A Quick Look at POS Software Developers and Acquirers in the U.S.
Point of sale software development is a large and notoriously fragmented market characterized by a large number of very small developers. First Annapolis has identified over 4,000 discrete developers in the U.S. market, and we are sure we are undercounting. (To be clear, these developers do not always offer payment engines, but they offer point of sale software of some sort.) We recently analyzed the certification lists for nine acquirer processors. Certification lists are simply the list of the applications that a given acquirer processor supports on its front end platforms or gateways. The lists we analyzed included over 1,100 developers with applications certified on at least one of the acquirers.
Interestingly, over 950 of these developers were certified to only one of the acquirer processors we examined. Of the developers who had certified to only one acquirer processor, First Data and TSYS accounted for nearly two thirds. However, First Data and TSYS also have the largest raw numbers of certifications as well, and most acquirers have a large percentage of unique certifications. Seventy-eight percent of Elavon’s and 73% of Heartland Payment Systems’ certifications were also unique.
The majority of these unique certifications appear to be rather small players. By contrast, there were about 20 companies whose certifications ranged from half to all of the acquirers we examined, and these companies tend to be household names: Squirrel Systems, IC Verify, Micros, Microsoft, Radiant, etc. Certain gateways appeared on this list as well – Shift4 and MerchantLink, for example.
There are many reasons to think these market conditions will change. EMV, cloud-based computing, mobile acceptance and mobile payments, offers redemption and any number of other functional and technical changes at the point of sale may trigger a shakeout among POS developers. Moreover, acquirers of all sizes are pursuing strategies to ease integration. The proliferation of SDK’s (software developer kits), may lead to developers routinely having a greater number of certifications. However, today, acquirer processors enjoy highly distinct (albeit often very low scale) points of differentiation from other acquirers resulting from unique certifications.
For more information, please contact Marc Abbey, Managing Partner, email@example.com; or Emily Boese, Senior Manager, firstname.lastname@example.org. Both specialize in Merchant Acquiring.
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