Despite the incessant fanfare around mobile wallets, biometrics and the Internet of Things, the slow-and-steady move to EMV security is in the spotlight of Verifone's revenue prospects in the coming year.
Sixty percent of the point of sale terminals in the U.S. still in need an upgrade to accept EMV chip-card technology, the San Jose, Calif.-based terminal manufacturer and payments technology provider said Dec. 14 while reporting its earnings. Verifone enjoyed its second straight quarter of record revenue in generating $514 million in its fourth fiscal quarter, which ended Oct. 31, a 4.8% increase over its 2014 fourth quarter.
Much of the revenue came from the buildup for the EMV liability shift in the U.S. in October, as well as Verifone's transformation to a more complete digital technology services company, CEO Paul Galant said during a conference call.
The EMV upgrade cycle will provide "tailwinds for the next several years" in earnings for Verifone, Galant said.
Last year, Verifone projected 3% growth in North America for the 2016 fiscal year, and it has revised that number to 5% because of the momentum from EMV in the U.S. and corresponding growth in digital and mobile payments, Galant added.
Verifone is estimating that of the 13 million point of sale devices in the U.S., about 8 million still need an upgrade, a scenario Galant calls "a pretty big field" for the company to serve.
In addition to the need to convert current POS systems, Verifone will also benefit from the preparation taking place in the petroleum services industry, which faces a 2017 EMV liability shift. Afterwards, any gas stations not able to accept EMV payments assume the fraud liability for payments on EMV card.
"The liability shift in 2017 is something that folks are really starting to get ahead of," Galant said. "They see how difficult it has been for the general merchant community to get to the EMV date in 2015, so they're starting early and they're focused."
Gas stations will first update their countertop terminals, then upgrade their pumps at a later date, Verifone said. The vendor expects to benefit from its digital media services at the pumps, wherein it displays advertising messages on screen as motorists fuel up.
Beyond the promise of EMV-related sales, the mobile point of sale will continue to be a significant driver for Verifone, selling "devices that salespeople can walk around with" as a supplement to countertop terminals in larger and mid-size stores, Galant said.
Two months ago, Verifone opened the door for acquirers, banks and ISOs to develop products for the
Verifone has spent the last couple of years trying to make sure it has the correct terminal product in each market and for every type of customer, culminating in the creation of Engage, said Gil Luria, analyst with Los Angeles-based Wedbush Securities.
"Going forward, Verifone's focus will be on the types of applications and services it can deliver on the terminal to the retailers that utilize Verifone services," Luria said.
After EMV upgrades and changes related to the Payment Card Industry data security standards, retailers are starting to understand that payments technology purchases will be cyclical from now on, Luria added.
"They are more open to seeking help from companies like Verifone to manage their payments estate on an ongoing basis, rather than just to periodically buy a new terminal," Luria said.
Verifone's push to expand its brand as a full-service technology company also benefits from an agreement it entered this year with Visa and the card network's CyberSource unit. The partnership allowed CyberSource to connect its payment management platform to Verifone's point of sale gateway for
