The global point-of-sale payment terminal market is enjoying a technology boom as manufacturers peering just over the horizon see rampant demand for in-store devices that can accommodate both contactless payments and card transactions authenticated by EMV chip-and-PIN security protocols.
Two major manufacturers with a presence in the U.S., VeriFone Systems Inc. and Ingenico, have broadened their respective terminal capabilities to enable merchants to quickly add, via software download, Near Field Communication acceptance as contactless payments expand.
NFC refers to short-range wireless connectivity to communicate transaction, loyalty program and other data between similar chips in two devices, such as a mobile phone and a payments terminal. ISO 18092 standardizes protocols for two-way communication via NFC.
Merchants also similarly can decide to comply with the EMV card payment security standard. EMV has been widely used in Europe and Asia, but is just now starting to perk up in the U.S. after years of stagnation over cost concerns.
"The [terminal manufacturers] are standardizing at the terminal hardware level. A merchant may not accept EMV capabilities today, but it will be available later," says Rick Oglesby, a senior analyst at Aite.
VeriFone has developed the H5000, a countertop payment terminal that can handle multiple payment types, such as magnetic stripe, EMV and contactless transactions with a single hybrid card slot and integrated NFC/contactless reader.
It is a successor to the Hypercom Artema hybrid and is the first major upgrade of a Hypercom system since VeriFone's acquisition of Hypercom was completed in August (
The new H5000 also includes an optional printer and a color screen and graphical touch-screen user interface. The tech firm did not disclose price, but cost savings is part of the strategy.
The H5000 will be offered as a stand-alone device, or it could be coupled with VeriFone's PAYware TCS central management system, which is designed to give network service providers and retailers more control over their payment devices and reduce operating costs. The system uses a 32-bit ARM11 400 MHz processor and Linux operating system, enabling developers to create other applications spun off of the payments system on behalf of merchants.
VeriFone spokesperson Pete Bartolik says "integrating the NFC reader means that operators won't need to add a peripheral reader to obtain that functionality." The new terminal will be initially made available early next year.
Other payment-terminal firms are upgrading their technology. Gores acquired Hypercom's U.S. payments business, which is now called Equinox. Equinox's L5300 includes NFC and EMV capabilities, which are available by download. The firm's new L5200 offers much of the same services, with a smaller footprint.
Ingenico also has upgraded its terminals to allow Web-enabled downloads of NFC and EMV capabilities.
"There's a convergence as several things are coming together at once that will increase merchant adoption of NFC and EMV in the U.S.," says Bruce Rasmussen, Ingenico director for the retail banking channel, citing market pressures to adopt both EMV and NFC quickly. The tech firm is targeting retailers and banks with terminals for use in branches.
Additionally, Rasmussen says a move on behalf of merchants toward adopting the ISO 18092 payments standard gives Ingenico added reason to believe demand for NFC terminals will increase.
"There's an opportunity there for loyalty programs, special offers, etc., to be delivered via NFC," Rasmussen says.
Large retailers such as Wal-Mart Store Inc., card networks such as Visa, and the Atlanta Federal Reserve Bank are pressuring merchants to move to EMV standards, particularly in the U.S.
"There's a dictate to convert to EMV cards over the next five years, so there's an incentive, and this space will become extremely hot," says Brian Riley, a senior research director for TowerGroup.
At the same time, a new generation of smartphones is expected to include embedded NFC technology, a boost for contactless payments.
In a statement, First Data Corp., which sells VeriFone's products to its clients, said it believes devices able to support PIN entry, peer-to-peer NFC, mag-stripe and EMV will be the future standard of POS devices.
“As such, First Data is soon launching a peripheral device that not only accepts PIN-based debit transactions and swipes traditional payment cards, [but also] combines the latest in fraud protection via smart chip technologies [EMV], contactless to speed up check outs, mobile phone payment acceptance to meet growing consumer demand as well as added security for contactless transactions,” the company said. “In addition, the device allows merchants to generate and redeem special offers to consumers' mobile phones that can help drive loyalty and repeat business."
First Data also said it plans to release additional devices with EMV capabilities in 2012.
"As merchants change terminals through their normal replacement cycle, they will be getting EMV and NFC enabled terminals as a standard," says Zilvinas Bareisis, a senior analyst for Celent, who adds VeriFone has about a 50% market share in the U.S. "That's a big bonus when you are talking about payments infrastructure."
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