The Dutch smart card maker Gemalto NV is negotiating to buy the banking operations of Xiring, a French security technology vendor.
Gemalto, an Amsterdam card firm, said Monday that it had entered into "exclusive negotiations" with Xiring and hopes to complete a deal by yearend; it did not give a price.
"Xiring has a very complementary offering" to Gemalto's card reader business, said Amol Deshmukh, a member of Gemalto's product marketing unit responsible for e-banking solutions.
Payment cards that use the EMV Integrated Circuit Card Specification can be used to initiate transactions at the point of sale and as identification devices that provide additional authentication capabilities; in the latter case, cardholders insert their cards in a special reader to generate a one-time password that can be used to verify their identity and approve online transactions.
Xiring's banking unit produces smart card readers that are used to authenticate cardholders, especially for business-to-business transactions such as payments by a company to a supplier or vendor. Xiring typically sells the readers to banks, which distribute them to corporate customers.
This approach can protect the customers from "man-in-the-middle"-style cyberattacks, Deshmukh said, in which hackers intercept electronic transaction data and change the details to route funds to the wrong destination.
Gemalto offers a similar type of card reader, but Deshmukh said it is designed more for consumers. The U.K. banking company Barclays PLC has issued more than 3 million of the readers to its customers, who use the devices to authenticate themselves when making payments online. Deshmukh said the readers are not designed to charge purchases to the cards that people insert. "It's not for e-commerce," he said.
Xiring's banking unit would continue to operate largely independently if it is acquired, but Deshmukh said it would eventually be integrated into Gemalto.
He described the Xiring operation as a "bolt-on" acquisition that would be able to quickly add value to Gemalto.
Though the two companies have not completed a deal's terms, he said, "there is a will to make it happen, from both companies."
Gemalto has made other moves recently to expand its card offerings.
It increased its stake this month in Serverside Group, a London provider of payment card personalization software to issuers.
Gemalto now owns 50.1% of Serverside and has an option to buy the rest in three to five years. It also signed a worldwide distribution agreement to market Serverside's software.
The Dutch company has operations in 40 countries and is one of the top providers of products and services related to smart cards, a technology becoming increasingly important as the EMV standard gains wide use worldwide.