Lingering effects of a weakened U.S. economy continue to inhibit U.S. small businesses from making significant payment-systems upgrades, according to VeriFone Holdings Inc.
The point-of-sale terminal maker’s small-business sales through independent sales organizations dropped during last year’s fourth quarter from the previous quarter, VeriFone CEO Douglas G. Bergeron told analysts this week during a conference call to discuss first-quarter earnings. VeriFone reported $223.4 million in first-quarter revenue and net income of $10.6 million (
Small businesses account for about 15% of the San Jose, Calif.-based company’s overall revenue, down from as high as 40% six or seven years ago, Bergeron said. VeriFone would not release specific sales figures.
“There is not much new to report with U.S. small business, which continues to languish, even as big retailers resume spending on technology,” Bergeron told analysts. “As long as strip malls remain empty and tight credit inhibits small-business formation, this segment will have little good news to report.”
VeriFone likely cannot do much by itself to improve its small-business sales without an increase in the number of new business startups and creditors opening up their lending to small businesses, Bergeron said. What VeriFone is doing is looking at ways to grow its business outside of small merchants and not worrying about factors out its control, Bergeron said.
For example, the company is pushing its PayWare Mobile service for Apple Inc.’s iPhone and is developing versions of the mobile payment terminal for BlackBerry, Google Inc.’s Android and Windows Mobile-equipment smartphones.
Bergeron also doubts many small businesses will meet a July 1 deadline set by Visa Inc. banning the use of devices not compliant with its or the Payment Card Industry Security Standards Council’s PIN-entry device requirements. Between 50% to 60% of small merchants are believed to have not yet upgraded their payment devices in anticipation of that deadline, he says.
“The vast majority of those are likely not to be upgraded [by the deadline],” Bergeron says. “The reality is that they view any penalty to be a real wet noodle and won’t inflict any damage on them.”
Acquirers must ensure smaller merchants comply with Visa’s security mandates, a Visa spokesperson says.
