Welcome. This is Alex Walsh of PYMNTS.com. I m. joined today by David Talach, the Vice President for

Transcription

1 Welcome. This is Alex Walsh of PYMNTS.com. I m joined today by David Talach, the Vice President for Strategic Partner Development at VeriFone. Mr. Talach, how are you? Good. Good morning, Adam. Thanks for joining us. I m excited to learn more about EMV in this advocate conversation today. And as I understand it, you ve been with VeriFone since 2004, but even in the past couple of years, a lot has changed. And now EMV is on the verge of inevitability. So talk to us about what s changed lately? Well, I have to say there s a lot that s actually changed. When I joined VeriFone in 2004, and I ve been in product management for a majority of those years. And I have to say that you know, just payments as a whole, it s the most exciting that it s ever been. And it s almost like a snowball going down a hill, picking up momentum and picking up mass. You know, I think for many of us, it s not just EMV, but also a lot of mobility trends in the mobile (inaudible), and NFC, and social commerce. So 1

2 there s no shortage of activity in the space. And you know, dare I say, payments has almost become sexy these days. But you know, as we look at EMV, again yet another massive change and you know, opportunity for us to define the payment infrastructure as the years kind of unfold here. So yeah, no shortage of things going on, and EMV is definitely one of the notables here in our books. So what s different though about the environment -- either the consumer side or the emergent side -- what s different that sort of sets us up now for EMV to happen in the very short term? Yes, there s two sides to kind of the payment infrastructure, the payment system, right? There s obviously the innovative side, where we look at new use cases and new things happening. But sometimes we also forget that the payment infrastructure is about transactions, and about security, and about preventing fraud. And you know, you look at the you know, American payment infrastructure, and really the system or the rail that we ve been running on for, oh gees, gosh, I don t know for far too many years. Which is inherently a very simple [mag stripe?] base, static data based infrastructure. And so, you know often we like to focus on the bells and whistles of the payment infrastructure, and all the great 2

3 new use cases that are coming. But at the end of the day, when we look at transactions, we need to remember that it s about security. It s about, you know, preserving the integrity of the transition of that money, and making sure that we re adding additional levels of encryption to you know, mitigate fraud and mitigate all of those risks that are associated with conducting payments. And you know, I think EMV, although it may not be the sexiest trends in payments. And you know, it competes for you know, PR time with things like mobility and mobile wallets. You know, we can t forget that ultimately, it s about cardholder data, it s about identities, it s about safe guarding people s you know, personalities, and identity, and making sure that the transaction is performed securely. So you know, EMV is really just an upgrade to the payment infrastructure that we ve been using for so many years. And it s just really kind of bringing the base payment system up to snuff; up to speed. And putting us on par with many of the payment systems that are found in other geographies. And if you look at UK, you look at most of Europe, you even look at parts of Asia. You know, for mass majority of the country, they ve already moved EMV a level of encryption, and EMV type of methodology of payments. And it s kind of refreshing that, you know, one of the leading countries in 3

4 the world -- or the leading country in the world -- the United States of America to finally make the jump to upgrade our base payment infrastructure to EMV. So I think it was long overdue. And essentially, it s kind of just bringing us up to where we need to be to ensure that we have a base payment infrastructure that we can continue to build and innovate on. I think you re right. You mentioned bells and whistles earlier, and sort of I think somewhat agree with you. That payments is (inaudible) to sort of a sexy industry. And EMV maybe is not full on there with the sex appeal, but NFC maybe is ahead of it. And that s something that s getting a lot of attention. But perhaps EMV deserves more attention in terms of the benefits it can provide on both sides, relative to what we re doing now. You know, when I say bells and whistles, you know I mean that in a positive tone. In that there s a lot going on in this space. You know, I think sometimes people forget about the you know, the base system that those new use cases run on. Which is you know, mag stripe data static data. And so involving the EMV is going to really allow us to you know, potentially entertain new use cases, entertain new possibilities by upgrading the base kind of level of encryption or level of authentication that the 4

5 system provides. The other thing that we can t forget is that you know with some of these EMV mandates and EMV you know, news releases or updates that we have them put out. Is that they re -- most of them are associated with a complementary NFC upgrade schedule. So you know, I think that is fantastic news that at the same time that we re upgrading the base kind of payment infrastructure with EMV, we re also putting in place NFC. So you know, we re looking at a big inflection point in the United States here that you know, the next couple of years not only will debased terminals me EMV capable, but also NFC capable. And when we start looking at the vast majority of devices in the United States, having both EMV and NFC capabilities; acceptable capabilities. My gosh, that s going to just open a whole bunch of opportunities to, you know different wallets, different use cases, different start ups. You know, there s been a kind of ongoing debate of NSG: the chicken and the egg. And some of those type of conversations. And what these EMV mandates and complementary NFC mandates, you know the next couple of years it s going to be a radical transformation of the things we can do at the point of sale. You mention EMV mandates. Let s talk a little bit more about Visa and MasterCard. And specifically, how 5

6 their sort of directives are impacting liability shift, if at all. Is liability shifting more over to merchants because of what s happening with EMV? You know, I think at this point it s a little too early on to I think jump to conclusions on merchant impact. You know, the liability shifts that are out there in 2015, and I think for many of the merchants -- especially in the you know, [SME?] space -- the news hasn t really kind of hit them yet. And so you know, I think when we look at the EMV mandates, and we look at these liability shifts of The people or the merchants are impacted by that right now are really the people within the payment industry or payment professionals. So you know, processors, large box retailers. So they re the ones that are starting to kind of think through just how this affects them. So you know, I think the conversation at this point is still somewhat limited to the payment professional industry. It s kind of limited to you know, the First Data, and the Chases, and the (inaudible), and the Wal-Marts, and the (inaudible), and whoever it may be. But I think for the vast majority of the merchants, the kind of SMB [234?] space, they may not necessarily know. Or even as this kind of EMV upgrade cycle unfolds, I think they will continue to not to you know, be fully engaged in terms of what this 6

7 means for them. So you know, it s very preliminary. I think you know, a lot of this news and these mandates kind of came out early this year, and you know many of the big, box retailers and processors, and payment professionals are still kind of digesting the news. And I, you know, hopefully over time as we all get our messaging, and education, and training, and get the word out to the street that the smaller merchants will appreciate exactly, you know, essentially what s going on here, and how it impacts them. So we re sort of in an educational phase it sounds like. I would like to know more about the message VeriFone is delivering, and what economic benefits VeriFone is highlighting in its conversations with retailer and merchant partners. Yeah, so our message is relatively simple. For us, you know EMV has essentially been part of our DNA for, gosh, years. We sell them to 115 plus countries, we ve supported EMV transitions around the world. So when the UK went from you know, mag stripe data to chip and pin, we were there working with acquiring partners to make that upgrade happen. When Canada, you know most recently just the last couple of years went from a mag stripe transition to EMV mandate. We again were there helping with that 7

8 upgrade. And so, you know when we look at gees, nearly every country in the world that has gone from mag stripe to EMV, and has successfully made that transition. You know, VeriFone being, you know the provider of payment acceptance devices. We ve been right there for every single one of those EMV transitions. So you know, even though we -- you know, most of us at VeriFone here live in the United States, and we re very focused on the American trends. For many of us, it s something that we ve been doing for years. And so, you know it s big news for the American payment infrastructure, and payment -- you know, American payment ecosystem. But you know, I think for VeriFone, it s just a matter of doing business, and helping with yet another EMV transition. So you know, all of our products are designed with EMV capabilities. We ve been writing EMV level one and level two solutions. We have various EMV level two (inaudible), which may receive cardholder verification methods. And so for us, we -- so like you know, we can help take some of the scariness, and some of the complexity, and some of the worry out of the equation. And I think that s our -- essentially our fundamental kind of messaging is that it s a yet another EMV transition for us that we do oh so well, and have proven to be successful at doing -- in other countries with other partners. And that 8

9 you know, we re going to be putting out the messaging, the education. Letting our partners know that which products have the capabilities, how to get the capabilities. And really trying to be a good steward to take you know, any of the scariness if you will -- the best word that can come to me -- to take that out of the equation, and let people know that this has been done before. And it can be done here in the United States of America. So there are other cases in other countries to point to and say this has been successful here, look at what it can do for the United States. And it helps to have an extra partner, like VeriFone, to sort of enact the transition. But no doubt, there are also some challenges for retailers too. Maybe we should sort of -- this could be our look into the future. Let s wrap up with this idea of what will retailers have to do to get going on this? And what s left for them to achieve to bring EMV over to the United States? Yeah, so you know EMV, I don t want to you know, marginalize the impact of EMV. So EMV does, you know affect card issuers. It does affect merchant acquirers, and processors, and you know it does affect ultimately either the retailer, or the processor that has the equipment. And you know, at each part in the EMV 9

10 transition equation has a responsibility to do their part. You know, from VeriFone, you know we re very well known. And rather well respected for providing the acceptance devices and the acceptance points. So the hardware, the operating system, and the application. And one of the things that we re trying to do to work with retailers, and processors, and merchant acquirers is try to work with them to figure out how potentially existing devices could be upgraded to EMV, if they do have chip card readers. But also how you know, we can make it easy for them to upgrade their existing state to be populated with chip card reading devices or EMV capable devices. So you know, there is somewhat of a capital expense associated with any time you have to upgrade hardware. Most of the (inaudible) devices deployed in the United States through the various years do not have chip card readers, and are not EMV capable. So you know, we want to be very mindful that you know, any time a large upgrade cycle needs to take place, that we also need to be very mindful of trying to make that a process that, you know can be digested by a processor or retailer. And so we re trying to work through things like payment as a service, you know operating leases, and also trying to stagger out the upgrade cycle to make it more doable for some of these companies to make the transition. 10

11 You know, 2015 sounds like it s a long ways away, but when you look at a balance sheet, and you look at the you know, potentially the expense of upgrading to EMV. We need to make sure that we re working with our partners closely to make it palatable, and make it something that they can do. So you know, the way we see it is by 2015, most big boss retailer and most processors and acquirers will have made the shift, and made the investment into EMV devices. But you know, some of the SMV 234 merchants may (inaudible) beyond So I think for us, the message is to be flexible, to be accommodating, to be calm, to help educate and accommodate, and make sure we get through this upgrade cycle. You know, we ve done this in various other countries around the world. We hope to replicate that here seamlessly in the United States. And once we get over this bump of EMV transition in the United States, we look forward to all the new use cases and all the new, exciting things that EMV and NFC in particular will enable. And we just need to keep our eye on the ball to work with our partners to make this happen. Well, speaking of educational opportunities, we re grateful for the one we had today. Mr. Talach, thank you for your time. I m sure we might as well put you on speed 11

12 dial, because I m sure there s so much more to talk about between now and But thank you for your time today. My pleasure. Have a good one. Thanks. 12