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During the two years since the Covid-19 pandemic hit, point-of-sale technology for enterprise merchants in the United States has gone from being a low-growth channel for POS solution and hardware providers to one that now presents significant growth opportunities, according to a report from Moody’s Investor Service.
Sparking the turnaround has been consumer adoption of contactless payments and other alternatives, such as buy now pay later, as well as self-checkout technology. Also playing a role: Large merchants’ growing emphasis on omnichannel sales and data security.
As a result, the leading U.S.-based providers of POS and payment solutions—NCR Corp., ACI Worldwide Inc., and Verifone Inc.— are moving to capitalize on these trends as large merchants are no longer losing sales to e-commerce sellers and are focusing less on containing costs.
As part of this trend, the leading U.S.-based POS and payment solutions providers are offering cloud-based Platform-as-a-Service (PaaS) solutions , as these are seen as a way for large merchants to expand customer relationships. PaaS platforms enable POS and payment solutions to offer myriad services related to consumers’ current needs, including card issuing, payments clearing, cross-border payments, disbursements, and e-commerce gateways, the report says.
Moving in this direction is expected to propel profits for NCR and ACI. But Verifone is being projected as the biggest winner as it is the only one of the top three projected to post double-digit percentage gains in 2022, according to Moody’s.
According to Moody’s, the estimated revenue growth for the leading U.S. POS solutions providers in 2022 is NCR at 8%, down from an estimated 10% in 2021; Verifone North America at 15%, up from an estimated 10% in 2021; and ACI at 6%, up from an estimated 4% last year.
Of the big three, NCR appears to be the farthest along in large-merchant transition to PaaS. Moody’s says NCR reported about three times growth in PaaS POS lanes in 2021. The growth spike, however, did not do much to boost the installed PaaS base among large merchants. Among NCR’s merchants, just 1% use its PaaS solution, the report says. Nevertheless, Moody’s says NCR has a target of reaching 25% penetration of PaaS lanes in 2026.
“Given NCR’s large market presence, such a shift would be transformative for the sector. NCR indicates that [the] revenue opportunity from a platform lane exceeds that of the product approach by about 50% upon transition with potential to scale to multiples of prior revenue over time, as it enables NCR to increase share of wallet across [a] broader POS and payment technology solution suite including payment cloud and merchant acquiring among other elements,” the report says.
Self-checkout kiosks (SCO), which were growing pre-pandemic, especially among large merchants, continue to be widely adopted by merchants. Driving the trend is consumer focus on getting through checkout quickly. Labor shortages and higher labor costs for cashier positions are also factors in the continued growth, the report says.
As a result, many merchants are introducing SCO for the first time, and more lanes are converted to SCO in locations where it was already present. “Adoption of SCO solutions [is] becoming broad-based across merchant categories, expanding out of big box and grocery into specialty retail, convenience and fuel,” the report says. “While the pace of growth may slow over time as the installed base expands, the SCO segment is likely to continue generating solid growth over the coming years.”
NCR had the largest share of self-checkout unit shipments in 2021, with an estimated 40%+, followed by Toshiba Corp. accounting for 20%+ of shipments, and Diebold Nixdorf Inc. accounting for 10% shipments, according to the Moody’s report.
