Diebold Inc., one of the nation's leading manufacturers of automated teller machines and bank security products, has announced plans to dramatically expand its presence in the debit point of sale terminal market.
The news is significant because the U.S. point of sale terminal business is currently dominated by a single vendor, Verifone Inc. According to POS News, Verifone accounted for almost 60% of the point of sale terminals sold in North America in 1992.
"Any time you've got a company the size of Diebold coming hard into a market like point of sale, there's the possibility that some large-scale market changes will take place," said Neal Chambliss, vice president at Payment Systems Inc., based in Tampa, Fla.
Limited Product Line
Diebold, based in North Canton, Ohio, has been providing retailers with terminals that allow consumers to pay for goods with their ATM and credit cards since 1986. But the company's product line has historically been so limited -- it currently sells only one type of point of sale terminal -- that it has been little more than an also-ran in terms of market share.
Diebold is betting that a recent agreement with Schlumberger Ltd., a French company that owns a huge chunk of the European point of sale terminal market, will help change this situation.
Last week, Diebold secured the exclusive rights to distribute Schlumberger products in the United States. Schlumberger terminals will be incorporated into comprehensive merchant point of sale systems that will be equipped with software for online authorization and settlement of debit transactions.
Point of sale "is an area we've been lacking in, and now we want to fill in the gap in our product set," said Robert P. Barone, Diebold vice chairman.
To place Schlumberger's penetration in the European market in perspective, the company has 120,000 debit point of sale terminals installed in France, which is more than the combined of the top eight vendors in the U.S. market.
Smart Cards
Schlumberger also specializes in terminals that accept smart cards. Smart cards are similar to traditional ATM or credit cards except that they also feature a computer chip that can be used to store consumer information and electronic cash. The stored cash can be downloaded to the card from a cardholder's bank account through special automated teller machines and other terminals.
Smart cards, which are common in many European countries, including France, are attractive to merchants because the cards deliver immediate electronic payment without the communications costs associated with on-line authorizations for credit and some debit transactions.
While smart card applications are few in number in the United States, there are indications that could change. Electronic Payment Services Inc., one of the most influential electronic funds tranfer companies in the United States, is pushing the development of smart card applications, and some experts believe that the cards will eventually become standard issue here.
Joint Venture with IBM
Diebold, through Interbold, its joint venture with International Business Machines Corp. has already developed ATMs that can transfer value from a cardholder's bank account to a smart card.
Since the Schlumberger terminals that Diebold will sell in the United States are all smart card-compatible, Mr. Barone feels that the success of his sales efforts could help speed the acceptance of smart cards in this country.
Mr. Barone emphasized that Diebold would be concentrating exclusively on the sale of debit point of sale terminals. The market is already saturated with credit terminals, he said.
There are currently about 950,000 point of sale terminals in the country, about 100,000 of which accept debit cards for purchases, experts estimate. These terminals allow consumers to use their bank-issued ATM cards to make purchases. To use such terminals, a consumer swipes an ATM card and enters an identification number. This authorizes the purchase amount to be debited directly from a consumer's bank account.
Growing Demand Foreseen
Diebold decided to redouble its efforts in the debit terminal market based on the assumption that one million new debit point of sale terminals will be installed in the United States in the next five years. This estimate is conservative, according to point of sale terminal growth predictions published in industry newsletters.
Thus far, debit point of sale terminal installations have been promoted mainly by regional ATM networks, such as Star in California and NYCE in New York, in search of new transactions. In addition, with the success of several debit programs consumers are now beginning to demand debit point of sale options from retail merchants.
