The CEO of VeriFone has announced a withdrawal from direct-to-micromerchant services.
VeriFone took the mobile payments industry off guard when its CEO released the surprising news that it would no longer be pursuing direct-to-micromerchant and would be selling off that part of its business.
It explained that its Sail service has been unprofitable and that it would no longer be continued.
The mcommerce news was released by Doug Bergeron, the VeriFone company CEO. After a year of heavy promotions of all of the company’s mobile payments services for tablets and smartphones, many people throughout the industry were very surprised that it would step out of this sector of the digital transaction environment.
Bergeron explained that it was simply shedding the part of its mobile payments that were not profitable.
He explained that Sail, which allows small businesses to accept credit and debit card transactions through mobile devices, was not generating acceptable profits. He stated that “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.”
Instead, VeriFone has decided to shift its attention away from direct-to-micromerchant services but toward indirect channels. In the meanwhile, it will be selling off the mobile payments assets relating to the sector that it will no longer be serving.
In Bergeron’s mcommerce news release, he went on to say that he doesn’t believe that Sail will be the only mobile commerce failure of this sort. He believes that there may not be any way to build a profitable business around services designed to be provided directly to the micromerchant.
Instead, he said that he felt that the best place for mobile payments would be in the digital wallets sector. The reason is that he believes that the opportunity will be much larger and that the business model will be less challenging.
Still, after the intense focus that VeriFone has shown in the tablet and smartphone mobile payments industry over 2012 and even before, it is still taking the industry a moment to absorb the news and start to process its implications.