Coronavirus pandemic puts Ingenico, Diebold Nixdorf digital strategies to the test
The point of sale terminal industry was already under pressure to go digital before the coronavirus pandemic made this transition much more crucial to its survival.
One of the market's mainstays, Ingenico, is more than two years into a transformation that started with an unsolicited takeover bid and an executive shakeup in 2018, and seemed to hit a peak earlier in 2020 with an $8.6 billion merger agreement with Worldline. That was just before the coronavirus crisis came into clear view in Europe and North America, but also was the time it started to ease in Asia.
Not all markets are experiencing the virus (or its recovery) the same way, making it hard for any global company to adapt.
“The reality is that in many markets, the worst day has not yet come,” said Damian Perillat, who joined Ingenico in April to lead the Paris-based company’s global online business line, which is responsible for digital payments serving large enterprises.
He most recently worked at PayPal, where he had been general manager for Western Europe and also led Southern Europe for a time. Earlier in his career, Perillat worked for GE Money in Europe and Asia and was a management consultant in France.
Perillat is part of a small group of financial technology execs who started new posts as the pandemic raged, joining a new company just as its ongoing operations were thrown into disarray. Ingenico reported a 13% decline in revenue in the first six months of 2020, despite a strong start, as payment volume dropped precipitously.
While only at the company for about four months, Perillat will bear a lot of the responsibility for Ingenico's recovery given his focus on digital commerce, an area of strength for most payment companies during the crisis and also the clearest path out of the storm.
“It’s important to have a global reach but with truly local relationships,” said Perillat, adding Ingenico is leaning on a mix of relatively newer ways to deliver merchant technology while maintaining its global network of bank relationships to tailor recovery for local markets.
The Worldline merger, which Perillat said is on target to be completed by the end of 2020, is designed to enhance both companies' geographic merchant and partner networks in central and northern Europe and in the Americas.
The two companies are also pressured to develop more digital delivery to counter payment facilitators, or technology companies that support multiple payment types and online marketplaces — and API connections for brick-and-mortar retailers to add online storefronts.
The combined Ingenico and Worldline, and other point of sale hardware companies such as Verifone and Diebold Nixdorf, face competition on two fronts. In addition to the payment facilitators like Square, PayPal and Stripe — which have all added tools to attract more merchant categories to digital during the pandemic — the point of sale hardware industry faces pressure from Fiserv, FIS and Global Payments, which all become substantially larger over the past year and a half due to M&A deals with bank technology companies.
That’s requiring point of sale firms to become less reliant on hardware. Diebold Nixdorf says it is focusing more on self-serve customer experiences that limit contact and enable faster shopping and checkout. That’s underpinned through the company’s advisory service, which it uses to help define store layout, consumer flow and the technology mix for each store.
As contactless payment limits increase, consumers have adapted, which puts pressure on retailers to always have mobile pay available. Physical retail stores will retain the majority provider of a retailers’ revenue, although some retailers have seen as much as a 150% increase in online sales, Matt Redwood, global head of self-service, retail division, at Diebold Nixdorf, said in an email.
“All retailers need to rethink the value their physical stores provide to consumers,” said Redwood. “More services and experiences are expected, which is a challenge with the same amount of staff. The only way forward is more automation … taking processes that were once human-heavy to a truly automated service.”
Verifone did not return requests for comment by deadline. Verifone has also made management changes in the past two years and was taken private despite showing a turnaround in its financial performance. Like its competitors, Diebold Nixdorf is in the midst of a multiyear management and technology shakeup.
As stay-at-home restrictions were put in place, merchants had to ramp up cross-channel options such as curbside pickup and mobile ordering. In addition, they had to accelerate adoption of contactless commerce, including pure online purchases through their e-commerce sites or mobile apps, said Benny Tadele, vice president of global merchant solutions at ACI Worldwide.
“As stores slowly started to reopen, consumer fears of infection from shared POS systems are also necessitating in-store contactless payments through NFC mobile and contactless cards,” Tadele said.
Businesses that provide payments hardware and software to merchants need to focus more heavily on technology and architecture that allows them to enable omni- or cross-channel sales, Tadele said. “Some have invested in flexible token vault systems to support complex consumer journeys, richer payment types and payment instruments to allow contactless commerce.”
As airline and travel share at Ingenico dropped from 30% at the beginning of the year to 10%, there's been a jump in other categories that has helped offset that, Perlillat said, adding gaming, digital marketplaces, international e-commerce have all expanded by double digits over the past three months.
“There are many global merchants that are taking advantage of this new ‘no touch’ environment, and so we’ve made changes to accommodate that,” Perillat said.
As part of its response, Ingenico launched a product in July designed to make it easier for digital businesses to offer subscription services, including partnerships with SAP, Zuora, Aria Systems and Vindicia. That initiative supports cross-border payments, personalized performance analysis and recommendations, and access to a recurring payments suite.
Ingenico has also focused more on cloud delivery, enabling point of sale systems to add new payment types, or shift to contactless through a remote hosted connection. “For some categories of business, this crisis has been a wake-up call. Some of these businesses were not ready to shift,” Perillat said.