VeriFone Abandons SAIL Mobile Card Acceptance

Dec. 17, 2012

After what seemed like weekly announcements by new entrants getting into the mobile card acceptance space, one major company has pulled up stakes and taken its product off the market. Verifone, which introduced its SAIL mobile acceptance system in May of this year , said it is shuttering the product line because acquiring the micro-merchants at which the product is aimed is “fundamentally unprofitable.”

In its recent fiscal fourth-quarter earnings call, Verifone CEO Douglas Bergeron explained 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 volume and extremely high attrition.”

Bergeron implied that even startup Square, which popularized the plug-in dongles that enable small businesses to accept credit or debit cards using a smartphone or tablet, cannot make money just offering mobile card acceptance to micro-merchants.

“I think you can see evidence of other competitors’ similar experience as they shift their own business models to wallets,” Bergeron said to analysts during the call. “My belief is that 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.”

Square, of course, has diversified its business beyond small-merchant mobile card acceptance, signing an agreement to process all U.S. credit-card transactions for Starbucks , and will pilot a similar program with luxury brand Burberry .