Update: Surprise: VeriFone gives up with mobile payments

by Doug Drinkwater

December 17 2012

VeriFone CEO Doug Bergeron says that its mobile payments service Sail has been unprofitable
VeriFone CEO Doug Bergeron says that its mobile payments service Sail has been unprofitable

Having spent much of last year promoting the growth of smartphones and tablets being used for inventory and payments, point-of-sale provider VeriFone has surprised many in the industry by announcing it is getting out of the mobile payments space.

During the firm’s latest quarterly conference call, VeriFone chief executive Doug Bergeron announced the move and said that its own mobile payments service Sail, which allows small merchants to accept debit and credit card payments, had been largely unprofitable.

“Customer acquisition costs, either through search engines or TV advertising, cannot and will never justify the razor thin margins produced by merchants with infrequent volumes and extremely high attrition,” said Bergeron.

VeriFone will instead spend time focusing on providing mobile payments to small merchants through 'indirect channels', with the company to sell off all mobile payments assets.

And while Bergeron detailed how VeriFone had failed, he also cast doubt over whether mobile payments can be a truly profitable business in its own right.

“I think you can see evidence of other competitors’ similar experience as they shift their own business models to wallets. 

“My belief is that the only possible survivors in this fundamentally challenging business model will be companies who might have an opportunity to provide other services to these micro-merchants.”

The news will surprise many in the industry, not least those who had followed VeriFone’s ambitious smartphone and tablet plans over the last year.

The company acquired mobile payments provider Global Bay Mobile Technologies back in November of last year, continually promoted its mobile POS solution PayWare Mobile Enterprise and introduced Sail in May. The firm also launched a host of new mobile POS hardware earlier in the year.

 

Update: VeriFone has clarified that it is actually getting out of the “direct-to-micromerchant” aspect of mobile payments.

A statement from the firm to the firm ran as follows:

“We're no longer directly acquiring those micro merchants but we're still providing mobile payment products/services that others will sell to them. 

“VeriFone will continue to offer a full portfolio of innovative mobile payment solutions, both directly and indirectly to larger customers, and to SMB customers through the channel.”

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