HOT COMPANY PROFILE: Mobile payments company VIVOtech

Interview with VIVOtech president and founder Mohammad Khan

At the forefront of the rapidly-growing mobile payment market, VIVOtech makes both point-of-sale (POS) reader hardware and software outfitted with near-field communication (NFC) technology. Having already established a dominant domestic market share of NFC readers, the company is hoping to capitalise on the increasing prevalence of NFC-enabled smartphones for its software solutions. VIVOtech president and founder Mohammad Khan says to make such technology big, you have to “work with the big players”. In this case, the player is Google, which licensed VIVOtech to provide POS software for Google Wallet. Khan explains the convenient suitability of NFC for mobile marketing and consumer targeting.

¤ What makes VIVOtech different from other companies?
Our whole purpose was not only to make the mobile phone a payment device, so it can be your credit and debit card, but also to make the mobile device a shopping assistant to you as a consumer. So it can help you find the right products at the right place at the right price, and with the right set of services. Here in the US and in Canada we have over 80% market share of installed NFC readers. And those readers are not only capable of accepting payments, but also coupons and loyalty cards and merchant programmes. We developed what is referred to as the TSM, or trusted service manager software, for the carriers, handset vendors, banks, merchants, healthcare and transit – you name it. All of those are application providers who, using current means, can extend their application onto mobile.

¤ What is your business model?
We make money by swipes. One, we ship NFC POS readers, and make revenue, but subsequently the same readers give us additional revenue because we license them. Number two is the software side. We provide software to mobile operators, banks, merchants, or merchant service providers. Basically our model is partly a usage-based licence model for our B2B customers, who do not make money using our software right away. Within software, the model is licensing plus revenue sharing. For service providers who license our software, there’s a revenue share component of that. Our biggest costs right now are on the hardware side, but the software revenue’s increasing. But at the same time, people continue to develop the software, and that’s why our software is very rich right now. As for profitability, it all depends how fast NFC moves. We have a model that shows becoming profitable in the second half of next year.

¤ Who are your main competitors?
On the POS side, VeriFone for example. VeriFone used to be our customer. Now NFC is becoming big, so now they’re trying to do these things by themselves and they’ve become our competition. And Ingenico, but Ingenico also resell our products in some countries, so I think it’s a mixed bag on the POS side. On the software side, we have Gemalto or GND [Giesecke & Devrient]. They’re more of a payment-only play, whereas our play is payment, but a lot more importantly, all these richer experiences that our solutions deliver.

¤ What’s the biggest challenge you currently face?
Our biggest challenge that we have been facing is the availability of NFC phones. I think that has started to break in, so a lot more smartphones are becoming NFC and exponentially increasing. Number two is the ecosystem play. To deliver our solution at the POS, or even deliver the solution in the payment, it touches a lot of different players in the background. For consumers it looks very simple. But when you have an ecosystem play, then you have to work with a lot of different players. I think there is an expectation by the market that this is happening overnight. So the disconnect between the expectation and the reality is going to be very important. It will take two or three years to get into the mainstream, but what we are seeing – a major thing that we did not see a year ago – is that the commercial implementation by businesses is being done right now.

¤ What do you think is the hottest trend in digital media?
I believe it’s all mobile. So far in the digital world, when you are sitting on a PC which has cookies and all of those things, some level of personalisation is taken care of, but still not enough. But smartphone mobile media is going to be very powerful in my view. It’s going to create a better value for consumers, because whatever I see, it’s going to be a lot more tuned to who I am. And it’s going to bring more efficiency for businesses to reach out more effectively, in terms of cutting down costs.

VIVOtech appears well positioned in the mobile payments space, but ultimately its prospects centre on how well established NFC eventually become. With Google execs saying NFC will become a mobile standard by 2015, VIVOtech can feel assured by the search engine using its products as they both aim to drive the mobile payments bandwagon. The company also has strong votes of confidence across the mobile phone industry, with Nokia and Motorola providing both capital and strategic partnerships.

VIVOtech is seeing increased competition from other firms as NFC becomes more mainstream, with VeriFone opting to go it alone on NFC rather than license NFC readers. It may also find itself in conflict with France’s Ingenico for the purchase of POS terminal provider Equinox Payments. If VIVOtech can drive NFC adoption in alternate industries such as healthcare and transit, as it anticipates, and successfully implement its international expansion, it will be well positioned to lead the NFC revolution.


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