VeriFone Goes Outside Usual Channels to Sell Its New iPhone Product

VeriFone Holdings Inc.'s PAYware Mobile mobile-payments initiative includes not just the previously announced card swipe for Apple Inc.'s iPhone and an iPhone app, but also a marketing campaign that aims to make the payment terminal maker's brand name more familiar with consumers, especially consumers that run small businesses. San Jose, Calif.-based VeriFone announced on Monday that the iPhone payment system disclosed nearly two months ago (Digital Transactions News, Dec. 8, 2009), is now up and running?and that it will be accompanied by an Internet-based campaign that will reach beyond the terminal maker's core customers and channel partners, which are merchant acquirers and independent sales organizations. “It's targeting online users, specifically trying to reach out to small-business owners,” Paul Rasori, senior vice president of marketing, tells Digital Transactions News. “The target audience we believe is going to be somewhat outside the reach of channel partners that we have worked with so long.” In fact, the campaign will reflect the fact that the personal and business lives of small-business owners who need a mobile terminal are hard to separate. “It's more of a consumer message,” says Rasori. “The profile of the customer we're going after with this product doesn't really have a merchant storefront.” Accordingly, VeriFone will be running banner advertisements and other Internet-based messages through various marketing outlets that can reach not only consumers, but also sole proprietors and other small-business owners who might be interested in turning their iPhones into portable payment terminals. Such media outlets include Yahoo! Inc.'s small-business network and mobile-advertising specialty companies such as Millennial Media and AdMob Inc. The campaign also will include other venues such as MyBusiness.com and the online versions of various mainstream media, including CBS and BusinessWeek magazine. VeriFone plans to spend between $750,000 and $1 million on the campaign between now and April, according to Rasori. That's a small amount for a national broadcast television network, but it buys a lot of impressions on the Web. VeriFone has already started promoting PAYware Mobile on its own Web sites and in New York City taxicabs, where thousands of specialized, media-enabled backseat VeriFone payment terminals are being installed (Digital Transactions News, Dec. 15, 2009). “It's been a pretty good response,” Rasori says. “We've gotten thousands of hits to our PAYware Mobile site.” Rasori admits VeriFone's is not exactly a top-of-mind consumer brand, but he adds that consumers have at least a vague awareness of VeriFone because they see the its name on point-of-sale terminals in stores, restaurants, and other card-accepting locations. “A lot of consumers recognize our brand; I would say probably not as much as we would hope, but I would say this is one of the first opportunities we have to expand on it,” he says. The goal, he says is to develop new merchant business for VeriFone's traditional partners. VeriFone had aimed for a Jan. 15 launch date, but Apple insisted on inspecting the hardware before approving the app as an offering on its App Store, which resulted in a two-week delay, according to Rasori. PAYware Mobile uses the end-to-end encryption VeriFone has developed for its other product lines to mask card data and protect transaction security. The card reader, or sleeve, 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. VeriFone is developing similar systems for other smart phones and operating systems, including the BlackBerry. PAYware Mobile's app on App's huge App Store (100,000-plus third-party software applications for the iPhone and iPod touch) joins at least 30 other applications that turn the devices into card-accepting terminals. Plus, startups such as the Square service from the cofounder of Twitter are seeking to make hay from the booming interest in turning smart phones into payment terminals (Digital Transactions News, Dec. 3, 2009). VeriFone's iPhone app is free, but merchants must sign up for the VeriFone PAYware Connect gateway service, which has a $49 enrollment fee and monthly fees of $15 and 17 cents per transaction. Would-be merchants must also get a merchant account. VeriFone will refer such applicants to its channel partners. VeriFone is seeking to stand out in this increasingly crowded field through its experience in the payments industry, its end-to-end encryption, and its extensive ties to acquirers and ISOs, according to Rasori. “I think we've got a major advantage in leveraging our relationships,” he says. George Peabody, director of merchant-technologies research at Maynard, Mass.-based Mercator Advisory Group Inc., says hardware makers such as VeriFone are competing against small, third-party software developers for the attention of small-business iPhone users, and no winner can be called yet. “The hardware guys like VeriFone?they're shifting their model toward transaction-oriented revenues,” he says. “We'll see how successful they are with that.”