Verifone 'Doubling Down' on ISO Strategy to Reach Small Merchants

At a time when many independent sales organizations feel threatened by disruptors like Square and Groupon, which sell directly to merchants, Verifone is relying more on ISOs to extend its offerings to smaller stores.

The San Jose-based terminal maker is "doubling down on our channel strategy," said Shan Ethridge, vice president and general manager of Verifone's North America financial services group.

That strategy was central to the rollout of its payment-as-a-service offering in North America, where it is sold to small businesses only through ISOs and acquirers. The offering, called Verifone Point, is a bundle of hardware, software, gateway and support services. Verifone sells the same bundle directly to its enterprise customers, which the vendor categorizes as among the top 1,000 retailers.

This approach benefits from three separate trends. First, moving closer to ISOs at a time when others are veering away is an interesting competitive play, as ISOs may be more agreeable to working on Verifone's terms. "This certainly presents an opportunity for us," Ethridge said.

Secondly, in the last few years, mobile has reversed the trend of new technology appearing first at large retailers. Smaller merchants may have smaller IT budgets, but they also have less complexity when implementing new ideas.

"It's now not impossible for a sandwich shop to offer some of these unique services to their consumers," Ethridge said. "The implementation costs to the [small and medium-sized business] is much more affordable, especially on such a small scale."

Third, quite a few payments-oriented technologies—especially EMV, Near Field Communication, biometrics and virtual currencies such as Bitcoin—are making their appearances in SMBs first. In particular, the shift to EMV-chip cards, which improve security but require new hardware at the point of sale, creates a huge opportunity for a vendor such a Verifone.

"This is going to be a game-changer for us," Ethridge said. "We feel much better leveraging our 3,000 ISOs, with their broader scale and quicker penetration. It allows us to cast a much wider net. Our relationship with our channel partners has been very static in the past."