Ingenico Group is the world’s largest payment-terminal, as measured by shipments. That means their brand is on more retail-store registers than any other company’s.
But Paris-based Ingenico has historically been weaker in the US. Ingenico is now expanding rapidly into the US and Asia-Pacific markets beyond its stronghold in Europe, and has sought to double-down on its online and mobile-commerce businesses.
Ingenico Group has faced a shifting landscape in the US: VeriFone, its main rival, bought a third competitor in 2011. Also, the rise of NFC as a mobile-payment technology (e.g., Apple Pay), and the US shift toward more secure so-called EMV credit and debit cards with computer chips has prompted merchants to upgrade their registers and adopt new technologies.
BI Intelligence, Business Insider’s subscription research service, recently sat down with CEO Phillipe Lazare to discuss this market’s future.
This Q&A has been edited for brevity and clarity, and it’s abridged. The full Q&A is only available to subscribers of BI Intelligence, Business Insider’s subscription research service, which covers payments, e-commerce, mobile and other areas. For background on the structure of the payments ecosystem read our recent payments industry explainer.
BI Intelligence: Let’s start with the US market. Ingenico Group hasn’t always enjoyed the same level of success in the US market as it does now. Can you talk about what prompted the decision to stay?
Philippe Lazare: We decided two or three years ago to keep selling our solutions on the US market when the decision was not completely obvious. We had our doubts, there was significant competition, our market share was not so big, and the certification process was tough going. The question was: Do we stay or do we go? Which is a question you ask in every part of your life. We decided to stay with a significant number of people working in Atlanta and we’ve made a small mobile payments acquisition in Boston. Now, Ingenico Group has strong momentum in the US.
BII: When you talk to your US distributors do you hear any specifics on why merchants are choosing Ingenico?
PL: In our business, the relationship is based on trust and confidence. We are providing secure payment solutions. We believe that in the mind of (distributors), Ingenico Group is a no-risk solution. They know we are working globally, that we have been doing this for more than 30 years, and we are No. 1 in China and most European countries. The other aspect is timing. Opening the door at the right time. And that door opened with the combination of the EMV/NFC migration and VeriFone’s acquisition of Hypercom.
Switching the big retailers in the US from one operating system to another was another challenge, but we did that reasonably easily. But we still didn’t have the ISOs [independent sales organisations, which are the merchant-facing distributors of payment-register systems], which we needed to reach out to smaller US merchants. Convincing the ISOs to move from the two usual suspects [VeriFone and Hypercom] they used to work with was not so easy. At the same time, VeriFone decided to buy Hypercom which opened the door for us to be the second option for ISOs. So we sped up the process of certification and have been selling a significant number of terminals in the US for the last two years.
BII: What about mobile point-of-sale (mPOS), or registers operated from smartphones and tablets? On your July 2014 earnings call, I heard you say something to the effect of “we have significant share, but it’s an incredibly hard segment to monetise.” Is mobile ever going to be profitable?
PL: The size of the segment is tiny so far. I think the business model for the merchant acquirers is questionable because if you have a merchant with two or three $US10 transactions a day, out of that you have to pay for the merchant-acquiring fee, the hardware. So far we don’t see a business model.
I think there is much more noise than revenue coming from that part of the business. If you asked me if in the future the mobile solution will be important for retailers, my answer is yes, but it is not obvious for the very small merchant. The basic idea was to provide a payment solution for small merchants with very small volume — that may be too little to support a long-term business model. But we believe there is room for mobile among mid-sized retailers because they want both types of solutions in their shops.
BII: New mobile commerce apps like Uber and Seamless bypass payment-terminal transactions. Do you see a significant threat from these apps?
PL: With Uber you pay the Uber service and that’s it. If you want a Starbucks coffee you need another application. The key question is whether they can get something to become a single interoperable ecosystem. The two models can exist in parallel and we can deal with both. From a consumer perspective is that a good experience to have to deal with 20 different apps to do your shopping or would you rather just use your card?
BII: Right, so if there are 100 different apps it will probably be a problem for me unless they can be called up with beacons or something like that. But at the same time I definitely use Uber. I definitely use Seamless. Do you see any threat in particular markets such as taxis or restaurants?
PL:No. Again, I strongly believe that what you are describing is going to exist at a large scale, but it will only be a part of the payment industry. You are coming from something unified and driven by big players. Things are starting to be a bit different, but if you look at the strength of that larger ecosystem, it’s pretty strong. There is room for everybody. We know players in the ecosystem and as such we can act as an enabler with all of them, leveraging on our strong position in e-commerce thanks to the acquisition of Ogone and more recently Global Collect.
Catherine Blanchet, VP Investor Relations and Corporate Communications:Remember cash remains very much king. All of these new initiatives are increasing the size of the electronic payments market. You have new piles for different applications on top of what already exists.