VeriFone Systems Inc., the nation's largest maker of point of sale terminals, is introducing a new one that could make it as easy for merchants to accept alternative payments as it is to take Visa or MasterCard.
Some merchants have experimented with nontraditional payment methods that are often cheaper to accept than traditional debit or credit cards. The alternatives range from digital bar codes on a phone screen to contactless stickers. But each new system requires separate contracts and, in some cases, separate hardware.
The all-in-one product that VeriFone is set to announce Tuesday removes this obstacle. The package of software and hardware, called PayMedia Solutions, also lets retailers accept digital coupons.
VeriFone said it is responding to demand from the upstarts challenging Visa Inc., MasterCard Inc. and American Express Co.
"We are increasingly being probed by a lot of companies that you wouldn't consider traditional players at the point of sale," said Paul Rasori, VeriFone's senior vice president of marketing. "Having the Internet in your pocket kind of opens up the possibility for online companies to start thinking of business models that start to dovetail with the offline world, the brick-and-mortar store."
By streamlining the process, VeriFone may make itself a necessary node in these young payment systems — a position that has already benefited the company in test runs.
"If we go talk to a merchant that is not using a VeriFone terminal, we sell them one — that's part of the deal," said Jeff Mankoff, the president and founder of vPromos Inc., a Dallas company that is testing PayMedia in roughly a dozen restaurants in Texas.
Other providers instead offer mobile payments and couponing using existing hardware, such as displaying a bar code on a phone's screen, but Mankoff said such systems are not built to last.
"The question is: Where are promotions going to be in the future?" he said. "Is it going to be paper or presenting at a mobile phone display? We really don't think that it is."
Mocapay Inc. of Denver also is testing PayMedia, which VeriFone offers via at least ten resellers and independent sales organizations.
Doug Dwyre, Mocapay's president, said PayMedia provides "the ability to reach markets that we may not otherwise reach … this has a broader audience than we would be able to address individually."
VeriFone charges a subscription fee for the PayMedia package, which includes the terminal. It shares part of this revenue with the payment providers, a spokesman said.
The first iteration of PayMedia is specifically designed for "small to medium-sized merchants," Rasori said, but that will change in the future as the software evolves to potentially include other channels such as taxis and gas stations.
"Our goal is to provide access to any player that wishes to try and reach consumers via the point of sale device," he said.
The play furthers VeriFone's strategy to push beyond the point of sale to mobile payments and advertising, said Wedbush analyst Gil B. Luria. "What VeriFone is trying to do is get into this new emerging world of value-added payment services," he said. "Especially as we shift to a world of" payments from phones using near-field communication chips.
In the past, VeriFone's chief executive Doug G. Bergeron said mobile payments initiatives, such as those being pushed by the telecoms, Google Inc. or Apple Inc., would inevitably involve VeriFone because all those companies will need to guarantee that their payments will work at the point of sale.
Even so, Luria cautioned that PayMedia might not be fully capable of meeting that need.
"It's an incremental product in an emerging category," said Luria. "It's not going to move the needle any time soon, but it's a very interesting effort."
Brian Riley, a research director in the bank cards practice at TowerGroup, said VeriFone's software "goes hand in glove," with merchant rewards, so "you'd expect that VeriFone would engineer this so you are still building the bridge on point of sale."
"This really has the ability to build a long-term relationship with the customer," Riley said.
The San Jose, Calif., terminal maker plans to unveil PayMedia on Tuesday at the Electronic Transactions Association Annual Meeting & Expo.
