Terminal Makers Keep Their Fingers Crossed

  The demand is up in North America for new payment terminals. And the relatively smaller terminal makers in the region are among the chief beneficiaries, the results of a recent survey by Credit Card Management sister publication ATM&Debit News suggest.
  As a group in 2003, manufacturers experienced double-digit shipment growth in point-of-sale payment terminal shipments in the U.S. and Canada for the second straight year after years of relatively flat growth. Combined, they
  shipped 2.25 million stand-alone terminals, up 11% from 2.03 million in 2002. Their combined shipments grew 16% in 2002 from the previous year. The companies' shipment totals include only new devices in which debit and credit cards can
  be swiped or inserted.
  The top two manufacturers remained strong in 2003, and they remain very close in overall marketshare. And most of the region's relatively smaller players experienced significant gains.
  Santa Clara, Calif.-based VeriFone Inc. says it shipped 656,428 terminals last year, up 8% from 606,680 in 2002. Phoenix-based Hypercom Corp. in 2003 shipped an estimated 625,800 terminals in 2002, up 5% from 596,000 the previous
  year.
  The next two leading terminal makers showed even more sizable gains. Roswell, Ga.-based Ingenico says it shipped 443,600 terminals, up 24%. New York-based Lipman USA shipped an estimated 253,000 devices, up 38%.
  But NBS Technologies Inc., formerly Mobile Information Solution Technologies Inc., a Toronto-based wireless-terminal maker, shipped an estimated 67,200 devices, down 4%. NBS executives did not return calls, but the firm's
  latest earnings report cites reduced sales last year caused by a slowdown in wireless-terminal deployments in Canada.
  Atlanta-based Thales e-Transactions Inc. shipped an estimated 52,500 terminals in 2003, up 5%. First Data Corp.'s Linkpoint International unit reports that it shipped 43,769 terminals, up 20% from 36,333 in 2002.
  Smaller manufacturers combined shipped approximately 105,000 devices, down 17% from 127,000 in 2002. Much of that reduction was caused by Armonk, N.Y.-based International Business Machines Inc. IBM in 2002 shipped about 37,000
  terminals to its sole stand-alone terminal client, Target Corp., to support the discount retailer's smart card program that Target now plans to phase out (Card Watch, page 10). An IBM spokesperson declined to state shipment totals for last
  year, but they are believed to be much lower than in 2002.
  For terminal makers in general, though, the market appears to be increasingly friendly. "It certainly feels like things are growing better today than they had for some time," says Douglas Bergeron, VeriFone's chief executive.
  Helping drive the growth are increased demands for personal identification number-based debit card acceptance and faster transactions through broadband, Internet Protocol-based telecommunications. There also is a growing
  demand for multipurpose terminals.
  "For many years we had people in the church who were listening to the sermon but had no reason to buy," Bergeron says. "But now the idea has fermented, and people are now using our terminals for more than just debit or credit card
  authorizations, and that helps to reterminizalize."
  Indeed, payment terminals increasingly are being used to support multiple applications, including retail gift cards, electronic signature capture, loyalty programs, and employee time and attendance. And that can lead to higher profit
  margins for resellers, which in recent years have had difficulty convincing merchants to replace their aging legacy terminals.
  With multifunction systems, independent sales organizations and transaction processors, which often provide terminals to their merchant clients, become more
  entrenched and are better able to fend off competitors trying to move in on their customers, notes Michael English, Ingenico marketing director. "A lot of (processors) can make a lot more money with the value-add services than they can
  with payments," he says. "A lot of the entrepreneurial ISOs and acquirers are looking at that."
  Also helping vendors to sell more terminals is more security, including devices that support so-called Triple DES encryption standards, notes Jan-Erik Rottinghaus, Thales president. "This is where we as a company feel we are well
  positioned because of our heritage in both the defense business and the security business," he says, referring to his firm's parent company, France-based electronics and defense conglomerate Thales Group.
  During an analyst teleconference Feb. 25, Isaac Angel, president and CEO of Lipman Electronic Engineering Ltd., Lipman USA's Israel-based parent, also cited the need for enhanced security systems as a leading terminal-market
  driver.
  He also noted that demand for POS terminals is increasing in sectors that historically have not taken payment cards, including fast-food restaurants, taxis and delivery services.
  "We're aggressively pursuing opportunities in these areas," he said. "And we believe that a significant portion of the installed base will need to be replaced."
  Hypercom, meanwhile, says it soon will roll out a device that converts existing dial-up terminals to faster, IP-capable ones. The device will be marketed to merchants who are adamant about keeping their basic debit and credit
  terminals but who also want speedier transactions.
  "We are all trying to come up with new ideas to change out the installed base," says Christopher Alexander, Hypercom chairman and CEO. "And there will be some merchants who want to add a level of functionality that they can't get
  with dial-up, so they will want a new terminal that is IP-capable. But this device says you don't necessarily need to do that."