The market for cashless and mobile payment is on the move. Companies like Square or Sumup enable micro-companies to accept card payments. The years of payment terminals may be numbered – they could soon give way to new technologies.
In some Scandinavian countries, paying with a face scan has already been tested.
Emmanuele Contini / Imago
The market for payment solutions is reorganizing – also in Switzerland. “Digitization is changing the retail industry and the payment market in equal measure, and new solutions and offers are constantly coming onto the market,” says Marianne Bregenzer, country manager at the payment service provider Nets Switzerland.
This also has an impact on the so-called acquirers – these are companies that ensure for merchants and companies that card transactions are authorized and processed. You make a promise to pay to the retailer based on an authorized transaction and handle the corresponding financial risk. They also check traders, fight fraud and ensure that transactions comply with regulatory requirements.
Square has shaken the market
In the US, Twitter boss Jack Dorsey did it founded company Square shook the market for payment services in the past few years. The company enables small businesses and the self-employed to have their customers pay electronically and on the move without having to spend large sums of money on a card terminal.
“It’s not just about paying, it’s about the whole thing Ecosystem, similar to Wechat and Alipay, ”says Tobias Trütsch, payment economist at the University of St. Gallen. In addition to the payment function, Chinese providers such as Wechat and Alipay offer a variety of additional services. “Sumup and other providers are undoubtedly emulating Square, they have established the service in Europe,” says Trütsch.
Worldline and Nets dominate in Switzerland
According to the HSG economist, competition among acquirers is also intensifying in Switzerland, especially in online Area. The market leader in Switzerland is SIX Payment Services, which is now active under the name Worldline and a former division of the financial infrastructure provider SIX Group. This had acquired Aduno’s acquiring business in 2017. In 2020, the company also bought the French payment service provider Ingenico. The company operates the mPrime offer in Switzerland, which arose from mCashier from SIX and Anypay from Aduno.
Nets is the second largest provider in the market. The company emerged from the merger of Concardis Switzerland and CCV Switzerland at the end of June this year. With the merger of Nets with the Italian Nexi, the company has gained further innovative strength, says Bregenzer.
Trütsch expects changes in the market in the coming years. “The benefices of the previous duopoly SIX or Worldline and Nets are dwindling. There are more innovative offers on the market, which is to be welcomed from retailers and consumers, ”he says. According to its own statements, SIX / Worldline has a 70 to 75% share of the acquiring business in Switzerland, according to Trütsch. Nets have a large share of the rest of the market. In addition, there are Postfinance and Twint as national solutions.
New providers are entering the market
In the past few years meanwhile, new providers have made a name for themselves in the acquiring market in Switzerland. These include Adyen or Be-Cash, the largest of which is Sumup. According to Vera Pershina, who works at Sumup as a growth manager for Germany, Switzerland and Austria, her company has 3 million dealers as customers worldwide. Sumup was founded in 2012 and has been active in Switzerland since 2014. Pershina says that the company has focused on small traders from the outset as these have been neglected by traditional banks.
In the meantime, Sumup has entered into partnerships with traditional banks. In Switzerland, the company cooperates with UBS. “In Switzerland there are around 600,000 SMEs with a total of 3 million jobs. Many do not yet offer card payments, »says Pershina.
The new providers state that they are significantly cheaper than the providers of conventional terminal solutions. This should especially apply if not too many payments are made, which is probably especially the case with smaller shops and merchants. Marc Schluep, Switzerland boss at Worldline, however, points out the relatively high transaction costs with the new providers. With them there is often a cross-subsidization between hardware and transaction fees.
What is the future of the payment market?
There are some indications that the upheaval in the acquiring market will continue. In the medium term, the number of payment terminals could decrease, and ultimately they could even disappear, expects Malik Khalfi, head of the Be-Cash provider. He assumes that customers will pay more and more with their mobile phones.
A survey by the online Comparison service Comparis from September this year confirms this trend. Accordingly, the number of mobile phones has increased significantly during the corona pandemic. Almost 40% of the participants in the survey stated that they pay by mobile phone at least once a week. Before the pandemic, it was only 13%, according to Comparis. According to the study, the future belongs to the smartphone as a wallet.
Trütsch also expects physical cards to disappear in the longer term. “In the future there should be a virtual image of it on the cell phone and customers pay with this or other wearables,” he says.
Biometric approaches tested
In addition, in some countries biometric approaches to payments are gaining ground. In the Scandinavian countries, Nets have already tested payments via the scan of the face or via the vein structure on the finger, says Bregenzer. Consumers there are very open to new payment methods, and digitalization is advancing accordingly quickly.
Schluep refers to the entry of big tech companies and fintech companies into the payment industry. The corresponding offers include Facebook Pay, Google Pay or Amazon Pay. Cryptocurrencies, stable coins and digital currencies issued by central banks are also likely to cause further changes in the market. One of the big topics of the coming years will be the introduction of a universally applicable digital ID as well as its linking with the also digital means of payment.
According to Schluep, “Tap to Phone” is likely to be increasingly introduced. This means contactless payments using a corresponding app on a normal mobile phone or tablet. “PIN on Glass” is also on the advance, meaning entering the PIN on the corresponding device. “Worldline will launch its first pilot in Switzerland in October, which of course can also be seen as the answer to Sumup’s successful positioning in the very small retailer segment,” he says.
Another trend, from Schluep’s point of view, is the seamless integration of the Payment process in the retailer’s value chain, so that the customer is no longer aware of the actual payment process. A classic example of this is the travel agent Uber.
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