If Verifone wants to benefit from the major card brands' efforts to operate in China, it must confront a virtual army of independent sales organizations already selling low-cost payment terminals.

China represents the largest terminal market in the world and is moving "extremely aggressively," said Paul Galant, CEO of Verifone Systems Inc., said during a presentation May 18 at the 43rd annual JPMorgan global technology, media and telecom conference in Boston.

"It used to be when we operated in China, it was basically with five big banks that would get you 90% of the business," Galant said. "Now there are more than 1,000 ISOs in China representing more than 50% of the terminal distribution, and that's a massive change."

In China, terminal sales have a very low margin, and the hardware is produced at a very low cost, he said.  Verifone hopes that it can sell software and security services to companies that are accustomed to bare-bones devices.

"You will see a significant shift to build services in China and it's an important opportunity for VeriFone," Galant said.

China recently announced it would allow foreign card brands to handle domestic payments, but how those card brands will go about carving out their own territory in a market dominated by UnionPay and Alipay remains to be seen.

The new rules established through China's State Council take effect on June 1, essentially opening up its $73 trillion (449.9 yuan) payments industry to U.S. card firms.

China UnionPay is currently the lone clearing service provider for payments in the country.

Assuming that the opportunity for others in China unfolds the way the card brands are hoping, "it would be very good for our business," Galant said.

It's likely that separate devices for Visa and MasterCard transactions would be needed to go alongside those used for China UnionPay, Galant said.

It will be important for the card brands to differentiate themselves with products in China, Galant added.

It's too early to tell whether Verifone could work with the ISOs in China, but the company is already committed to using more independent channels to reach more small merchants in North America in the coming years. 

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