Seeking new sources of revenue in an increasingly complex payment world, VeriFone Holdings Inc. is starting to offer services designed to help retailers and processors install and integrate its devices.
The San Jose, Calif., terminal maker announced Thursday that it has formed a unit called VeriFone Integrated Systems Professional Services and has entered a partnership with ISTS Worldwide Inc. of Fremont, Calif., to provide software development, consulting, and systems integration services to VeriFone clients.
Jeff Wakefield, the vice president of marketing for VeriFone's integrated systems unit, said retailers and banks need help connecting their transaction processing systems with the other computer systems they use. "These devices will become more and more multipurpose. We feel there's a huge opportunity for us to help retailers and financial institutions to get the customer more loyal by being able to deliver these applications faster."
VeriFone has a global network of software development centers, he said. "What we have not had is a formal organization to consult with retailers and financial institutions."
Payment terminals increasingly must tie into a wider array of back-end systems. VeriFone's flagship MX800 products let customers check prices, locate products, enroll in loyalty programs, buy and reload gift cards, even apply for instant credit.
In the past merchants and banks had to set up their own systems or hire third parties, such as ISTS, to do it for them, Mr. Wakefield said, but now VeriFone is looking to do more of that work itself.
How VeriFone and ISTS divide up the work will vary, depending on the project, he said; ISTS, for instance, has experience with service-oriented architectures such as Microsoft Corp.'s .NET, which is not a strength for VeriFone.
The value of system integration is not only for merchants, but also for the acquirers and independent sales organizations that deliver their payment processing, Mr. Wakefield said. "The ISO community is interested in the issue for stickiness." Once a company has integrated its payment system with its loyalty programs, cobranded credit cards, and inventory systems, "they are going to be less likely to switch to the next guy coming down the street saying, 'I can save you a penny a transaction.' "
In addition, VeriFone sees an opportunity to help clients upgrade their payment systems to meet new requirements. It announced an agreement Friday with ArcSight Inc. of Cupertino, Calif., to help merchants in the retail and petroleum markets comply with Payment Card Industry data security standards.
VeriFone sees an ongoing business in the changes needed in payment systems to meet requirements such as the Sarbanes-Oxley Act and the Health Insurance Portability and Accountability Act, Mr. Wakefield said. "It is our goal to make this a business unit, not a free service to sell more hardware."
He said he could not discuss financial goals for the new unit, because of an ongoing review of the company's earnings. VeriFone said last month that it would restate its results for the first three quarters of the fiscal year that ended Oct. 31, because of accounting errors related to inventory valuation. It has said it expects the restatement process to continue at least through March.
Regions Financial Corp.'s Morgan Keegan & Co. upgraded VeriFone's stock Friday to "outperform," from "market perform."
Robert J. Dodd, a Morgan Keegan analyst, wrote in a note to clients, "While there are substantial risks investing in VeriFone at this stage, we believe the risk/reward is favorable." He estimated the fair value of the stock at $22 to $27 a share.
VeriFone stock was trading at $17.50 Friday afternoon, up 3.98% from Thursday's closing price.
