The European market has witnessed a great deal of growth and change over the past decade in the area of merchant services and mobile payment apps. A new report from AEVI, a German-based company that enables better cooperation among banks, acquirers, and merchants, states that the industry has matured to the extent that 2020 may be a transition year where consolidation is the rule and participants compete on quality of service, not necessarily on price.
Payment Week notes that AEVI’s CEO, Mike Camerling, remarked:
We can expect acquirers to increase the amount of strategic partnerships and look to acquire smaller, more nimble players to add to their talent pool and refresh their innovative drive. Rather than trying to integrate and connect individually with best-of-breed software developers, acquirers need an open platform that provides the interoperation of services and an app marketplace from which to select the right apps for particular merchant types.
Growth and change have been the hallmarks of this market, but AEVI saw the need to assess trends in significant markets to determine if directions were changing. Although German-based and residing in the largest market in the EU, AEVI chose to study Spain, France, and Italy. The primary finding of the report is that Mergers and Acquisition strategies are in full force, a sign of market maturation. They see this trend as continuing, due in part to the success of external companies like iZettle, PayPal and Square in spreading their “tentacles” into the EU marketplace.
The secondary finding deals more with the nature of competitive battles in the sector. The report suggests that price wars have achieved their limited objectives. If companies are to move market share going forward, the general conclusion is that it will have on the quality level of delivered services. Consumers are becoming more aware of innovations in the space and of applications that can bring more convenience to their daily lives. In order to compete on this changing battlefield, companies must appeal to the changing interests of their consumers.
The AEVi report expands upon many of the trends that other research firms have found. In a recent report by JPMorgan, the number one acquirer for e-commerce transactions in Europe, it noted that:
Our findings highlight a multifaceted European e-commerce market that is developing into a mature industry. Mobile commerce is the main driver of growth, far outstripping the overall e-commerce market. Despite the growth of payment methods such as digital wallets, cards are still the dominant form of payment in Europe and will continue to be a primary way to spend online for European shoppers.
McKinsey has also noted that payment growth in Europe has been sluggish, due primarily to the lagging European economy. Electronic payment transactions, however, have grown “consistently” at twice the rate of GDP growth in the region. The shift away from cash has been aided by innovations in real-time payments, mobile wallets, and regulation in the form of the second Payment Services Directive (PSD2). As always, security issues will remain front and center, as cyber fraudsters expand their efforts.