VeriFone Brings a Terminal Maker’s Savvy to Mobile Payments

With a number of processors and software houses having introduced applications over the past year to let merchants process cards on smart phones, many observers wondered how long it would be before the established point-of-sale terminal vendors entered this market. On Tuesday morning, the answer came with VeriFone Holdings Inc.'s announcement that it will start shipping next month an app for the iPhone that pairs with a mag-stripe reader that attaches to the USB connector at the bottom of the device. VeriFone's entry, called PAYware Mobile, incorporates technology the San Jose, Calif.-based terminal maker has developed for its other product lines to mask card data and protect transaction security. The card reader, which slides onto the iPhone from the back and features a card slot on the right side, encrypts card information at the moment of the swipe, using technology VeriFone calls VeriShield Protect. “Any data that makes its way into the iPhone is completely useless to criminals,” says Paul Rasori, a senior vice president at VeriFone. While Rasori won't give specific numbers, he says the new product can potentially ship in the “millions” around the world. In the U.S., “we're optimistic this will generate significant numbers,” he says. Apple Inc.'s iPhone is making inroads with small businesses, making it a popular platform for payment applications. Among 283 small businesses surveyed by Boston-based research firm Aite Group LLC, some 25% of those with revenues exceeding $1million annually had owners using an iPhone; among those with revenues between $100,000 and $1 million, the percentage was 12%. Versions of the PAYware Mobile app for BlackBerry devices as well as handsets running the Windows Mobile and Android operating systems are under development, though Rasori says these versions may not offer card-swipe hardware. The iPhone, he says, offers a consistent form factor, while the other smart phones vary significantly in size and shape, making it hard to mass-produce compatible swipers. VeriFone, which says it will start shipping PAYWare Mobile Jan. 15, will market it through acquirers and independent sales organizations as well as directly from the company and, ultimately, on Apple's online app store. It has already struck a distribution deal with Tasq Technology Inc., a unit of First Data Corp., and has also entered an agreement for First Data to process transactions from the app. Rasori says more such processing deals will follow now that the company has announced the product. “There's zero development work needed,” he says, to run transactions on other platforms. The software and hardware for PAYware Mobile are free, but merchants must have an agreement with VeriFone's mobile gateway. Enrollment is $49, with monthly fees of $15 and 17 cents per transaction. Merchants must also have or obtain a merchant account, differentiating the product from Square, the iPhone-based mobile-payments product introduced last week by a San Francisco startup founded by the cofounder of Twitter (Digital Transactions News, Dec. 3). Square offers to stand in as merchant, letting individuals and small businesses run transactions on its iPhone app and dongle-like card reader almost immediately. With the product in beta testing, final pricing hasn't yet been set, but the company indicated in at least one press interview that it would give away the card reader while charging $1 for the app. Both Square and PAYware Mobile let customers sign for transactions on the iPhone screen; customers using Square sign with a finger, while VeriFone's product provides a stylus. The new VeriFone entry has evoked applause from some experts who have argued the terminal vendors should introduce a payments app for the large market of tradesmen, delivery people, café operators, and other on-the-go merchants who need a device to process card transactions. Such vendors, they contend, are in the best position to produce secure solutions that can stand up to the rigors of steady retail use. Merchants “want devices that will take some abuse and are likely to pay a premium for a solution from a trusted player,” says Nick Holland, a senior analyst at Aite Group who follows mobile payments. “I think this has legs.” Rasori says VeriFone's experience with building secure payment devices should give it an advantage in a market that seems to grow more crowded by the day and already includes a diverse array of players with smart phone apps for mobile merchants. Besides Square, these include Intuit Inc. and TSYS Inc. as well as mobile-gateway provider Charge Anywhere and ISO Merchant Warehouse. While not jumping on the smart-phone bandwagon, rival terminal maker Ingenico introduced this fall a personal digital assistant that doubles as a payment terminal (Digital Transactions News, Oct. 27). Even though VeriFone has been working on PAYware Mobile since spring, it has deliberately kept a low profile for the product, hoping to carve out a big slice of the developing market. “We've followed the uptake and interest in this type of solution,” says Rasori. “We've kept the lid on this pretty good. It's a significant advantage. We didn't want to tip off our competitors.”