VeriFone Exits Direct-to-Merchant Mobile POS in ‘Maturing’ Niche (Dec. 17, 2012)
Dec. 17, 2012
VeriFone Systems Inc.’s decision to withdraw from marketing its mobile POS device directly to merchants is the first sign of retrenchment and likely consolidation in what has been a fast-growing niche. The San Jose-based company last week said from now on it will sell its Sail smartphone attachment for mobile card payments only to banks to resell to business customers, taking VeriFone out of direct competition with Square Inc., PayPal Inc., and a host of other players still targeting individual merchants with mobile POS devices in the U.S. and in Europe. VeriFone introduced Sail in May, building on PAYware Mobile, its direct-to-merchant service introduced in 2009. VeriFone CEO Doug Bergeron last week told analysts that approach was “fundamentally unprofitable” for the company.
VeriFone’s moves probably suggest “the beginning of consolidation in the space,” Rick Oglesby, a senior analyst with Aite Group, tells Paybefore. Those that will succeed in the niche need to have “core competencies in consumer and small business customer acquisition and risk management … and [they] will continue to grow in this space or use it as a launch pad to get into other areas, as we are seeing both Square and PayPal do,” Oglesby says. For example, Square has a partnership with Starbucks Corp. likely to dramatically increase its transaction volume next year, while the company continues to enrich offerings to merchants, such as its new mobile wallet gift card feature. PayPal is aggressively expanding payment acceptance through all channels, including prepaid. And financial services giants like Bank of America still see fresh opportunity in expanding basic mobile POS services to small business customers.
While the mobile POS market “is maturing,” there is still plenty of room for growth, Zilvinas Bareisis, a senior analyst with Celent LLC, tells Paybefore. He predicts more new players entering the field, including more banks and traditional acquirers launching proprietary branded products. Most significant is the fact that growth is coming from new types of customers. “The target market is expanding to include not just micro-merchants but also larger players with the need for mobile terminals,” Bareisis says.
