Payment market in upheaval. Mission statement: "German Payment Champion", in response to market changes. Competition authority approves ICP acquisition.
Eschborn, 14 June 2016. Concardis, one of Europe's leading payment providers, based in Eschborn near Frankfurt, is stepping up the pace and reinforcing its growth path with strategic initiatives. Its main aim is to build a strong market position at the real and virtual point-of-sale (POS) and to continue its international expansion. The company is responding to far-reaching changes in the payment market. Providers from the non-bank sector, agile fintechs and international companies are increasingly becoming competitors. Good results bolster growth path.
"Competition in the payment market is decided at the point-of-sale. Whoever finds the best answers to the dynamic changes taking place there will win the day. Ongoing digitalisation is the basis for and driver of these changes. It is causing sales channels to converge in "multichannels", it integrates payment apps into consumers' daily lives via smartphones and other devices, and it makes it possible to link value-added services like localisation and communication with the payment application. Payment is no longer just payment. Payment is part of the communication and transaction interface with the customer. So we are investing in the modernisation of our technical platforms and further improvements to our competitive position at the point-of-sale", says Marcus W. Mosen, CEO of Concardis, explaining the company strategy. As part of this strategy Concardis has in recent weeks and months increased its stake in Orderbird, the leading iPad POS system for the HoReCa sector, acquired a majority interest in the technical network operator Cardtech and completed the acquisition of ICP International Cash Processing. The German competition authority has now approved the takeover, so ICP will be integrated with Concardis with retroactive effect as of 1 January 2016. With the acquisition of ICP, Concardis will take responsibility for an additional 36,000 payment terminals and 85 million transactions a year.
German Payment Champion is the vision
With this strategy Concardis is also responding to increasing international pressure. It is coming from new providers, who have discovered the German market and are addressing attractive niche customer segments there. Whereas Concardis' main competitors in the past were traditional companies such as B+S Card Service, which is part of the Savings Banks Finance Group, it is now international players like Adyen or Sumup that are defining the competitive environment. They are trying to win over the major retail companies with a strong e-commerce business and an international outlook. To support these customers in their international strategies, Concardis will also be increasing its international engagement. Cross-border processing for major airlines is already common. The aim is to extend these capabilities in future, to continue supporting large retail companies with their international expansion plans. The investment in Orderbird should also help, since Concardis is now its largest single shareholder and also its payment partner. An additional impetus should also come from the Metro Group's simultaneous investment in Orderbird and the shareholders' common intention to support the further internationalisation of the system. "We want to keep growing in quantitative and qualitative terms, so we can play in the same league as the international providers. This is also a contribution to strengthening our domestic market. A strong export nation like Germany needs a partner with an international dimension, especially in the rapidly changing world of retail payments. With our mission statement, "German Payment Champion" we are aiming to be exactly that", explains Mosen.
Technology is the key success factor
Alongside increasing digitalisation, the main driver of the changes in the payment market is the shift in technology platforms. Whereas traditional payment providers are tied by their early investments to the legacy IT systems of the financial industry, new providers deploy the highly specific and streamlined systems of internet technology. They work with fast, IP-based protocols and don't have to worry about old system architectures, often with multiple connections. They can implement new solutions in a sprint of just a few weeks and roll them out to their entire customer base. By acquiring a majority of the shares in Cardtech, Concardis has obtained a central technology hub on which it can build these capabilities.
Extend vertical integration
Central processing steps that are currently carried out by business partners will increasingly be insourced going forward. One reason is that as the market consolidates, acquisitions are turning former partners into competitors who are operating in direct competition with Concardis. Mosen commented: "It is vital for us to be able to manage and control the full extent of all value-added and mission-critical processes. The data created by these processes alone are an extremely valuable asset for improving and expanding our own services. That is a prize we want to win."
Principles of the shared economy: accelerated expansion of the service portfolio
Partnerships to increase direct customer benefits are different. In Eschborn they do not see the increasing complexity and dynamism at the POS as a threat, but as potential that can be exploited by means of intelligent cooperation. A good example is the cooperation agreement signed recently with the Chinese payment provider Alipay. Alipay is going to be integrated into Concardis terminals. In addition to payment, the app offers a lifestyle feature, the "Global Lifestyle Platform". It adapts the app to the user's location and provides information about retailers in the vicinity, with offers and recommendations. Conversely, retailers can market their advertising promotions via the Alipay app and so address the app users directly. But partnerships are also progressing on the technological front. An agreement has just been signed with Valuephone, the leading provider of mobile couponing and mobile loyalty in Germany, and the Concardis payment solution for e-commerce, the Concardis Payengine, is already integrated in the Valuephone platform. Mosen's comment: "As an established company that has been stable and dependable for many years, there is no doubt that we have a great strength that we can bring to bear against our new competitors too. But we can also learn a lot from them. Especially when we go beyond our core business and into adding value for the customers of our customers. The key attributes there are a willingness to cooperate, speed and the sharing of knowledge. We can hold our own against the competition if we combine the best of both these worlds. Because Concardis is partly a fintech business too."
Results support the implementation of the strategy
The company's economic foundations are in order. Concardis continued its previous pace of growth in 2015 and expanded its business with payment solutions for card-present and virtual POS. Transaction volumes for the full year rose by 8.9 per cent to EUR 38.3 billion. Company revenue also went up to EUR 479.76 million, 6.6 per cent higher than the previous year's figure of EUR 449.87 million. The company traditionally does not disclose precise earnings figures. Rising by significantly more than revenue growth, they performed well in 2015. "We reported the best financial year ever for Concardis GmbH in 2015. By initiating the switch to Interchange++ billing, introducing new services and so gaining new sources of income, we were able to improve margins and so more than make up for the fee increases by the card organisations. At the same time most of the project costs for expanding the infrastructure will only be incurred in subsequent years, so the cost increase remained moderate", said Jens Mahlke, commenting on the company's financial statements.
|Transaction volumen in EUR billion||Trans. Volumen 2014||Trans. Volume 2015||Change|
|VISA inkl. VPay||14.1||15.0||6.5 %|
|Union Pay, JCB & Diners||0.2||0.4||73.4 %|
|Total transaction volume||35.2||38.3||8.9 %|
Growth was achieved in almost all segments. The number of Mastercard partners went up year on year by 3.9 per cent, the number of Visa partners by 7.1 per cent and the number of Maestro partners by 7.5 per cent. New customer wins were reflected particularly in the transaction volume submitted for VISA credit cards in 2015. Including Visa V-Pay transactions of EUR 15.0 billion, total transaction volume went up by 6.5 per cent compared with the previous year. Mastercard transaction volume of EUR 16.37 billion was 8.3 per cent higher than a year ago. Transaction volume with Maestro cards of EUR 5.6 billion went up by 17.8 per cent within the reporting year. Including transaction volume from Union Pay, JCB and Diners, which are shown in the overview for the first time this year, credit card transaction volume climbed year on year by 9.3 per cent to EUR 37.3 billion in total. ATM acquiring volume of EUR 1.0 billion was 5.7 per cent down on the year. "The decline in ATM volume is mainly due to a reduction in the number of cash machines by a large private bank. We expect this trend to halt in 2016, however", said Mahlke.
The development of transaction volumes over the past three years underlines the unbroken positive trend towards cashless payments at the point-of-sale. It is accompanied by a steady decline in the average transaction volume. This reflects increasing use of cards for smaller amounts; a tendency that should continue following the recent move towards card acceptance by discount supermarkets.
|Trans. volume (€ bn)||30.16||32.43||35.16||38.27|
|Number of transactions (in millions)||254.35||291.83||330.92||363.58|
|Average transaction volume (in €)||119||111||106||105|
Continued positive performance by Concardis GmbH in the reporting year was based on ongoing improvements and launches of new Concardis products, such as an expanded DCC offering, a new e-payment product Masterpass, a broader terminal portfolio and the addition of new payment methods to the mPOS solution Concardis Optipay. Strong customer loyalty as a result of high service quality and focused sales activities were also responsible for this success. "Although we continued to remove inactive and non-compliant customers from our portfolio, the total customer base remained stable thanks to our focus on acquiring new customers", emphasised Jens Mahlke. Concardis currently serves some 110,000 customers in Germany, Switzerland, Austria, Benelux and other EU countries, as well as international airline clients.
Focus on customer benefits
The intention is to keep increasing the benefits for customers of working with Concardis and so boost customer loyalty. The company has now established its own e-commerce offering. It only takes three clicks to get a ready-made payment solution for e-commerce, classic POS business or for a mobile acceptance version. And anyone who wants to put together a customised solution can use the product configuration tool to get individual offers that match their needs. "We want to simplify access for our customers, so we have defined a number of customer journeys, which we have developed in interdisciplinary teams right through to customer service. We want to show that payment solutions can be very flexible, deliver high-performance functionality and still be very simple and transparent for our customers. And that they can rely on the service behind them too", says Mosen, adding that the products are now available from the Concardis website.
Results of first quarter confirm growth trend
Concardis continued on its growth path in the first quarter of 2016. The number of transactions rose to 94.1 million, compared with 81.3 million in Q1 2015 (+15.8 per cent). Transaction volumes as of 31 March came to EUR 9.6 billion. The year-on-year increase in transaction volume was therefore EUR 0.88 billion or 10.1 per cent. Union Pay was down at the product level. This is a result of less travel due to the subdued economic situation in China. "Overall, the positive performance is being confirmed in 2016. The projects launched to modernise our technical infrastructure will affect earnings for 2016 as planned, however. We nevertheless assume that the result will be on par with 2015", said Jens Mahlke, looking ahead to the full year.