Mooreland Monitor - Future of Payments - Retail (May 2014)

PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE

The Future of Payments

Retail 2.0 … an Omni-Channel Future

Converged, eCommerce and Retail Systems

Payments Monitor, Part 2

May 2014


Contents

Introduction: Mobile Payments Ecosystem

Retail 2.0 Landscape and Ecosystem

Mooreland’s Perspective on Omni-Channel Retail Systems

Retail 2.0 Investment Activity

Retail 2.0 M&A Transactions

Mooreland Partners: Firm Profile

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Payments involve consumers making payments, retailers accepting payments, and balances being transferred between banks

When considering mobile payments we need to examine the following three segments to form a complete picture of the ecosystem

– mPayment: Solutions that enable the consumer to transact and make payments using their mobile device

– Retail 2.0: Solutions, sold to Merchants, that enable new ways to accept payments and manage their business, increasingly enabling the convergence of online and offline commerce towards an “Omni-channel” commerce paradigm

– Digital Banking: Solutions, sold to banks, that enhance the “anywhere, anytime” consumer banking experience (includes online and mobile banking)

Introduction: The Mobile Payments Ecosystem

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Retail 2.0

mPayment

Digital Banking

• Mobile Wallet • Merchant

Payment Apps

• Mobile Banking • Internet Banking • Mobile Money

Transfer • Remote deposit

capture

• Mobile POS Terminals • eCommerce Platforms • Cloud/Tablet-based

POS Solutions • Omni-channel

commerce

Three Interconnected Segments


Retail 1.0: Legacy Retail . . . Separate Systems & Inflexible Architectures

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Retail systems, grouped into three major segments, are typically complex, difficult to manage and configure, and not readily adaptable to a converged online/offline environment

eCommerce Platforms: • An eCommerce platform is a complete online store

application that includes navigation, search, user accounts, shopping cart, and ordering capabilities.

POS Software Systems: • Point of Sales systems are computerized systems

incorporating cash registers, computers and peripherals.

• These systems keep track of sales, labor and payroll, and can generate records used for accounting, ERP, and inventory.

Payment Acceptance: • A stand-alone piece of equipment that

allows a merchant to process card transactions

• Market dominated by Verifone and Ingenico, with ~60% market share globally

Off-Line Commerce

(In-store retail)

On-Line Commerce

*Excluding back-office systems such as inventory, order management, logistics, payment gateways, etc.

Challenges: 1) Off-line and on-line platforms have been run entirely separately, thus far

2) The legacy architectures are frequently inflexible and would be difficult to evolve to fit with modern approaches

The market needs new solutions, build from the ground up, to be more flexible, modular, and seamless across channels

*


Off-Line Commerce: Moving from Hardware to Software Systems

New Requirements Retail 2.0

Software-focused solution, leveraging consumer hardware

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Retail 1.0

Payment Acceptance: Hardware-Centric Solution

Expen

sive and

clun

ky

Address the Micro-Merchant Casual merchants can now accept cards

On-the-go payments Facilitating mobile bus. (i.e. taxis and taco trucks)

Consumer Hardware Savings for merchants via low-cost consumer HW

Cloud-based solutions delivered via a tablet

interface

POS Software: Integrated with proprietary

hardware

Agile Systems Can be customized + integrated w/ 3rd Party Apps

Interactive Experience Social integration, reshaping customer experience

Accelerated by Windows XP XP “End-of-Life” makes POS non-PCI Compliant

Difficu

lt to ad

apt to

cu

stom

er-specific n

eeds


Online Retail: Moving towards Scalable, SaaS Platforms

eCommerce Platform

6

Build a custom website

+ Integrate a

Shopping Cart

No

t able to

adap

t / stay curren

t

Multi-Channel Online, Offline, & Mobile

Global Reach N. America, Europe, and Beyond

Ability to Scale to millions of customers

Technology Innovation Stay at the Leading Edge

2012 2008

Other, In-House

Major eCommerce

Platform

New Requirements Retail 2.0 Retail 1.0

Growth in % of global top 500 internet retailers using SaaS eCommerce Platforms

74%

26%

63%

37%


Traditional boundaries are blurring and Omni-Channel is the new focus

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Retail technology vendors are driving towards “Omni-Channel” solutions

Customer Frustration Lost Revenue

50% 59% $338 Billion Percentage of customers

dissatisfied with cross-channel experience

Percentage of multi-channel customers that switch vendors after a single bad experience

Revenue lost by enterprises in 16 key global economies due to customer defections and

abandoned purchases

Customers are Already Shopping Across Channels

51% Research online and visit

store to purchase

32% Research online, visit

store to view product, then return online to purchase

17% Visit a store first, and then purchase online

Source: Oracle


Order Management System

Startups will play a significant role in the Omni-Channel solution

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Companies focused on building best-in-class component systems are best positioned for success

UI: Offline Retail

Merchant-specific user interface, designed for customer check-out

Order workflow management Inventory management Initiate shipment (for online)

Customer

Other Systems ERP / Financial

Systems Marketing, CRM,

Loyalty

Commerce Platform Product Information Mgmt (PIM) Uniform pricing & promotions Personalized recommendations

and contextualized experiences

UI: Online Retail Consumer-facing interface, designed to engage shoppers and improve conversion

Unified Fulfilment Store-based fulfillment Drop-ship management

Big Data / Analytics

Omni-Channel Retail System


Mooreland Summary: Omni-Channel Retail Systems are the Future

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The Retail Systems industry is in the early stages of a disruption cycle that will reshape the industry landscape, threaten legacy vendors, and crown new champions

The POS landscape is ripe for change – Legacy POS solutions are expensive, slow-moving, inflexible, and outdated – New, tablet-based POS solutions hosted in the cloud offer lower costs and higher flexibility

Investment (and M&A) will increase as next-generation solutions gain momentum

EMV deadlines and the End-of-Life for Windows XP are catalysts for change – EMV (Oct 2015) is catalyzing a refresh for the hardware terminals – Windows XP-based POS systems will become non-PCI compliant, forcing retailers to migrate to new systems

Legacy POS will have an unusually high rate of total system replacement in 2014-2017

eCommerce is moving towards SaaS platforms – Retailers want low maintenance solutions – Merchant IT departments will be downsized

eCommerce platform vendors, especially those focusing on the SMB, will grow rapidly

Merchants will upgrade to seamless “Omni-Channel” solutions – Unifying the back-end (shipping, order mgmt., etc.) for both online and offline platforms remains a challenge – Players that establish complete omni-channel solutions in 2014-15 will emerge as the new leaders

It is critical to develop technology leadership early in the cycle

New technologies are driving POS disruption

… accelerate by EMV and the XP replacement cycle

Omni-channel Strategy: the key differentiator

TRENDS MOORELAND PERSPECTIVE

WINNERS:

eCommerce is migrating to comprehensive platforms

• Cloud Retail Systems that have solutions for both online and offline commerce via a single platform • Tablet-based POS solutions • Vendors offering best of breed back-end systems that enable online/offline convergence


Retail 2.0 Solutions: Company Landscape is Crowded

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Mobile Payment Acceptance POS Software Systems eCommerce Platforms

Outsourced Solutions

On Premises Custom Solutions

SaaS Platforms

Shopping Carts and Mini-Platforms

Clienteling

Restaurant and Hospitality POS

Hardware / Software

Tablet-Based Retail POS Payment Services


$54

$214

$42

$11 N/A

$19

$56 $54

$131

$51

$113

$144

$298

$333

$265

$103

$200

$100

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Investments >$100M ($ in millions)

Investments <$100M ($ in millions)

Number of Investments

Retail 2.0 Solutions: Investment Activity is Picking Up . . .

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Retail 2.0 1999 – 2013 Financing Activity

Source: Capital IQ, 451 Group, and publicly available information. Note(1): Values based on public disclosed deal values

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

# Investments 7 16 5 3 1 6 12 7 21 17 17 31 66 77 68

Total value ($M)1 $54 $214 $42 $11 N/A $19 $56 $54 $131 $51 $113 $144 $401 $533 $365


… while M&A activity has focused on filling product / technology gaps

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Acquirer Target Category Date Transaction Size (EV) EV/Revenue

May-2014 $30M Confidential

Jan-2014 NA NA

Jan-2014 $19M NA

Aug-2013 $1.5B 11.0x-13.0x

Jul-2013 NA NA

May-2013 NA NA

May-2013 $28M 8.0x

Mar2013 $56M Confidential

Nov-2012 $124M 8.0x

Nov-2012 $746M 2.0x

Sep - 2012 $15-20M NA

Jul – 2012 $26M NA

May – 2012 $10-20M NM

Apr – 2012 $850 0.7x

Feb – 2012 $100M Confidential

Nov – 2011 Confidential Confidential

Aug – 2011 $2.1B 1.6x

Jun – 2011 $158M ~7.0x

Restaurant POS/Reservations

Cloud POS

Mobile Payment Acceptance

Clienteling Application

eCommerce Platform

eCommerce Platform

Cloud POS

eCommerce Platform

Cloud POS

Mobile Payment Acceptance



Cloud POS


Retail Management System

Retail Management System Retail Store Solution

eCommerce Platform



Mooreland in Brief

Technology Focused Digital Media & Internet | Enterprise Software

Communications & Mobility | Industrial Technology

100% Partner Owned

Founded 2002 One Global P&L

Global Reach Serving European, North American, and Asian

markets from offices in Silicon Valley, New York, and London

Team of 40+ 13 Nationalities

10 Languages Spoken

53 Deals Since January 2012,

Ranked #1 in Mid-Market Technology M&A

Unrivalled Experience

1,000+ Deals Closed by Senior Bankers

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Mooreland is one of the most active tech focused M&A advisory firms in the world – differentiated by deep sector knowledge, tier 1 buyer relationships, and a collaborative business model.

www.moorelandpartners.com

SILICON VALLEY 950 Tower Lane, Suite 1950

Foster City, CA 94404 Tel: +1 (650) 330-3790

NEW YORK 537 Steamboat Road, Suite 200

Greenwich, CT 06830 Tel: +1 (203) 629-4400

LONDON 2-4 King Street,

London SW1Y 6QL, Tel: +44 (0)20 7016 3380

Mooreland Monitor - Future of Payments - Retail (May 2014)

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Transcript of Mooreland Monitor - Future of Payments - Retail (May 2014)