EMV is no longer about the card and the terminal – it’s a solutions business

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The traditional world leaders in POS payment, victors in the consolidation war that shrank the top 10 vendors to a top 3 list have recently been acquiring other players further along the value chain, but now are themselves rumored to be the prey of others interested in rationalizing this vertical.

Recent press rumours indicate that VeriFone could be a prey of even larger players in the field of electronic payments looking to move from the virtual to physical world (here). VeriFone, which plays an active role in the move to increased concentration in the field of Merchant POS solutions worldwide, could become victim of ever larger players in this overall market, which suggests that moving out of their manufacturer box to become a payments solutions provider has put them in a new pool with some bigger fish, and there is always a bigger fish!

Only a year ago VeriFone made a large acquisition of Point (the Stockholm based merchant service operator) covering 11 European markets and over 475.000 merchant contracts (here) and in doing so took a big step into the merchant services market. With this acquisition, VeriFone secured its market distribution channel, allowing them to channel their payment solutions via Point. This acquisition was a trigger for the a round of comparable moves by other key players, Ingenico (here) and PAX Technologies (here) both looking to capture larger slices of the vertical market.

Rumoured potential new owners for VeriFone include Google and Paypal, which would indicate brave moves by them but also a real consolidation of the payment service provider market from a solutions perspective. So will this be the likely end to vertical integration? Does this mean that the terminal itself will fundamentally change?

The electronic payment market is in a very dynamic mode, but new products will not kill the terminals as we know them today. The terminal will have to become more cost-efficient and more flexible, but we are still a long way down the road before the terminal will be obsolete.

The payments industry is naturally cautious in adopting new mode of payments via different initiatives, because these are additional payments and not replacing the older payment methods. The retailer and the consumer will be more confused and the cost and complexity of this will become the biggest barrier. Few would defend the traditional card payment model, because there is still much room for it to become more cost-efficient, but the investments made to have the cards in the pockets of all consumers and to change their habits to use this cards, and to have different merchants and merchant sectors to accept them over the 50 years it is now in existence will not change suddenly.

So this could be a good move for Google or PayPal, because introducing a new payment schemes or payment method takes a lot of time (years) and a lot of money. The big benefit for them will be in increasing the speed of migration, by acquiring the leading supplier of POS to merchants.

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