Verifone, the huge point-of-sale equipment manufacturer that entered small business mobile payments this year with the Square-a-like Sail card reader, has announced it plans to exit that market. Speaking in a quarterly conference call, CEO Doug Bergeron called the economics of small merchant payments "fundamentally unprofitable," with "razor-thin margins" meaning that the costs of acquiring new customers were unlikely to be offset. Verifone will continue to offer Sail to banks for resale, but the days of it providing the mobile dongle direct to small business owners appear to be over.
It’s always been clear that Verifone had its eyes on Square, to the point where the Sail user agreement appeared to have been copied entirely from Jack Dorsey’s startup. Square has had some big successes so far, including a high-profile deal with Starbucks, but Bergeron had some words of warning for his now former competitor. He believes that initiatives like the Square Wallet mobile app prove his point about the unprofitability of small merchant payments, and that “the only possible survivors” in the market will be those that can offer other services to their clients.
