Magazine article American Banker

Payment Terminal Makers Getting Busier in China

Magazine article American Banker

Payment Terminal Makers Getting Busier in China

Article excerpt

As China moves forward with its plan to outfit its merchants with payment card terminals in time for the 2008 Olympics in Beijing, terminal manufacturers are jockeying for position to try to capture a practically virgin market that has an estimated 12 million merchants.

At least three major terminal vendors -- Verifone Inc., Hypercom Corp., and Ingenico -- say they have nailed down "preferred provider" contracts from Chinese banks and government agencies, but apparently this status represents more of an entry ticket than a guarantee of victory. One payment industry consultant with extensive experience in China said that Chinese executives are very much like their counterparts in capitalist countries: They play vendors off one another to obtain the best price.

"The Chinese want to leave their options open," said James B. Shanahan, the president of Shanahan & Associates, a consulting firm in Landenberg, Pa. He compared it to the way U.S. banks deal with Visa U.S.A. and MasterCard International, belonging to both and seeking the best deal from each.

Another industry expert agreed that a "preferred provider" designation meant little more than a vendor had met certain quality and price criteria. Manufacturers care about the designation because it gives them the ability to compete in a highly promising area, once it begins spending, said David Robertson, the publisher of the industry newsletter The Nilson Report, of Oxnard, Calif.

"It is inevitable that China will become a huge market," he said, but "it will take longer than everyone hopes."

Verifone, the Santa Clara, Calif., which is owned by the Chicago venture capital group GTCR Golder Rauner LLC, announced last Tuesday that it had been named a preferred payment terminal provider by China Union Pay, a consortium formed by more than 80 Chinese banks to develop a merchant-acquiring and processing network for debit and credit cards. …

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