casa de Bolsa, S.A. de C.V. (BCCB, Mexico)
Barclays Securities (India) Private Limited (BSIPL, India)
Barclays Bank PLC, India Branch (Barclays Bank, India)
Barclays Bank PLC, Singapore Branch (Barclays Bank, Singapore)
Barclays Bank PLC, DIFC Branch (Barclays Bank, DIFC)
Disclaimer:
This publication has been produced by Barclays Research Department in the Investment Bank of Barclays Bank PLC and/or one or more of its affiliates
(collectively and each individually, “Barclays”).
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It has been prepared for institutional investors and not for retail investors. It has been distributed by one or more Barclays affiliated legal entities listed
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Barclays | European Fintech & Payments Primer - Volume 18
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Barclays | European Fintech & Payments Primer - Volume 18
Dubai International Financial Centre) and accordingly should not be construed as such. Furthermore, this information is being made available on the
basis that the recipient acknowledges and understands that the entities and securities to which it may relate have not been approved, licensed by or
registered with the UAE Central Bank, the Dubai Financial Services Authority or any other relevant licensing authority or governmental agency in the
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Environmental, Social, and Governance (‘ESG’) Related Research: There is currently no globally accepted framework or definition (legal, regulatory
or otherwise) of, nor market consensus as to what constitutes, an ‘ESG’, ‘green’, ‘sustainable’, ‘climate-friendly’ or an equivalent company, investment,
strategy or consideration or what precise attributes are required to be eligible to be categorised by such terms. This means there are different ways to
evaluate a company or an investment and so different values may be placed on certain ESG credentials as well as adverse ESG-related impacts of
companies and ESG controversies. The evolving nature of ESG considerations, models and methodologies means it can be challenging to definitively
and universally classify a company or investment under an ESG label and there may be areas where such companies and investments could improve or
where adverse ESG-related impacts or ESG controversies exist. The evolving nature of sustainable finance related regulations and the development of
jurisdiction-specific regulatory criteria also means that there is likely to be a degree of divergence as to the interpretation of such terms in the market.
We expect industry guidance, market practice, and regulations in this field to continue to evolve. Any references to ‘sustainable’, ‘sustainability’, ‘green’,
‘social’, ‘ESG’, ‘ESG considerations’, ‘ESG factors’, ‘ESG issues’ or other similar or related terms in this document are as used in our public disclosures
and not to any jurisdiction-specific regulatory definition or other interpretation of these terms unless specified otherwise.
IRS Circular 230 Prepared Materials Disclaimer: Barclays does not provide tax advice and nothing contained herein should be construed to be tax
advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used,
and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the
transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax
advisor.
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prior written permission of Barclays. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP.
Additional information regarding this publication will be furnished upon request.
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