Fear of foreign manufacturers one day invading the United States and other developed markets with low-cost hardware is another headache plaguing the world’s top payment-terminal makers (
Asian terminal makers specializing in lower-tech, lower-cost hardware are not yet a direct threat to the world’s leading terminal manufacturers, says Gil Luria, a Wedbush Securities analyst who tracks the point-of-sale terminal industry. It remains difficult for upstarts to break into the complex business of manufacturing payment terminals certified for use in developed markets, he says.
But Asian manufacturers are looking for opportunities. Indeed, the threat of foreign competition underlies VeriFone Holdings Inc.’s recent legal battle with Heartland Payment Systems Inc., Luria says. (
Late last year, Heartland engaged VeriFone to supply it with “end-to-end” card-data encryption technology. According to court documents, Heartland subsequently began developing a proprietary data-encryption terminal using technology from Taiwan-based terminal maker Uniform Industrial Corp. VeriFone subsequently sued Heartland for alleged patent infringement. In a countersuit, Heartland alleges VeriFone wants to rebuff foreign competition from the U.S.
“Heartland was looking for an end-to-end encryption solution, and they tried to source and design a product from Asia,” Luria says. “VeriFone appropriately saw it as a threat not just to its U.S. market but to its international operations.”
Several Asia-based terminal manufacturers already have tentacles in Europe, Latin America and beachheads in the U.S., but so far none has achieved major distribution outside of Asia.
Uniform Industrial manufactures a diverse line of countertop, contactless and EMV-based terminals, and it boasts a few U.S. distributors. Another Asian terminal manufacturer making waves is Hong Kong-based Pax Technology Ltd., a large supplier to China that also sells terminals elsewhere in Asia and in the Middle East, Europe, Africa and Latin America.
Pax in 2008 opened a U.S. office in Atlanta and sells a diverse line of point-of-sale terminals. On its Web site, Pax declares as its mission: “To be the leading global provider for end-to-end card-payment solutions.”
Another vendor is CyberNet Inc., a Korea-based terminal manufacturer with offices in Brazil, Russia, the United Arab Emirates, Japan and the U.S.
The world’s three largest terminals makers–VeriFone , Hypercom Inc. and Ingenico–are keeping a close eye on the array of smaller Asian terminal manufacturers, Luria says. “I don’t see that either Pax or CyberNet have made any noticeable attempts yet to penetrate more-developed markets, but that’s not saying they won’t do so one day,” he says.
Bruce Parker, vice president of product strategy and innovation at payment software company ACI Worldwide, believes upstart terminal makers will have difficulty winning any significant business from established players in developed markets. “Low-cost terminal providers are unlikely to enter developed markets like the U.S. and Europe, ... also because of the growing breach-related legal implications they could face.”
