For years, the United States has lagged behind other countries in credit card security – sticking to dated swipe-and-sign technology while the rest of the world adopted chip and pin. Later this year, that's all going to change, and a 10-year-old Montreal company hopes to be a big part of the shift.
"It's a huge opportunity for us," says Dax Dasilva, founder and CEO of Lightspeed POS Inc.
The company, which builds point of sale systems for retailers and restaurants already has a significant presence in the American market, but thinks its inventory-centric technology will gain further traction when the American market is turned on its head this October.
The end of swipe and sign – also known as the Europay, Mastercard and Visa (EMV) liability shift – will force financial institutions and merchants to adopt chip technology or be liable for fraudulent transactions made with old, magnetic stripe cards.
"It's a great moment for the new retail technology to help a lot of retailers switch over to something that's going to really help them succeed," Mr. Dasilva said in an interview. He hopes as businesses across the U.S. look to upgrade their technology, they'll turn to Lightspeed, allowing the company to build on its already strong presence in urban centres.
While bare-bones systems may never go entirely out of style, Lightspeed, as well as other market players such as San Francisco-based Square and Ottawa-based Shopify Inc. have reason to be optimistic about the EMV shift's effect on their businesses. These companies, as well as others in the mobile payments sphere, will likely benefit from the change, Euromonitor analyst Michelle Evans said.
"The convergence of the EMV migration with the arrival of mobile payments into the mainstream will help to ignite mobile-payment adoption in the U.S.," she said. "As merchants upgrade their terminals for EMV capability, they also will end up with [near field communication] functionality that can support many of these new payment types."
Montral-based iNovia Capital and Silicon Valley-based Accel Partners led Lightspeed's $35-million second round of funding last fall.
"It's definitely an amazing time to be in this game right now," said Chris Arsenault, managing partner iNovia. "Anything that's complex in terms of inventory management, that's where Lightspeed excels."
While Lightspeed has been securing investments, its Canadian competitor, Shopify, has built over 162,000 merchant clients, and announced plans to go public earlier this month. The company hopes to raise up to $100-million in a much-anticipated initial public offering.
The two companies only recently became adversaries. For years, Lightspeed focused on in-store retail while Shopify built e-commerce solutions. In 2013, however, Shopify expanded to brick and mortar stores with Shopify POS, and last year, Lightspeed moved into e-commerce.
Lightspeed's Mr. Dasilva said investors should not rule out another Canadian IPO in the payments industry.
"When we started, it took a month and a half to install a single Lightspeed, and now we'll install 1,000 new stores in a month," Mr Dasilva said. "It's always shocking to me … a couple years ago, going public was so far away, but every year things move so quickly, especially in this space.
"Going public is something that doesn't seem that far away any more."
Lightspeed, launched in 2005, is in use today by 23,000 businesses in more than 30 countries. The company processes $9-billion in transactions annually, and has been growing since inception. Bigger-name clients include home-and-car audio maker Harman Kardon and Leica Camera, as well as DASH, the boutique shops founded by the Kardashian sisters.
Though Mr. Dasilva would not discuss company revenues, he noted that transaction volume is up 120 per cent from a year ago and that the average business pays about $100 monthly for its subscription.
Lightspeed's pricing model, which has packages ranging from $76 to $222 per month, allows retailers to choose the plan that suits the number of cash registers and employee profiles they require. Companies can add the Lightspeed Web Store for $49 per month.
Mr. Dasilva credits the company's success to how Lightspeed manages inventory. Many of the company's clients sell high-ticket merchandise, such as cameras, stereo systems or bicycles, which means having a system that can track serial numbers, keep tabs on suppliers, book items in for repair and quote prices to customers is paramount, he said.
Because most of the company's clients are independent brands with one to 10 store locations, these features offer businesses a retail enterprise planner for a fraction of the cost, Mr. Dasilva said.
"We're kind of democratizing these tools that you would pay a lot of money for in a large retail chain," he added.