VeriFone-Hypercom-Ingenico Shuffle Is Finally Settled—But Not Questions About Competition

Written by Frank Hayes
August 10th, 2011

After a failed effort to rearrange the U.S. PIN-pad industry into a “benevolent duopoly,” VeriFone on August 4 acquired Hypercom and then sold off Hypercom’s U.S. business to a private investment group. That means there are still three big card-swipe terminal vendors in the U.S.—and Hypercom retail customers are at least a little less likely to learn that their products have suddenly reached end-of-life.

The deal was finally done just weeks after the U.S. Department of Justice put the kibosh on an earlier plan for Ingenico to take over Hypercom’s U.S. operations, which would have left VeriFone and Ingenico with more than 90 percent of U.S. market share between them. But what the DOJ finally approved last week still leaves some big questions about how much PIN-pad competition there will be, especially because Gores Group, the new owner of Hypercom’s U.S. business, is the former owner of VeriFone—and that’s where VeriFone CEO Doug Bergeron got his job.

Under the DOJ-approved deal, Gores is taking over the #3 PIN-pad business in the U.S., with about 18 percent market share. That’s big enough that the DOJ wasn’t willing to let either VeriFone (at 48 percent) or Ingenico (at 26 percent) simply snap up that chunk of the market.

It should leave three large-enough players to discourage too much coziness. And that’s certainly what the DOJ was afraid of when it filed a lawsuit in May to block the original shuffle of the business. Its complaint quoted Bergeron saying in 2007 that the industry was trending toward a “very benevolent duopoly” consisting of VeriFone and Ingenico—not the sort of language antitrust enforcers like to hear.

“Bergeron’s description of such a potential duopoly as ‘very benevolent’ has led VeriFone to eschew robust and vibrant competition in favor of cooperation with, and benevolence toward, competitors,” the lawsuit said. “Consummation of the proposed transaction would achieve Mr. Bergeron’s vision.”

A week after the lawsuit was filed, VeriFone and Ingenico gave up on that idea. But will bringing in Gores provide any more real competition? Maybe it will, but the signs aren’t promising.

For the record, the president of Gores’ as-yet-unnamed new acquisition, Clint Jones, is making very competitive noises. “We plan on rolling out the world’s most advanced multilane POS solutions throughout the remainder of 2011, to be followed by a suite of world-class products for countertop and banking,” Jones said in the press release announcing the deal.

But it was Gores Group that bought VeriFone from Hewlett-Packard in 2001—and hired Bergeron to run it. Bergeron left Gores the following year, when it sold VeriFone to another private equity firm in Chicago, which eventually took VeriFone public.

That means there’s a very short path between Gores’ newest acquisition and its biggest competitor. It’s not quite as incestuous as VeriFone’s original plan of marrying off Hypercom-U.S. to Ingenico, but it’s close enough to be uncomfortable for anyone hoping for competition to hold down prices and improve products.

Then again, maybe that won’t matter much. With Visa’s new bid to convert as many card-swipe terminals as possible in the U.S. to support EMV, contactless and NFC transactions, and Google, ISIS and other players pushing for their own PIN-pad changes, what has been a cozy and mature business is about to become a lot more competitive no matter what VeriFone, Ingenico and Gores do.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.