Philip Stiller - Citi
[Abrupt Start]…for your company to say the least and there's a lot of things to discuss. I wanted to start out talking about the top line. I think that's one of the main areas of focus for investors. You guys have given a preliminary outlook for next year, which implies around 10% top line growth.
Bob, if you could talk about what the main drivers of that growth will be, perhaps we could walk through each of your major regions and talk about what you're seeing in terms of trends there and what you expect for next year.
Okay, Phil. I want to first of all say that I can’t take any questions on Q4, which we just finished our Q1 [ph] because that sort of would be too close, we’ll announce our results on December 13. But talking about longer term and that would -- I would say for the full year of ’13 would fall into that category.
The major drivers, first of all, was 70% international, a lot of that business comes from emerging markets, such as China and the rest of Asia, Latin America. Those markets still have very - well growing middle class, growing at a good rate. And that’s really going to contribute to drive up the installation of our terminals we think in the mid-teens to 20% type rates in those markets. Similarly with Eastern Europe, we see good rates there.
For next year, I think also we’ll get a recovery in Germany, because we started to roll out the new H5000 product, which is really [driving] [ph] our revenue in Germany this year.
In France, the recovery really won’t come until the middle of the year, because our VeriFone products with integrated NFC won’t be available on that point. So the French year-over-year may not be as big a deal, because the damage was more in the latter half of the year, but I think, that we’ll see, certainly during the year, recovery in France.
In North America, we are talking about growth here, now not large absolute numbers, but lot of exciting things happening in the advertising space are continuing to gain more traction in the taxis, rolling out at gas pumps for example, and the convenience stores, so there a lot of good things there.
And then, one of the biggest drivers is really happening in retail space these days. People talk about mobile but (inaudible) take lots of different forms. But the growth of our business putting software on to iPads and similar devices, and then when a customer comes into the store, having the sales clerks out from behind the counter and engage with the customer, so that they get their telephone number or some other identifier and so what did you buy last week, I see that you bought a red dress last week, can I sell you some shoes to accessorize that?
If the shoe’s out of stock then engage with the online store and have them to the customer’s house in two days for example. That’s the type of thing that we see a very exciting growth in North America.
There is a lot of talk about EMV and NFC and things like that. But retailers themselves are much more excited about how to compete with Amazon and get that incremental sale. And so this particular aspect of mobile payments I think is the most exciting thing that’s happening and that would definitely be a growth driver for us next year.
Philip Stiller - Citi
Can you talk about the competitive environment and there is multiple facets to it as well. We could talk about the mobile tablet area in a second. But can you talk about how you feel your business is positioned against competition from either traditional terminal providers or those that are trying to turn smartphones into mobile acceptance devices.
Okay. So we’ll start at the top. Our largest competitor is Ingenico. Similar cost structure to us, pricing is pretty stable and we are in similar markets with similar products, we really don’t compete on price, we compete on relationships and [I spoke to the person] [ph]. And the big picture, (inaudible) we compete with most of the time and the picture is pretty stable.
Next size down, people like Equinox, that’s the remnant of what was Hypercom they were -- they are a big player in the U.S. right now. They were a big player in other markets, since we bought them, obviously we’d able to - they are [ankle by the tight] [ph] prices (inaudible) raise those prices. And so, in the great scheme of things, prices have actually gone up, because of our ability to raise the Hypercom product prices.
And then, we have other competitors from Asia that are - PAX for example. But they tend to not be making much headway in most markets and so we’ve not had to do any pricing to compete against them.
Our business does involve quite a lot of services and other software services aspect, it may not be apparent to investors, but there is -- there are a lot of hooks and lot of software development around our products to make them pretty sticky in most markets, not every market but most markets are pretty sticky and it’s very difficult for these new entrants to get into those markets.
Now coming back in the U.S., I -- the people who continually think of companies like Square as being a competitor of ours. They are a big competitor on the PR [war], but actually we are talking about selling products to bricks-and-motor merchants. Square really isn’t there in any meaningful way, certainly not that we’ve ever had to adjust pricing to compete with.
So they've had a few cars and taxis but they pulled out and so, certainly, never effected our pricing there. And so, that really hasn’t been an impact when it comes to pricing, big impact on the stock price and the PR [war] but not so much on any reality in our business.
Philip Stiller - Citi
If we take a longer-term view on pricing in the market, do you feel that there is eventual pressure on the ability to charge several $100 for a terminal or do you think that there is still pricing power, which we’ve seen from you, both you and Ingenico over the past year to 18 months.
Well, let’s really get to that - I think the subtle way of saying, what's the disintermediation risk here, that people would just go to something cheap. The -- you have to think about at this level, that retailers are most focused on driving down interchange rate. That’s the biggest thing and well actually getting more revenue is the biggest thing and that’s really goes to the mobile initiative that I already talked about.
But beyond that, getting interchange rates down is very important to the retailers and of course they talk about, well, can we compete against Visa or MasterCard with a white-label card that -- another initiative that really hasn't anything to do with VeriFone.
So I won't go there. The one that's relevant to VeriFone is that, if you look at the costs of interchange, that's made up of, clearly the brand [profits] [ph] retailers sometimes object to, but there's value in it of course and then there is the ultimate value that people do have to process these cards, they have a lot of capital involved in card issuance and so there is real value there as well.
And then in the middle there is fraud cost, and that’s really those three elements and so the retailers understand that they can reduce their interchange rate by reducing fraud, you reduce fraud by having high security and that’s where VeriFone plays. Our terminals are all about security.
So when people talk about are we going to do, just download this piece of software on a phone and use a QR code, etcetera, and Starbucks, for example, I have a photograph on my phone that we took one of our employees Starbucks QR code and you can take that photograph, you don’t have to take it out, you take a photograph and show it to the Starbucks checkout line and buy coffee on her account. So there is no security around the Starbucks.
Now, at five bucks a shot, they probably don’t care about security, but most retailers’ do. So these -- again, it’s about disintermediation because people aren’t going to care about security and there is cheap ways to do [terminals] [ph]. Yeah, there are cheap ways to do it. But they don’t have a secure element.
What Ingenico and we and Equinox are selling is a high degree of security and that does have value that I think we would be able to charge for. So as people come up with other ideas, Isis has come up with their wallet and Google has their wallet, et cetera, PayPal, for example.
All of these folks took a while to get engaged with them, they didn’t naturally think that they had to talk to VeriFone. But we have a group that calls on all these start ups to make sure they understand that we are [Switzerland] [ph] and when it finally dawns on you that you need security and whatever [things] you have to have, you got to need to talk to us and then they come on board and they work through our terminals.
So, I would think that, no matter what you are seeing out there, you get statements from start-ups that don’t fully appreciate how easy it is to hack into or the lengths to which will people will go to hack into payments systems is actually the better way to say it, because [Micos] [ph] and other retailers have seen this to their expense, the hackers really would spend a lot of energy, TJ Max, the hackers spent a lot of energy to get into credit cards data and the start-ups don’t appreciate that. But when they do, they realize, okay, I’ve got to go through a secure element in one place or another in the payment system and we expect to get a fair share of that business, not to say that we get everything.
Today, a magstripe card just being swiped down our terminal isn’t actually using security of its own, the terminal is really playing to PIN debit transactions. But the retailers also like the idea of having one place while all the payments go through. So they like, yeah, PIN debit is here, they like magstripe to be in that same place.
So, I imagine over time, there’ll always be PR that we - ahead of what we can chase down, but over time, we intend to corral all these different initiatives and encourage them to come through our device.
Philip Stiller - Citi
Building on that point, I think one of the things that’s changed in terms of how investors perceive VeriFone over the past year has been differing opinions around NFC. I think initially, if you think about our conference last year there was a lot of excitement around that technology.
Clearly in the U.S., there has been other initiatives - wallet providers that are going around NFC, partly due to the infrastructure issues associated with that. Counter to that, I think it seems like there is a still lot of initiatives internationally that are dependent on NFC.
So perhaps you could give some update on how you guys feel about NFC, whether it’s really an important factor for your business going forward? Are there opportunities for you to change your approach to incorporate more forms of payments beside NFC like using QR codes or cloud solution?
The answer to the latter part, absolutely, yes. We think that NFC is just part of the way things would evolve. We are not weighted to NFC. NFC was a good revenue opportunity for us. [Over time, it’s going] [ph] to get upgraded and because we charge 300 bucks for NFC, at least [terminal] [ph] service saw that as an opportunity. But it’s not like, NFC is our baby and we’re going to live or die by NFC, there were a few companies out there who literally not died, but they were totally weighted to NFC.
That’s not our stick. Our stick is that we expect -- we try to bring everything through the terminal and so things like QR Codes being displayed on our terminals and affecting payment that way, if that’s what retailers want to do we can figure out a secure way to do it, totally open to do doing that.
There are other technologies we think are out there that could compete with NFC to lower the cost of communicating between the phone and the terminal. And so we expect we’ll chase down each one of those technologies and we can play it anyway you want.
NFC has the advantage, because I can remember, actually going to Google now more than two years ago, maybe it’s now three years ago, saying, well, you know there are other alternatives. Wouldn’t you like to explore these other ways to do it because who is going to wait for these phones to get upgraded to NFC. You’ve got to upgrade all the terminals and (inaudible).
And they were pretty clear that the industry -- all these standards the TMS providers know how to write-down to NFC. There is a lot of ecosystem in the industry already oriented around smartcards, which you’ve probably forgotten about. But that was the first genesis of NFC. So there was this ecosystem (inaudible), we can just write those [rails] [ph] more easily than starting again with a fresh thing.
Now, people may be getting burnt out with that idea and saying, well, still it’s going to take too long. But on the other side of it, you’ve got Isis that’s controlled by AT&T and Verizon. But first of all, there are lots of very deep pockets and the ability to drive NFC into the phones and I think the retailers -- many retailers are willing to go along with NFC if they can see some benefit from it for them. So, I definitely wouldn’t write NFC off. But we are not banking on it. We want to get [bat] [ph] on all the technologies out there.
Philip Stiller - Citi
Do you have an update in terms of how many of your terminals have NFC? I think Ingenico said the other day that 40% of their shipments in the past year, are contactless enabled. Do you have statistics like that?
Hold on. You just switched things, you said contactless not NFC, so we -- if you are talking about EMV as well or you are talking about just NFC.
Philip Stiller - Citi
They used the term contactless.
Yeah. Okay. Well, we last quoted a number like 29% of our terminal shipments that way. I think that this is really the…
Philip Stiller - Citi
…well that was EMV that was the EMV, I’m sorry, so NFC is listed on that. Even on the EMV world, as the bulk of the large retailers who are taking EMV, a smaller percentage of them are taking NFC. Maybe a number like Ingenico was saying.
Don’t forget in the U.S. we sell a lot of terminals to SMB; Ingenico is just coming up on that space, so it’s not being very big there. And then in the SMB space, most of those retailers are still buying the plain terminals, so lot of [dollar] [ph] terminals, actually not NFC or EMV. So that would affect our percentage versus what Ingenico is doing.
Philip Stiller - Citi
Okay. Perhaps you could shift to the tablet initiative, you guys acquired the company, GlobalBay a little more than a year ago. And we see headlines weekly about retailers experimenting with that that sort of technology.
Perhaps you could give an update on how that business is doing, describe some of the economics of that business relative to your core business? And talk about the competitive landscape. When you talk to retailers who are considering doing that, what other companies are you seeing?
Okay. So, yeah, this is the most exciting thing happening in retail. This is what, may not be the retail treasury people talking about it, but the retail operations and sales people are all talking about how they can compete with Amazon, how they can engage a customer as soon as they come on the store, make sure they are not just doing some comparison shopping.
And so the idea is to equip all the sales people, get them out from behind the cash register, get them out onto the store and walking around and engaging with customers as soon as they come into the store.
So then there are two aspects to this. One is the software that rides in that tablet and that software that we provide links to a server in the back office and then the server integrates software from the online stores from in-house inventory and from other ERP systems that they have, POS systems, it brings them all together and presents that in a nice efficient way on the tablet.
(Inaudible) their sales assistant to do comparison shopping; if you are looking at refrigerators and things like that, so really it enables the engagement with the customer. The really new thing is that it enables the in-house store people to be selling off their online store and that I think is really powerful concept.
And so this was a big growth area for us. We are hiring sales people just as fast as we can. It’s a different type of sales person, much more of a consultant, more of a high power software type sale than a typical terminal sale, there is a different class of customers who are already doing a lot of that - different class of salesmen that are already doing that, they’re selling, - of course, our existing sales guys have the customer relationship and they are helping to get the introductions. But there is a lot more details and that need to be understood by those sales people. So they -- we are hiring as fast as we can in that space.
The other aspect of it is the hardware. Obviously, an iPad can’t take a payment. So we provide this sleeve that goes around the iPad and that enables regular card swipe, EMV, PIN debit, it was really important and over 50% of credit card usage is debit cards. So a lot of debit card issuers these days are turning off the signature. So it had to be PIN debit. So retailers need to really have that PIN debit capability, we don’t get with the cheap dongle.
So they have this high powered sleeve and also it does barcode reading for example that an iPad has difficulty doing. So all of that we actually sell at a higher price than we do regular, just hardware terminal. So we have more money there. But the neat thing is that you need more of these than you do terminals because there are bunch of sales people all around the store.
And the other aspect of it is that iPad doesn’t have a replaceable battery. So you have to have multiple iPads, you have to have some [out charging versus] [ph] - so you have more of these than you do sales people. So we make way more money with that than we do if we’re just selling terminals. So we think that this transition is really powerful. And a neat thing is despite –I’m talking about we getting money – this is - we are not putting our hands into the retailer’s pocket. The fact is they are getting real value out of it. There are numerous retailers who have run comparisons where they put this in some stores and not in other running it through same period and see a significant -- sufficiently large uplift in the revenue they get where their sales folks are equipped this way versus not.
The payback is just in a matter of weeks literally. So it’s just a really dynamic proposition for retailers and it seems most exciting.
Now, in terms of competition for the software, the competition is in-house development by the very large retailers. So they want to do it themselves. At the midsize though they just don’t have IT organizations large enough to do this type of thing. So they tend to buy from us.
And on the hardware side, there are some other folks out there; (inaudible) has a product not quite as good as our product but they do have one, that an EMV capability, for example. But there are some people out there with low end wrapper hardware as well.
Philip Stiller - Citi
At this point, I’d like to open it up to questions in the audience. There should be a mic going around.
Hi. Thanks. One follow-up on GlobalBay, did you mention what GlobalBay was in revenue when you purchased them and then roughly what it could be in a year or two years kind of market opportunity. And secondly, could you update us on the replacement in petroleum market in North America?
Okay. So did we mention GlobalBay (inaudible)
Philip Stiller - Citi
So it’s a 1 million or so, it was really very small when we bought it. But it’s a high-growth area for us. We expect this will -- this is part of our growth story. I mean, it will be meaningful in terms of growth for the company because obviously it’s completely additive to anything we’re otherwise doing.
We have never sold enterprise level software. I think Israel and Turkey and some places, we actually do sell full enterprise software for retailers. But in U.S., we’ve never done this. So this is all incremental to our business.
Your second question on the petroleum, what was it? What was that again?
Just an update on the (Inaudible) that was a big opportunity at some point in the future?
Well, I wouldn’t -- well, let’s bifurcate that. In the convenience store, where if you see -- walk in there and you say I want $10 on pump six -- that big device or you want a bag of chips, the big device that they punch that into, that 70% of the time is a VeriFone product. Most of those devices were upgraded for the PCI standard upgrade in 2010. Of course, it was late, so it was also a driver in 2011.
And we are still selling them because there is always a tail to that business but we’ve not portrayed that one as a big feature. That was, sort of, something that we’ve done.
Out at the gas pump is maybe what you’re referring to. And there, we've been banging the drums about better security at the gas pump because if you do use your debit card in particular PIN debit at a gas pump, only do it if there is a verified logo right on that equipment because otherwise there is a high probability that your PIN numbers can be stolen because there is a lot of hacking that goes on at gas pumps.
And so we’d been banging the drums on this and encouraging gas pump operators to upgrade. Now, of course, EMV coming, that’s another reason to upgrade but that’s 2016 – actually 2015 is for major retailers, for most retailers but gas pumps have got a bit of a lag on that. And so that’s still multiple years or so. What we’re doing in the meantime is we’re giving away some of that equipment in order to generate the advertising revenue because it’s a good payback with the amount of advertising revenue you can generate on those screens to actually give the equipment away and take it whereas if we sell the equipment, we have a rev share on the advertising revenue, that’s why we keep it all.
And so that business has also taking off but that’s - we’re sort of selling some and we’re giving away some that’s really where we’re at. It hasn’t just retailers or gas station operators falling over themselves to buy that because they tend to still be saying we’ll delay that CapEx as late as we can based on the EMV standards and other dynamics.
Remember at VeriFone’s first Analyst Day, Doug spent a lot of time on the barriers to entry and all the payment logic that was in the terminals and how long the certification process takes with acquirers and networks. And I think that’s one of the issues you’re having in Europe right now is just navigating that process?
One of the things that’s just not clear to me at this point is why the dongles and the peripherals that are coming out aren’t held to those same standard, and can you talk about what changed in the industry that sort of allow these new entrants to come in. What seems like a pretty short period of time?
So those barriers of entry still exist, and are so just as real. Well, it doesn’t prohibit PR. PR doesn’t have to comply with PTI standards and get qualified for six months in Europe. PR can just be something to put on the press release, so the PR war clearly is something that we haven’t dealt with as effectively as we’ve with the actual products out there.
But if you’re at Walgreens and you’re buying a terminal, then you actually have to be PCI compliant, if you want to be able to get the correct interchange rate et cetera. If you are dog walker and you don’t - (inaudible) taking cash up until now, you’re perfectly happy to pay 2.75% interchange rate to do card swipe because you haven’t bank card swiped before.
And VeriFone never was in that space of providing terminals to dog-walkers previously. So that is a whole market. So if Doug was talking about barriers to entry, he wasn’t talking about barriers to entry to dog walkers. He was talking about barriers to entry to the markets that we were in and do compete in.
And those are still there. It’s only PI that says that Square is selling to -- obviously they don’t literally say this but it gives the impressions that Square’s selling to our existing bricks-and-mortar merchant. They’re actually not doing so.
Yeah. But I guess, there was barriers to entries to doing business with First Data and Paymentech and now Paymentech is behind one of the dongle-makers here and so -- there - it seems like at least from the acquiring side, that there is some scale players willing to play ball with people aren’t going through the same certification.
No, it’s the same star but actually different explanation around that. When Square came out with their dongle, from a PR point of view, they said they are competing with VeriFone. But actually they were selling to people that we didn’t compete with. But we said, well, you know offense is a best form of defense.
We should be in that market as well and for other dynamics, we actually had a product that was going into that space about the same time. So we said, yeah, we’re going be in this. So yeah, there was this perception of competing against us. But it really was not in the market that Doug was originally talking about but it’s in this other market.
Now, you got Square out, there was all of these -- again a lot of these casual merchants and as I said not really competing with us. But it turns that they really were competing with some people or treading on some real toes out there and that was for example, the eBay merchants and therefore PayPal was going to be affected by that. So eBay has entered the market in that space.
They were affecting Amazon merchants because they are also casual merchants. So you know the rumors that Amazon would do something like that. They’re a payment processor or at least a front end of the payment processor. So (inaudible) lot of these casual merchants, [they are repayment] [ph]. So there were real companies out there, that really felt that they were going to be affected by Square, if they didn’t do something . So they were piling onto that market with their own dongles.
And some of the banks are doing the same things, hey, we don’t want to get left up. So the fact that a lot of people are piling into it, it doesn’t affect the fact that there was always still a barrier to entry into our existing bricks-and-mortar market. It’s just this other market that we had never attempted to address, because we didn’t see good economics on it and still don’t see very attractive economics down in that space.
But what Square was doing, which was what I would do if those cards were handed to me, is they’re saying, hey, we are going to move up market and we are going to follow the PayPal model and we are going to have our own wallet and we have to then find places for people to spend that wallet. And they found Starbucks and dog-walkers don’t use [glass-blowers] [ph] very often or vice-versa, but everyone go to Starbucks. So it’s practically logical thing for them to take their wallet idea and then go to somebody else who doesn’t -- it doesn’t really matter about security, because people don’t cheat on $5 cups of coffee, it would appear and put the wallet into that space.
So, that is all true stuff, but it doesn’t affect the fact that if you are trying to sell to Walgreen’s or Macy’s etcetera, you need to have PCI compliant terminal, you need to have a terminal these days that’s going to be EMV capable and these entrants that you are talking about don’t have EMV technology.
And so, all those barriers still exist today. They don’t exist in terms of the PR that you hear. And as I said, retailers down the road may want to -- now, I would say, well, we’re now going to look at other alternative to entertain these startups. But what PCI and the security element [are going to tell] [ph] us all about is driving down fraud and so if somebody decides they are going to use General Electric white label cards and General Electric doesn’t care about PCI, but they do care about fraud. And so, eventually, people will put in the expense associated with preventing fraud and then they are on a similar cost base as ourselves. Does that answer your question?
(Inaudible) I mean, it was in my understanding that it was the merchants that demanded the certifications. It was my understanding that the acquirers, and processors and networks demanded that certification and that’s the step that doesn’t seem to be happening with a lot of the new entrants from at least from what I can tell.
The merchants demand low interchange rate, okay. The Square merchant is paying 2.75. They clearly are not demanding a low interchange rate. So, the ones that we deal with, they object to 2%. They object to 1.7% interchange rates. So, there are two different classes of people and even though those casual merchants may be millions of people, I acknowledge that and you could argue we should have been in that space that clearly is a different space, where people are willing to take risk, because who’s going to try and hack in to a dog-walker’s find.
I mean it just -- there isn’t a good payback there. You want to hack into a Walgreen’s or [Micros] [ph] for example or some book store. So, the fraud is going to chase the money and the money isn’t down there. The money is in these other retailers. So they want low interchange rate and the way that the card issuers and the card associations deliver low interchange rate, is to drive the fraud down and have these PCI standards to hold the fraud down. It’s really what it’s about. So, it doesn’t have to be PCI standard, but you do have to have security to get the fraud down.
Philip Stiller - Citi
Just to follow-on on that question, I guess to paraphrase it. Why isn’t Square allowed to exist by the networks, because if all the points that you say are valid, so fraud is a big issue and if these things aren’t secure, why are they even allowed to exist? So, why doesn’t network such as Visa and MasterCard’s just doesn’t shut down Square, because they have done that similar things to iZettle, for example, MasterCard -- Visa took out the certification from iZettle in Europe. So they weren’t able to process Visa cards, which is kind of useless, right. So that’s probably the most powerful line of defense for yourselves.
If you claim that fraud and security is one of the selling points of VeriFone terminals. So that’s one question. And the second one just to follow-on on the point that you made about how Square is not EMV compliant, but in Europe there are now similar startup to Square there are EMV compliant. So, how do you address those startup that are going to give away terminals for free and they are going to do 2% -- 2.5% type of interchange on a terminal that is EMV compliant?
Well, let’s take the first one. This is public forum. So Visa Europe is different from Visa U.S. it’s clearly different dynamics going on those companies, but Visa U.S. is actually a investor on Square, when you lay in the -- on the one hand let’s get lot more people using credit cards versus let’s worry about fraud, clearly Visa made a choice that well these retailers are willing to pay 2.75% anyway so (inaudible) are paying for their own fraud expense. If they are willing to do it, that’s fine. It doesn’t change the dynamics that Walgreen’s is not willing to pay 2.75% interchange rate. They are not willing to pay for fraud.
So, you can argue that it’s like, hey, guys if you want a cheap thing, you can have it. You are just going to pay for the fraud that’s associated with that and I’m sure there is a lot of fraud associated with it and that’s why you get that high rate.
So EMV is a very complicated piece of software and so somebody could do an EMV in Germany just for German banks for example, but if you want to do EMV for a major retailer in the U.S. you have to do EMV as compliant with not only the U.S. standard, it has to be compliant with Canada, Canadian card issuers, because you’re going to have customers coming from there, from the U.K., from Australia, from all over.
And so the EMV that major retailers want is a very complicated and it’s not (inaudible) just yet to know all those stuff for all these issuers all around the world and so that’s creates a barrier to entry, but in any one local market you might do an EMV that works on most of the local cards and get away with it, that’s really is the difference that you will see with these dongles.
Philip Stiller - Citi
Okay. We have time for just one more question. On Point, so this is an acquisition you guys announced about a year ago. Can you just provide quickly an update on how that’s tracked towards your expectations and where you guys are in terms of rolling that out more broadly across your business?
So, at Point we have had exchange rates negative versus Point, little bit behind where we’d hoped they are today. But the other dynamic is [we’ve seen] [ph] a lot more of the payment as a service and lot less upfront sales, so that has a short-term negative impact on revenue, but over the long-term has a positive impact.
So, they are doing lot -- they’re being more effective than we anticipated and the ultimate selling model; in the U.S. we are starting to make progress there. We think that the EMV conversion in 2015 is you’re building up to that was where we’ll make the bulk of our progress in the U.S. spending to retailers, the complexities because this EMV software has to be upgraded every six months or so. NFC, (inaudible) software is another piece of software that’s going to be upgraded on a regular basis. And so taking on those types of initiatives for retailers, I think it’s what’s going to drive payment as a service in the U.S.
Philip Stiller - Citi
Okay. Great. I think we’re out of time. Thank you, Bob. Thank you, Doug for coming.
Okay. Great. Thank you.
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