A reminder today that big companies often have trouble mirroring the efforts of companies disrupting their spaces: Payment industry giant VeriFone is killing its Square competitor Sail, which just launched in May, thanks to costs that didn’t make the “razor-thin margins” it was seeing from its small merchant customers worthwhile. VeriFone announced the closure of its dongle-based mobile point-of-sale system during its Q4 earnings call yesterday.
Sail will continue to exist on life support, essentially. VeriFone will be offering third-party partner customer support, and will provide those third-parties with dongle hardware and payment gateway access, but will discontinue any efforts around acquiring customers for the service, risk management or customer billing in its U.S. business. The company will however look into offering a version for global markets that works with EMV (chip and pin) tech, VeriFone CEO Doug Bergeron said during the call.
Bergeron said that the only way companies will thrive in this space, so far as he can see, will be in providing other services on top of the basic payment processing that will raise margins and the average revenue brought in per merchant. The cost of acquiring customers, vs. what they actually pay out doesn’t work, he suggested, especially given that use of the services by the kinds of very small independent merchants the systems are designed for tend to be occasional, infrequent and hard to predict.
Square seems to be aware of this, too, and recently started expanding its options, with the introduction of Square Wallet and a partnership with Starbucks that allows its dongle to be used to accept payments at Starbucks locations across the U.S. Working with retailers to expand its POS presence appears to be a new element of Square’s strategy, and one it confirmed to me in August it will be pursuing aggressively.
The demise of Sail is maybe an admission that big incumbents can’t match Square’s progress in the market it spearheaded with its own mobile payment dongle, but the more important fight in terms of long-term sustainability looks like it could still be fought among higher-tier businesses and retailers – and as our own Leena Rao pointed out in November, that’s where VeriFone is strong and looking to get stronger.
VeriFone is a global leader in secure electronic payment technologies. They provide solutions, services, and expertise that enable electronic payment transactions and value-added services at the point of sale. Their devices and systems process a broad spectrum of payment types including signature and PIN-based debit cards, credit cards, EMV smart cards, contactless, value-added applications, and signature capture. Their solutions incorporate existing and emerging technologies, comply with the latest global security standards, and take advantage of the latest connectivity options from...
Square is making commerce easy for everyone. Starting with a free credit card reader for the iPhone, iPad, and Android devices, Square Reader allows anyone to accept credit cards anywhere, anytime, for a low transaction rate of 2.75 percent per swipe, with no hidden fees. Square Register serves as a full point-of-sale system for businesses to accept payments, manage items, and share menu and location information. Square Wallet, available in the US, is the most seamless way to pay,...