As VeriFone Systems Inc. seeks new leadership to help it tackle its ongoing challenges, smaller rivals are looking at their own operations to determine which opportunities to seize in the payments hardware market.
Two companies, China-based Pax Technology and UK-based Spire Payments, consider themselves sitting in the third position in a terminal-provider pecking order that VeriFone and Ingenico sit atop.
Pax has a more global view of its standing because, like VeriFone and Ingenico, it manufactures and sells equipment in more than 60 countries with various international compliance standards. Spire has a narrower view, claiming its shipment figures place it as the third largest supplier of POS terminals in Europe.
Smaller hardware makers have their work cut out for them, since VeriFone and Ingenico have the scale to offer products at the price and quality most businesses request, says Richard Oglesby, senior analyst with Boston-based Aite Group.
"At a time when the EMV and Near Field Communication mandates are coming [in the U.S.], there are big opportunities for terminal manufacturers of all shapes and sizes," Oglesby says. "But all players are going to be very aggressive to get as much share as possible, so no one can count on being comfortable. They need to be pushing the envelope."
Despite these moves, "we are far from being able to displace one of the giants, but will keep that in mind as a longer-term objective," says Kazem Aminaee, CEO and president of Spire Payments.
Smaller players have been making considerable noise in mobile payments, and Spire figures to get a little louder in that arena quickly.
"The business models for the mobile point-of-sale space are still in development but there is no doubt that we will approach mobile network operators as well as suppliers of complementary components and software to bring more value to our overall payment terminal offering," Aminaee says.
Banks and payment system integrators generally agree that, after all of the recent POS industry consolidation, VeriFone and Ingenico have too much power in every market for another company to overtake them, says Mark O'Flynn, sales director at Pax Technology.
O'Flynn worked at VeriFone from 2002 to 2009.
But Pax operates with a different mindset, O'Flynn says.
"The cultural change is huge," O'Flynn says. Chinese companies such as Pax concentrate on building by providing technical support and software services without shareholder pressure, he adds.
VeriFone and Ingenico unleash powerful marketing programs and differentiate themselves with good websites and marketing materials, O'Flynn says.
"In Asia, it is seen as disrespectful to be arrogant about your brand or reputation or market share," O'Flynn says. "Very different cultures."
Still, Pax was quick to take advantage of VeriFone's situation in its most recent newsletter, citing the company's changes as a reason to consider Pax equipment.
For its part, Spire let its customers know about its commitment during the London Olympics, delivering equipment or service parts on roller blades and bicycles to clients on streets where vehicle traffic was prohibited during the games.
"We are well aware that this is part of what makes our business different than others in the market, and therefore we will remain true to our principles of 'customer first,' regardless of our size," Aminaee says.
Both VeriFone and Ingenico declined to comment about their competitors for this story.
Ultimately, smaller companies "need to be at the forefront of development," Oglesby says. If they wish to be a target for acquisition, smaller equipment manufacturers "have to be on the cutting edge of something to be worth buying," he adds.
In the small-merchant segment, companies are competing against tablet-based systems that provide services at a far lower cost than many terminals, Oglesby says. "The large merchant terminal business isn't going away anytime soon, but as merchants get smaller, the terminal is becoming more and more endangered," he adds.