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Payment processor Heartland Payment Systems Inc. says payment-terminal maker VeriFone Holdings Inc.'s offer to continue to support Heartland's merchants after Dec. 31 as "a disingenuous attack." The two companies are at odds because San Jose, Calif.-based VeriFone will cease supporting Heartland's merchants who use VeriFone devices through Heartland. Heartland has said it will continue to support its merchants using VeriFone equipment. VeriFone contends its devices used by Heartland merchants no longer will receive maintenance or updates after Dec. 31, unless the merchant enrolls in POS-device maker's program for Heartland merchants. The one-time partners in a new secure point-of-sale terminal are suing each other (CardLine, 10/22). VeriFone alleges a new payment terminal the Princeton, N.J.-based payment processor is developing infringes on a patent subsidiary VeriFone Israel holds for an anti-tamper enclosure in a point-of-sale terminal. VeriFone alleges that the Heartland device, using technology supplied by Uniform Industrial Corp., a Taiwan-based company, relied on the patent. More than a week later, Heartland filed suit against VeriFone alleging VeriFone threatened Heartland that it would cut off supply and services to Heartland's merchants if it did not cease development of device that used the patent. Heartland alleges VeriFone wants an exclusive deal to supply Heartland with payment terminals using advanced encryption technology. VeriFone says approximately 75% of Heartland's retail, restaurant and petroleum merchants use VeriFone equipment. Heartland says it has more than 250,000 "business locations" but did not define if that includes merchants with multiple locations. To use the VeriFone support service in 2010, Heartland merchants must register with VeriFone by Dec. 15. Support will be free, VeriFone says, but replacement parts and premium services will cost extra. "Heartland is fully capable–and will continue to be fully capable–of servicing all of its customers," Robert Carr, Heartland chairman and CEO, says in a statement. VeriFone is not able to support Heartland's customers because they operate on the processor's proprietary payments-processing platforms, he said. "Heartland is the only entity that can provide full service–including ongoing service of VeriFone terminals–to them. This means our servicing of VeriFone-related issues is not, and will not be, impacted by VeriFone's false claims and unethical attempts to scare our customers," says Carr. VeriFone is attempting to tamper with Heartland's customers "in an irresponsible way," he says. Carr alleges that VeriFone is "pursuing its own agenda of creating recurring revenue at the expense of merchants and consumers," though VeriFone says it is not using merchants as a "wedge" between the two companies. "VeriFone has a fiduciary duty to protect its intellectual property," VeriFone says in a statement. "The impact of not having access to those resources leaves Heartland severely handicapped in providing timely resolution to issues which may arise, leaving the merchant unable to process transactions efficiently." Heartland counters that its merchants "should not be fooled by VeriFone's offer to register for 'uninterrupted continuation of support.'" The processor also urged its merchants to contact Heartland with questions about VeriFone device support. VeriFone's stance is a protective one, suggests Gil Luria, vice president of equity research at Los Angeles-based Wedbush Securities Inc. "Since Heartland has decided to use its own platform to provide end-to-end encryption, VeriFone is both concerned about the possible infringement of their intellectual property as well as a new entrant in the fastest-growing segment of payment terminals," Luria tells CardLine sister publication ISO&Agent Weekly. "The risk VeriFone is taking is that this type of action may alienate other customers in the U.S. and beyond."
