EMV Migration Gives Verifone A Boost

When it comes to EMV migration, it can be difficult to determine how successful the switch is to rolling out EMV-capable devices to merchants.

But looking at Verifone’s second quarter earnings provides some optimism that more retailers are jumping aboard the EMV bandwagon and ensuring their devices are ready before the Oct. 1 liability shift moves into place. EMV migration gave Verifone an earnings boost during the quarter, but that wasn’t all that attributed to its positive quarter, said CEO Paul Galant.

“It’s important to note that our North America results are not simply due to EMV. We also increased our portfolio of certified terminal solutions, successfully launched our new portfolio of mobile terminals and delivered new products and services to our multi-lane retail, our SMB and petro clients. All in all, we believe that we again pulled ahead of our competition in these markets,” he said in an earnings call with analysts last week (June 4).

He did provide some specific facts about the merchant growth as it relates to EMV migration, saying that in Q2 alone, Verifone saw “31 additional major U.S. merchants signed on for this service that effectively removes consumer payment data from a point of sale register.”

“As of the second quarter, our total pipeline of terminals committed to be connected through this solution now exceeds 200,000 in the U.S. alone, pretty impressive considering we had none just six months ago,” Galant said, later noting that “our traction here is not limited to our direct merchant clients. Point of sale integrators, commonly known as ISPs, are increasingly endorsing our solution.”

Galant said that Verifone is working with Visa to promote the benefits of “Verifone’s secure commerce architecture for retailers who desire [a] more efficient and less expensive path to enabling EMV and innovation of point of sale.”

Overall, by the end of Oct. 24, Verifone said the total number of payment terminals in the U.S. that were EMV capable was around 24 percent. And by the end of October 2015, Verifone expects that to be around 41 percent. That leaves a tall task — or 60 percent of all merchants — left. Galant noted that getting that 60 percent up to speed on EMV will take place over the next couple years. For the largest retailers, however, adoption rates are much higher.

“We continued to build momentum across this product line in most regions as we deploy new products globally and benefit from the EMV liability shift in the U.S.,” Galant said. “By the end of October of this year, we will have 90 percent out of the total 1.8 million lanes at the top 200 retailers operate, they will all be EMV enabled.”

He said he expected the remaining 10 percent would migrate to EMV between October and Q1 of 2016. He also explained why there won’t be 100 percent of the top retailers EMV-capable by the liability shift deadline.

“A lot of these folks are really quite sophisticated in terms of payments, beyond operating the retail. …They made a decision that the most important thing is to encrypt, even more than anything else they need to encrypt whatever touches their payment devices, whether it’s a terminal, or a card reader, or a keyboard or whatever you have, it’s that encryption and then getting it out of their data centers and into the acquirer that is the key to preventing that headline risk that is so troublesome,” Galant said.

“And so when they have to make a choice [between] do I get encryption to work first or do I work on EMV, the vast majority of them go to encryption first and then they employ EMV. And so that’s why you have not 100 percent,” he added.

Verifone’s highlights from its second quarter include:

  • Record North America revenues were driven by security and EMV migration
  • Securing 28 large U.S. retail clients for EMV-capable devices; 13 of those clients added the EMV terminals for the first time
  • SMB market share in the U.S. grew through processing partners and the ISO channel, propelled by additional certified products and EMV and NFC demand
  • Signing 31 U.S. merchants for Secure Commerce Architecture to help remove consumer payment data from their integrated POS

“Q2 was an important quarter for Verifone. The team performed extremely well across a number of key areas as we achieved record North America results while also gaining share across several key European markets,” Galant said, according to the company’s earnings statement. “The progress we are making in our Year of Product with more certified solutions and offerings is beginning to yield benefits. Our clients are taking notice and we are earning both their first call and their business.”

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