MasterCard International has formed a global alliance with Verifone Inc. to encourage more merchants to install point of sale terminals.

The New York-based card association joined with the largest terminal manufacturer to offer MasterCard member banks incentive pricing, terminal upgrades, and special trade-in deals for their merchant customers.

"Through this alliance, we expect MasterCard members to save millions of dollars over the next two years while at the same time driving cardholder acceptance for all MasterCard products," said Heidi Goff, a MasterCard senior vice president who manages the card association's global point of interaction group.

MasterCard says close to 13 million merchants accept its brands.

The objective of the alliance is twofold: to add to these numbers and to ensure that merchants are ready for debit cards, smart cards, electronic purse products, and cardholder loyalty programs.

Most point of sale terminals that are in retail locations today do not have the keypads that are necessary for most debit card transactions. And reportedly less than 1% of all installed terminals are capable of reading smart cards.

"It's a nice alliance, but I'm not so sure the merchants are going to be interested in upgrading for smart cards," said Paul Martaus, a self- described industry cynic who runs a credit card consulting business in Clearwater, Fla. "Where's the merchant's incentive to implement a new technology that nobody seems to want - at the merchant's cost?"

Smart cards are embedded with a computer chip capable of storing value or other information like shopper loyalty programs.

"The estimate of millions of dollars saved could happen if every single MasterCard merchant participates in this program," he added. "But the likelihood of every single merchant taking part, well, I just don't think that's going to happen."

Recent studies, conducted by MasterCard, Visa International, and other firms, suggest that merchants would be willing to take smart cards, especially if enough consumers were carrying such a payment option.

MasterCard has publicly announced its intention to make all of its card products chip-capable by the beginning of the next century. With this alliance with Verifone, the card association is now addressing the merchant side of the business.

The mutually nonexclusive alliance was characterized by both companies as a formalization of cooperative efforts already under way. These include a product incentive program, which has driven acceptance of on-line debit in Latin America, and a pilot test of stored value cards in Australia.

Through the alliance, the two companies plan to continue their current projects as well as developing new projects and pilots worldwide. Merchants who work with MasterCard member banks will be given special pricing incentives as well as terminal trade-in, trade-up, and leasing programs.

The companies will conduct joint research and development programs in new technologies, including smart cards, remote banking initiatives, and electronic commerce. They will also provide training programs for merchants and MasterCard member banks.

MasterCard officials said the Verifone alliance is the first of many they expect to make in an effort to improve acceptance of MasterCard brands around the globe.

Although they would not announce any other alliances, MasterCard officials said they were working on an alliance with a company involved in interactive television initiatives.

Already this year, MasterCard aligned itself with Netscape Communications Corp. to ensure security of credit and debit card transactions over interactive computer networks like the Internet.

And just last month, that card association formed an alliance with data base software developer Oracle Corp. to develop a massive global information system for its members.

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