Verifone recently announced the termination of their SAIL mobile payments product line in a market that looks strong for Square but is “destined to be a negative gross margin business” says Verifone CEO Doug Bergeron.
SAIL was initially designed as a “streamlined, cost effective, payment-as-a-service platform that provides business owners and merchants an easy and secure way to accept payments wherever business takes them.” The pricing was average for industry with rates like 2.7% flat rates or $9.95 subscription with an additional 1.95% to save money on larger volume orders.
Verifone currently does $10 billion in annualized transaction volume each year, about twice Square’s annual volume, which may be why Verifone did not see the low numbers in SAIL to provide value to the company overall. The company found the cost of advertising to small merchants would “never justify the razor thin-margins produced by merchants with infrequent volumes and extremely high attrition.”
Doug Bergeron warns competitors in the market like Paypal, Intuit, and Groupon to diversify their revenue streams while involved with mobile payments. “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,” Bergeron said. “You can see evidence of other competitors’ similar experience, as they shift their own business models to wallets.”
Rather than attract small merchants directly, Verifone is shifting their business model to work with banks and reduce risks of fraud when handling business with these small market companies.
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