Dive Brief:
- Payments behemoth Fiserv’s Clover unit dominates the small restaurant point-of-sale card processing market with an estimated 20% share, including 175,000 locations, based on an analysis by the financial firm Baird. Fintech Toast follows with an estimated 17% stake, including 145,000 locations, according to the Jan. 7 report from the firm’s research arm that focused on restaurant businesses below the top 250.
- The report, which pegs the U.S. restaurant and bar market at about $1.1 trillion in sales last year, assumed that the 250 largest restaurant groups process their card payments directly with Fiserv, Worldpay, JPMorgan Chase and other major processors.
- In the smaller restaurant segment, which accounts for about 75% of the overall market, Block’s Square was the third-largest player, with a 13% share, while Global Payments, which acquired merchant services firm Worldpay last year, had an 11% share, according to the report.
Dive Insight:
The restaurant POS market is fiercely competitive, with a pack of large, established processors increasingly competing with fintech upstarts, such as Toast and Square, over the past decade. Other heavyweights include NCR Voyix and Oracle-owned Micros.
The smaller restaurant segment is where newer entrants have taken the biggest bite out of the market, and they’re collecting more lucrative rates there too. “The biggest restaurants often have many locations and get low processing rates,” Baird analyst David Koning said by email. “Toast, Square, Clover generally process for ex-top 250 (Toast has a little in the enterprise range, but not a lot).”
About 85% of restaurant tabs are paid with credit or debit cards, according to the report from Baird Equity Research. As part of their research for the report, the firm’s analysts also surveyed 37 restaurateurs, most of which said they liked their current POS services provider and planned to expand with that vendor.
“There wasn’t discussion of wanting to leave existing vendors,” the report said.
Clover has grown in recent years with support from its parent Fiserv, which acquired the business in 2019 when it bought the former owner, First Data Corporation, for $22 billion. The Milwaukee payment processor has singled out Clover as a key driver of future growth, including internationally.
Of the POS service providers, only Toast and SpotOn are focused entirely on restaurants, the report said. Boston-based Toast has experienced “strong growth,” the report noted. “We think Toast could grow its overall base from 134k locations at the end of 2024 to 244k by the end of 2028,” the report said.
Overall, the Baird analysts, including Koning, Robert Bamberger and Jacob Haggarty, expect the market to grow at a slightly slower pace this year, taking into account the impact of rising inflation and “healthier eating.”
“We assume a mid-single-digit growth rate with ~2% from locations and 3% growth in revenue per location (largely from inflation),” the report said.
