VeriFone Dec. 13 announced it will divestmany of its assets in its Sail mobile point-of-sale (mPOS) product.The San Jose, Calif.-based company said it is no longer confidentit could compete with the more advanced solutions being offered bythe likes of acquirers and ISOs. And thus, VeriFone Sail becomesthe first major mPOS solution to withdraw from the boomingmarket.
While this is a significant development for VeriFone, the morepressing question is: what this means for the mPOS market itself?Until now, companies with any experience in payments had beenracing to introduce their own mobile-payment acceptance solution.The business model seemed flawless: develop the basic software,produce a relatively inexpensive magnetic stripe-reading dongle,provide the solution to merchants, and just watch the money roll inas merchants that were previously unable to accept card-basedpayments paid a premium of 25 to 100 basis points to do so.
Suddenly, VeriFone is saying its product is unprofitable, and thatit intends to focus on providing solutions (including mobile basedones) to the relatively larger merchants it traditionally has donebusiness with. Who could have predicted that?
Well, Groupon probably could have. As could any other company thatrushed into the daily deals craze of 2011. After Groupon’s initialsuccess, there was a similar influx of companies trying to grabtheir own piece of the pie. Just like with mPOS, the barriers toenter the daily deals market were low (set up a website andestablish some merchant/consumer relationships), and the demand washigh. As a result, new daily deal providers were being introducedseemingly every other day — until they weren’t.
Organizations in other industries, seeing Groupon’s success coupledwith the low barriers to entry, realized that they could leveragetheir established business to provide improved, more efficientdaily deals. Financial institutions and payment processorsintegrated deals directly into their systems, where they couldprocess the deals behind the scenes, eliminating the large amountof friction that daily deals created at the point of sale. Paymentsolutions like LevelUp were able to not only provide an upfrontincentive to patronize the merchant for the first time, but sinceit could easily track repeat purchases, it could also provideloyalty rewards that would encourage repeat business, somethingthat daily deals providers struggled to do. As a result, simplyproviding a standard daily deal was no longer sufficient. Thesmaller daily deal providers quickly backed out of the market. Eventhe big names, like Groupon and LivingSocial, quickly began tosuffer, and today are facing regular rumors of collapse. Anindustry that once looked like an opportunity to print money diedseemingly overnight.
As might have been expected, mPOS appears to be following a similartimeline. Intuit has introduced a mobile payment acceptancesolution that integrates with its QuickBooks business-managementsoftware. PayPal’s solution includes a dongle for card paymentacceptance, but also accepts checks and PayPal. Groupon has onethat easily accepts daily deals. Even Square, the company creditedwith bringing mobile point of sale to the mainstream, is diligentlyworking on building out its solution, providing merchants withanalytics to better understand their business. It also isdeveloping a mobile wallet for consumers, which enables them to usetheir mobile device to make purchases from any merchant who acceptspayments via Square.
As with Daily Deals, the mPOS market is saturated, and is beingtaken over by companies that can provide solutions with addedbenefits above standard mobile payment acceptance. While VeriFonewas the first to leave, many can be expected to follow in theirfootsteps over the next six months.
