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Verifone Pulling Out Of Square's Market, Says It's Not Profitable

Verifone's Sail device was aimed at smartphone card transactions in the same market as Square. But it's being killed off because Verifone sees no future profit here.

Verifone, one of the world's top makers of the current credit card-reading tech in stores, launched its Sail ecosystem to address a totally new market: very small businesses who prefer to process transactions using devices like Square and the iPhone. But the company has revealed that it's withdrawing from the small business market with Sail (which will remain on offer to banks for their own resale purposes) because it says the market offers only "razor thin margins" and profits that are "fundamentally unprofitable."

That's bad news, potentially, for Jack Dorsey's Square. Sail and Square are highly similar systems, and though Square has had a degree of success in the U.S., Verifone's expertise in processing card payments spans the globe. Verifone even verbalized this warning to Square alongside its news, but that's nothing new—it's got a bit of a history of down-talking Square.

This makes us wonder how big the Square market is: Have you ever used Square, or its smarter European equivalent iZettle?

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  • Eli Abrams

     As a small company that provides technical services onsite, we historically have received check payments 99% of the time.  However, being able to take credit cards through Square has grown our business, even if we still get checks 98% of the time.  Surprisingly, a number of people who asked if we take credit cards later pay by check, as the question is more about "Are you a Reputable Company?" rather than "I want to pay with a credit card".  For us, Square's offering is a win-win situation.  No bank visit, $ deposited the next day, instant receipt for me and the client, etc.  I would not accept credit cards if I had to pay a monthly fee, but every couple of months, we charge a client's card upwards of $100.  By the second card transaction, Square had recouped the cost of the readers we have, and going forward, it's all "profit".  If they can do that on our tiny transaction volume, the trade show, farmers' market, and street fair vendors with a high transaction volume will be pouring revenue into a properly constructed company.

    Square, stay "small", and manage your cash flow well.  I expect you to be around and profitable for quite some time to keep my business growing.

  • Josh Graham

    Is the issue really that the market is unprofitable, or that the market is unprofitable for a large legacy company like Verifone. There are many examples of small startups making lots of money in spaces that large companies cannot. It is often a case of legacy systems, processes and people that contribute to higher fixed COGS. 
    I have never used Square as a merchant, but as someone who hates carrying cash I love the fact that virtually every vendor at the farmer's market I go to has Square! I have used it a couple of times at physical businesses and the ability to open up the app and be ready to pay by the time I am the front of the line is great!