than 30 facilities —— including regional offices, development
`
`centers, and manufacturing and distribution centers —— are located
`
`throughout the United States, Europe and Asia. To date, VeriFone has
`
`shipped more than 3.7 million Transaction Automation systems, which
`
`have been installed in over 80 countries. The company's 1993 net
`revenues totaled $258.9 million.
`
`NOTE: VeriFone is a registered trademark of VeriFone, Inc. OMNI
`
`and OmniNAC are trademarks of VeriFone, Inc.
`
`Location: California; Argentina
`
`Company / organization: VeriFone Inc.
`
`Identifier (keyword): Trade, VFIC
`
`Event classification: 610: Contracts &orders received
`
`NAICS classification: 33411: Computer and Peripheral Equipment Manufacturing
`
`Product classification: 3573200: Computer Auxiliary Equip
`
`Publication title: PR Newswire
`
`Pagination: N/A
`
`Publication date: Aug 11, 1994
`
`Dateline: REDWOOD CITY, CA
`
`Publisher: PR Newswire Association LLC
`
`Journal subject: Business, Business, general
`
`Journal code: OYMX
`
`Source type: Newswire
`
`Language of publication: English
`
`Document type: Magazine/Journal
`
`Source attribution: Gale Group New Product Announcements Plus, © Publisher specific
`
`Accession number: 44914820
`
`Document URL: http://search.proquest.com/professional/docview/1073703410?accountid=153950
`
`Copyright: Copyright 1994 Gale, Cengage Learning. All rights reserved. COPYRIGHT 1994 PR Newswire
`Association LLC
`
`Date created: 2010-1 1-27
`
`Updates: 2012-09-26
`
`Petitioner First Data - Exhibit 1012 - Page 22
`
`

`
`First available: 2012-09-26
`
`Database: Gale Group New Product Announcements / Plus® (1985 — current)
`
`VERIFONE DELIVERS FIRST MAJOR ORDER TO JAPANESE TRANSACTION AUTOMATION
`
`MARKET
`
`Publication info: PR Newswire 19 July 1994: p0719SF001.
`ProQuest document link
`
`Abstract (English): REDWOOD CITY, Ca|if., July 19 /PRNewswire/ —— VeriFone, Inc. (Nasdaq: VFIC), a leading
`
`worldwide supplier of Transaction Automation system solutions, today announced the initial delivery of more
`
`than 1,000 point—of—sa|e (POS) transaction systems to Daiei Finance Company, a leading Japanese issuer of
`
`Visa cards. Called the OMN|(TM) 395 Japan, the VeriFone solution performs credit card authorization and
`
`electronic draft capture at the point of sale. Each system consists of a terminal and a printer, both supplied by
`
`VeriFone. According to Daiei, VeriFone's OMNI 395 Japan solution will provide Daiei's merchant customers with
`
`a cost—effective means of processing credit card transactions.
`
`Full text: REDWOOD CITY, Ca|if., July 19 /PRNewswire/ —— VeriFone, Inc. (Nasdaq: VFIC), a leading worldwide
`
`supplier of Transaction Automation system solutions, today announced the initial delivery of more than 1,000
`
`point—of—sa|e (POS) transaction systems to Daiei Finance Company, a leading Japanese issuer of Visa cards.
`
`Called the OMN|(TM) 395 Japan, the VeriFone solution performs credit card authorization and electronic draft
`
`capture at the point of sale. Each system consists of a terminal and a printer, both supplied by VeriFone.
`
`According to Daiei, VeriFone's OMNI 395 Japan solution will provide Daiei's merchant customers with a cost-
`
`effective means of processing credit card transactions. In addition, Daiei says that the OMNI 395 Japan delivers
`
`the quality and reliability that Japanese companies demand.
`
`Committed to Japanese Market
`
`In order to better serve the Japanese Transaction Automation market, VeriFone recently established a
`
`Japanese subsidiary, Nihon VeriFone K.K. To support VeriFone's business in Japan, the company appointed
`
`Memorex Telex Japan Ltd. as its nation—wide distributor.
`
`"VeriFone is committed to Japan and to helping develop this strategically important market," said John A. Hinds,
`
`executive vice president of VeriFone. "Working together with Daiei, Visa and other industry leaders, VeriFone
`
`will focus on providing complete, cost—effective POS solutions —— systems, software, service and support —— that
`
`will bring increased cost savings, security and efficiency to acquirers and merchants throughout the country."
`
`Major Untapped Country Market for Transaction Automation
`
`VeriFone's new POS solution is designed to address the needs of one of the world's largest —— and as yet largely
`
`untapped —— markets for Transaction Automation. VeriFone estimates Japan's current installed base of POS
`
`transaction systems to be approximately 150,000 units, compared with an installed base of roughly two million
`
`systems in the United States. The company believes that market growth in Japan has been restricted in part
`
`due to the high cost of the terminals coupled with very high floor limits. According to the Nihon Keizai Shinbun,
`
`March 7, 1993, the Japanese government is planning to reduce floor limits by as much as 50% over the next
`
`two to three years, which VeriFone believes will fuel sales of POS transaction systems in Japan.
`
`VeriFone's OMNI 395 Japan solution is based on the company's mu|ti—|ingua| OMNI 390 system, developed
`
`originally for the Asia—Pacific region and other countries with non—Roman—a|phabet—based languages. The OMNI
`
`395 Japan features a high resolution graphic display that shows prompts, responses and messages in Kanji,
`
`Petitioner First Data — Exhibit 1012 — Page 23
`
`

`
`Katakana, and Hiragana characters to ensure ease of use for the operator. The printer prints Katakana
`characters.
`
`The Company
`
`VeriFone, Inc., based in Redwood City, Calif., is a leading global provider of Transaction Automation solutions
`
`used to deliver electronic payment services to various retail segments, as well as the healthcare and
`
`government benefits markets. The company's more than 30 facilities -- including regional offices, development
`
`centers, and manufacturing and distribution centers -- are located throughout the United States, Europe and
`
`Asia. To date, VeriFone has shipped more than 3.6 million Transaction Automation systems, which have been
`
`installed in nearly 80 countries. The company's 1993 net revenues totaled $258.9 million.
`
`NOTE: VeriFone is a registered trademark of VeriFone, Inc. OMNI is a trademark of VeriFone, Inc.
`-0- 7/19/94
`
`/CONTACT: David B. Barnes, 415-696-8823, or Beth Pampaloni, 415-598-4598, both of VeriFone/
`
`(VFIC)
`
`CO: VeriFone Inc. ST: California IN: TLS SU:
`
`TM -- SF001 -- 6745 07/19/94 09:20 EDT
`
`Business subject: Contracts; Telecommunications equipment
`
`Company / organization: VeriFone; Daiei Finance Co.; VeriFone (Contracts); Daiei Finance Co. (Contracts)
`
`Identifier (keyword): Trade, VFIC
`
`NAICS classification: 33429: Other Communications Equipment Manufacturing
`
`Product classification: 3662190: Communications Eqp NEC
`
`SIC classification: 3669: Communications equipment, not elsewhere classified
`
`Publication title: PR Newswire
`
`Pagination: p0719SF001
`
`Publication date: Jul 19, 1994
`
`Publisher: PR Newswire Association LLC
`
`Journal subject: Business, News, opinion and commentary
`
`Journal code: 4PRN
`
`Source type: Newswire
`
`Language of publication: English
`
`Document type: Magazine/Journal
`
`Source attribution: Gale Group Trade &Industry, © Publisher specific
`
`Accession number: 15591692
`
`Document URL: http://search.proquest.com/professional/docview/1050632820?accountid=153950
`
`Copyright: Copyright 1994 Gale, Cengage Learning. All rights reserved. COPYRIGHT 1994 PR Newswire
`Association LLC
`
`Petitioner First Data - Exhibit 1012 - Page 24
`
`

`
`Date created: 2012-08-07
`
`Updates: 2012-09-22
`
`First available: 2012-09-22
`
`Database: Gale Group Trade &Industry DatabaseT"" (1976 — current)
`
`Terminal Opportunities Are Being Made In Japan
`
`Publication info: POS News 11.2 (Jul 1, 1994): N/A.
`ProQuest document link
`
`Abstract (English): East is meeting West, if not politically or culturally then through another kind of advance:
`
`better POS terminals at better prices. The battle for Japanese market share among American POS terminal
`
`manufacturers is just beginning, and lucrative markets await those companies able to navigate through national
`
`politics and overcome out—of—date existing technologies. Now, U.S. firms are aggressively reaching out.
`
`Redwood City, Ca|if.—based VeriFone Inc. made a major move in the Asia—Pacific region in late May with the
`
`announcement it had set up a Tokyo—based subsidiary, Nihon VeriFone K.K., to sell its terminals in Japan. Of
`
`most interest to Japanese customers is likely to be VeriFone's new Omni 395, a combined termina|—printer that
`
`is based on the Omni 390 but which displays instructions in Japanese.
`
`Full text: East is meeting West, if not politically or culturally then through another kind of advance: better POS
`
`terminals at better prices. The battle for Japanese market share among American POS terminal manufacturers
`
`is just beginning, and lucrative markets await those companies able to navigate through national politics and
`
`overcome out—of—date existing technologies. Now, U.S. firms are aggressively reaching out. Redwood City,
`
`Ca|if.—based VeriFone Inc. made a major move in the Asia—Pacific region in late May with the announcement it
`
`had set up a Tokyo—based subsidiary, Nihon VeriFone K.K., to sell its terminals in Japan. Of most interest to
`
`Japanese customers is likely to be VeriFone's new Omni 395, a combined termina|—printer that is based on the
`
`Omni 390 but which displays instructions in Japanese. Japan represents great opportunities for U.S. terminal
`
`makers, says Denis A. Calvert, VeriFone's managing director of Asia—Pacific. Japan is the largest new market
`
`today with a potential for at least 1.3 million terminals and an installed base of 105,000 to 130,000, he says.
`
`"The market is extremely large, extremely aggressive," he says. VeriFone's chief American competitor in the
`
`region, Phoenix—based Hypercom |nc., is eyeing Japan just as closely and expects the market to open up to
`
`U.S. imports to an unprecedented extent this year. "There's a great deal of demand," says Graeme Collings,
`
`president of Hypercom Proprietary Ltd. Japan, the U.S. company's subsidiary. "The market is wide open." The
`
`market probably will demand 1.5 million terminals over the next five years, Collings estimates, a significant
`
`acceleration over the 110,000 terminals that he estimates have been installed over the last 12 years.
`
`Free Trade Several causes are converging to increase the demand for debit and credit terminals. First, the
`
`loosening of controls by the powerful Japanese credit card association, which consists of banks, card
`
`associations and technology companies, will enable outside firms to modernize a nation with aging terminals
`
`that has become antiquated and which are incompatible with those of other nations. Current POS service,
`
`Collings says, often results in transaction times of 45 seconds to two minutes. "Everyone that I talk to thinks it's
`
`horrendous," he says. "They're slow, they're c|umsy——the network's horrendous." Of the 100,000—p|us terminals
`
`in Japan, 80,000 are slow and old and definitely should be replaced, and these include many outdated
`
`Hypercom terminals that were manufactured in Japan in a previous partnership with Omron Systems of
`
`America, says George Wallner, Hypercom chairman. "Japan is the latest and the most significant opening," he
`
`Petitioner First Data - Exhibit 1012 - Page 25
`
`

`
`says. "The (existing) terminals are expensive, outdated, and the result of a closed market." As the Japanese
`
`market opens up to terminal imports, prices will decline and competition will heat up with Hypercom, VeriFone,
`
`Omron and an assortment of Asian hardware manufacturers vying for a slice of the pie. Both Hypercom and
`
`VeriFone will be able to sell large numbers of terminals in Japan, Wallner says, as a flood of terminals is
`
`expected to hit the Japanese market at perhaps half the price of previous, comparable models.
`
`New Incentives Also motivating banks to invest in new terminals is the serious problem of credit card fraud and
`
`plans by the government to combat it. Floor limits on electronic authorization of credit cards, which have been
`
`as high as $10,000, now stand at about $500. They are expected to be cut further by 1997, Calvert says, and
`
`this will encourage merchants to process purchases electronically. The Japanese credit card market is one of
`
`the most highly saturated in the world, and growth in cards in terms of absolute numbers is unlikely to occur,
`
`says James A. Cassin, president of MasterCard |nternationa|'s Singapore—based Asia—Pacific Region. Still,
`
`Cassin says the need for terminals will be great because such a small proportion of merchants in the country
`
`have terminals. Out of 1.5 million merchants, only 55,000 have personal identification number pad compatible
`
`terminals, he estimates. Cassin expects that Japanese merchants will install 30,000 to 50,000 replacement
`
`terminals for outdated boxes annually and then eventually will accelerate that pace as merchants without any
`terminals install them.
`
`Location: United States; Japan
`
`Identifier (keyword): Trade
`
`Event classification: 640: Foreign trade; 240: Marketing procedures
`
`NAICS classification: 334119: Other Computer Peripheral Equipment Manufacturing
`
`Product classification: 3573283: Point—of—Sa|e Terminals
`
`Publication title: POS News
`
`Volume: 11
`
`Issue: 2
`
`Pagination: N/A
`
`Publication date: Jul 1, 1994
`
`Publisher: SourceMedia, Inc.
`
`Journal subject: Business, Retail industry
`
`Journal code: 0YLA
`
`Source type: Newsletter
`
`Language of publication: English
`
`Document type: Magazine/Journal
`
`Source attribution: Gale PROMT, © Publisher specific
`
`Accession number: 44811027
`
`Petitioner First Data — Exhibit 1012 — Page 26
`
`

`
`Document URL: http://search.proquest.com/professional/docview/681698480?accountid=153950
`
`Copyright: Copyright 1994 Gale, Cengage Learning. All rights reserved. COPYRIGHT 1994 SourceMedia, Inc.
`
`Date created: 2010-04-28
`
`First available: 2010-07-25
`
`Database: Gale Group PROMT®; 1972 to date (1972 — current)
`
`VERIFONE ESTABLISHES SUBSIDIARY FOR JAPANESE TRANSACTION AUTOMATION
`
`MARKET
`
`Publication info: PR Newswire 31 May 1994: p0531SJ002.
`ProQuest document link
`
`Abstract (English): Company Targets Major Untapped Market For Point-Of—Sa|e Transaction Systems
`
`REDWOOD CITY, Ca|if., May 31 /PRNewswire/ —— VeriFone, Inc. (NASDAQ: VFIC) today announced the
`
`establishment of a subsidiary —— Nihon VeriFone K.K. —— to address the Japanese Transaction Automation
`
`market. The Tokyo—based subsidiary will provide direct sales, technical support and after—sa|e service of
`
`VeriFone's point—of—sa|e (POS) transaction systems. To assist in developing and supporting VeriFone's
`
`business in Japan, VeriFone has appointed Memorex Telex Japan Ltd. as its distributor. Based in Tokyo,
`
`Memorex Telex is one of Japan's leading suppliers of high technology computer systems and peripherals, and
`
`offers a full range of services including installation and maintenance. VeriFone has developed a Japanese-
`
`language version of its popular OMN|(TM) 390 transaction system called the OMNI 395 Japan.
`
`Full text: Company Targets Major Untapped Market For Point-Of—Sa|e
`
`Transaction Systems
`
`REDWOOD CITY, Ca|if., May 31 /PRNewswire/ —— VeriFone, Inc. (NASDAQ: VFIC) today announced the
`
`establishment of a subsidiary —— Nihon VeriFone K.K. —— to address the Japanese Transaction Automation
`
`market. The Tokyo—based subsidiary will provide direct sales, technical support and after—sa|e service of
`
`VeriFone's point—of—sa|e (POS) transaction systems.
`
`To assist in developing and supporting VeriFone's business in Japan, VeriFone has appointed Memorex Telex
`
`Japan Ltd. as its distributor. Based in Tokyo, Memorex Telex is one of Japan's leading suppliers of high
`
`technology computer systems and peripherals, and offers a full range of services including installation and
`maintenance.
`
`VeriFone has developed a Japanese—|anguage version of its popular OMN|(TM) 390 transaction system called
`
`the OMNI 395 Japan. Consisting of a terminal and a printer, the system is designed for credit card authorization
`
`at the point of sale and will be available in Japan in the second quarter of 1994. The OMNI 395 Japan was first
`
`demonstrated at the Card Fair exhibition in Tokyo, March 25 through 29.
`
`Major Untapped Country Market
`
`"With some 2.5 million merchants and an installed base of only about 150,000 POS transaction systems, Japan
`
`represents a significant untapped market for Transaction Automation," said John A. Hinds, vice president and
`
`general manager of VeriFone's International Division. "VeriFone's subsidiary demonstrates our commitment to
`
`Japan and to the development of this strategically important market. Working closely with Japan's credit card
`
`association, NTTD, and with banks and service providers, we plan to deliver complete, cost—effective POS
`
`solutions that will bring increased efficiency and security to consumers and merchants throughout Japan."
`
`Petitioner First Data - Exhibit 1012 - Page 27
`
`

`
`According to Hinds, Japanese market growth to date has been restricted in part due to the high cost of POS
`
`transaction systems coupled with very high floor limits for electronic credit card authorization. On March 7,
`
`1993, Nihon Keizai Shinbun reported that the Japanese government had given guidance to reduce floor limits
`
`by 50 to 70 percent over the next two to three years, which VeriFone believes will fuel sales of POS transaction
`
`systems in Japan.
`
`Designed Especially for the Japanese Market
`
`VeriFone's OMNI 395 Japan was designed specifically for the needs of the Japanese Transaction Automation
`
`market. The system features a high—resolution graphic display that shows prompts, responses and messages in
`
`Kanji, Katakana, and Hiragana characters to ensure ease of use for the operator. The printer prints Katakana
`characters.
`
`The Company
`
`VeriFone, Inc., based in Redwood City, Calif., is a leading global provider of Transaction Automation solutions
`
`used to deliver payment processing and other transaction services to various retail segments, as well as the
`
`healthcare and government benefits markets. The company's more than 30 facilities —— including regional
`
`offices, development centers, and manufacturing and distribution centers —— are located throughout the United
`
`States, Europe and Asia. To date, VeriFone has shipped more than 3.5 million Transaction Automation
`
`systems, which have been installed in more than 70 countries. The company's 1993 net revenues totaled
`
`$258.9 million.
`
`NOTE: VeriFone is a registered trademark of VeriFone, Inc. OMNI is a trademark of VeriFone, Inc.
`-0- 5/31/94
`
`/CONTACT: David B. Barnes of VeriFone, 415-696-8823; or Beth Pampaloni of Wilson McHenry Co., 415-592-
`
`7600, for VeriFone/
`
`(VFIC)
`
`CO: VeriFone |nc.; Nihon VeriFone K.K. ST: California IN: TLS SU: PDT
`TM —— SJ002 —— 1480 05/31/94 09:01 EDT
`
`Business subject: Computer peripherals industry —— Foreign operations; Contracts; Foreign operations; POS
`
`terminals; Planning
`
`Company / organization: VeriFone; Nihon VeriFone K.K.; Memorex Telex Japan Ltd.; VeriFone (Foreign
`
`operations); Nihon VeriFone K.K. (Planning); Memorex Telex Japan Ltd. (Contracts)
`
`Identifier (keyword): Trade, VFIC
`
`NAICS classification: 334119: Other Computer Peripheral Equipment Manufacturing
`
`Product classification: 3573283: Point—of—Sa|e Terminals
`
`SIC classification: 3669: Communications equipment, not elsewhere classified; 3575: Computer terminals
`
`Publication title: PR Newswire
`
`Pagination: p0531SJ002
`
`Publication date: May 31, 1994
`
`Publisher: PR Newswire Association LLC
`
`Journal subject: Business, News, opinion and commentary
`
`Petitioner First Data — Exhibit 1012 — Page 28
`
`

`
`Journal code: 4PRN
`
`Source type: Newswire
`
`Language of publication: English
`
`Document type: Magazine/Journal
`
`Source attribution: Gale Group Trade &Industry, © Publisher specific
`
`Accession number: 15280581
`
`Document URL: http://search.proquest.com/professional/docview/1050433980?accountid=153950
`
`Copyright: Copyright 1994 Gale, Cengage Learning. All rights reserved. COPYRIGHT 1994 PR Newswire
`Association LLC
`
`Date created: 2012-08-07
`
`Updates: 2012-09-22
`
`First available: 2012-09-22
`
`Database: Gale Group Trade &|ndustry DatabaseT"" (1976 — current)
`
`THE CHALLENGER:
`
`Publication info: CardFAX (May 27, 1993): N/A.
`ProQuest document link
`
`Abstract (English): The U.S. terminal market, long dominated by VeriFone Inc. and Hypercom Inc., is getting
`
`some competition, CardFax has learned. Newcomer lnstafone International plans to market two models of
`
`Korean—made terminals within a few months. Armed with a worldwide marketing agreement with international
`
`electronics behemoth Goldstar Electric Machinery Co. Ltd. and Koryo Trading Co. of South Korea, lnstafone
`
`intends to compete with worldwide market leader VeriFone and high—end terminal specialist Hypercom chiefly
`
`on price. lnstafone, which is headed by former VeriFone manager John J. O'Toole, claims VeriFone terminals
`
`sell for 50% more of what it plans to charge on a wholesale level for its products — the model 640, which offers
`
`64K of memory, and the model 1000, which offers 128K of memory.
`
`Full text: The U.S. terminal market, long dominated by VeriFone Inc. and Hypercom Inc., is getting some
`
`competition, CardFax has learned. Newcomer lnstafone International plans to market two models of Korean-
`
`made terminals within a few months. Armed with a worldwide marketing agreement with international
`
`electronics behemoth Goldstar Electric Machinery Co. Ltd. and Koryo Trading Co. of South Korea, lnstafone
`
`intends to compete with worldwide market leader VeriFone and high—end terminal specialist Hypercom chiefly
`
`on price. lnstafone, which is headed by former VeriFone manager John J. O'Toole, claims VeriFone terminals
`
`sell for 50% more of what it plans to charge on a wholesale level for its products — the model 640, which offers
`
`64K of memory, and the model 1000, which offers 128K of memory. The terminals will compete with VeriFone's
`
`Omni 330 and Omni 380 terminals. The Omni 330 has 32K of memory, while the 380 can be configured with
`
`64K, 128K or 256K. lnstafone, which claims its products at least equal the feature functionality and warranties of
`
`competing terminals, will target retail merchants, and the time—and—attendance and electronic— benefits transfer
`
`markets. lnstafone projects sales of $13 million in its first year.
`
`Petitioner First Data - Exhibit 1012 - Page 29
`
`

`
`One merchant banker who requested anonymity says Instafone is in the process of being certified for use by
`
`several major networks. In addition, as many as four large independent sales organizations already may have
`
`placed orders with Instafone. "|f Instafone comes in significantly lower than the Omni and Hypercom, they could
`
`be a serious contender," the banker says. Hypercom President and Chief Executive Officer Albert A. lrato is not
`
`so certain price alone will provide Instafone with quick share gains. ''If they're going to sell on price only, then I
`
`find it hard to understand how they're going to penetrate the high end, where you have to have a lot of feature-
`
`functiona|ity," says |rato." VeriFone declines to comment about competitors.
`
`COPYRIGHT 1993 by Faulkner &Gray, Inc.
`
`Identifier (keyword): Trade
`
`Publication title: CardFAX
`
`Pagination: N/A
`
`Publication date: May 27, 1993
`
`Publisher: SourceMedia, Inc.
`
`Journal subject: Business, Transportation industry
`
`Journal code: 0WIC
`
`Source type: Newsletter
`
`Language of publication: English
`
`Document type: Magazine/Journal
`
`Source attribution: Gale Group Newsletter Database, © Publisher specific
`
`Accession number: 43861938
`
`Document URL: http://search.proquest.com/professional/docview/1079197742?accountid=153950
`
`Copyright: Copyright 1993 Gale, Cengage Learning. All rights reserved. COPYRIGHT 1993 SourceMedia, Inc.
`
`Date created: 2012-01-30
`
`Updates: 2012-09-26
`
`First available: 2012-09-26
`
`Database: Gale Group Newsletter DatabaseT"" (1988 — current)
`
`The box makers bounce back
`
`Author: Lucas, Peter
`
`Publication info: Credit Card Management 6.2 (May 1993): 49.
`ProQuest document link
`
`Abstract (summary): Credit card terminal manufacturers are experiencing a resurgence in demand, buoyed by
`
`several factors, including: 1. growing interest in direct debit, 2. an aging terminal base, and 3. rule changes from
`
`Petitioner First Data - Exhibit 1012 - Page 30
`
`

`
`MasterCard International and Visa USA requiring more data per transaction to improve settlement. Vendors
`
`also stepped up their marketing for networking products that integrate terminals with personal computer—based
`
`cash registers and for other technology. Terminal shipments last yearjumped 21.1% to 952,156. Maintaining
`
`this growth rate will be closely linked to the ability of acquiring banks to sell higher—end terminals to paper—based
`
`merchants and |ow—vo|ume merchants using authorization—on|y terminals. With the federal government
`
`mandating guidelines for electronic medica|—c|aims processing and the card associations pushing their products
`
`harder to physicians and dentists, health care is a ripe market for sales.
`
`Full text: After three years of slow growth and nagging questions about market saturation, credit card terminal
`
`manufacturers are surging ahead with doub|e—digit gains.
`
`The resurgence is attributable to a combination of factors that are expected to keep sales strong for several
`
`years, terminal vendors say. Increased demand in 1992 was buoyed by growing interest in direct debit, an aging
`
`terminal base ripe for replacement, and rules changes from MasterCard International and Visa U.S.A. requiring
`
`more data per transaction to improve sett|ement——a move expected to prompt a bonanza of terminal upgrades.
`
`Vendors also see potential sales in health care now that the federal government is mandating c|aims—processing
`standards.
`
`In addition, vendors stepped up their marketing for networking products that integrate terminals with personal
`
`computer—based cash registers and for other new technology, such as portable debit terminals.
`
`With so much changing in the terminal market, vendors are betting that sales growth will remain in the double-
`
`digit range for several years. Growth estimates vary. Michael J. Shade, director of marketing for VeriFone |nc.,
`
`however, argues that since the majority of existing terminals are nearly 7 years o|d——the typical life span of a
`
`termina|——vendors can expect to replace up to 15% of their terminal base annually.
`
`Small wonder vendors are forecasting a bright future. "Merchants are going to pay more attention to retail
`
`payments systems," says Albert lrato, president and CEO at Hypercom Inc., which sold 126,000 terminals in
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`1992, a 23.7% increase. "There is going to be a need for more functionality and integration of products and I
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`think it will help keep sales vigorous for the next four or five years."
`HELPING HAND
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`Terminal shipments last year rocketed 21.1% to 952,156, up from 786,000 in 1991, according to POS News.
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`This was welcome news for beleaguered vendors who turned in collectively weak performances the preceding
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`two years. Industry growth totaled 8% in 1991 and just 7% in 1990.
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`Maintaining this torrid new growth rate, however, will be closely linked to the ability of acquiring banks to sell
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`higher—end terminals to paper—based merchants and |ow—vo|ume merchants using authorization—on|y terminals.
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`Help on this front is coming from MasterCard and Visa, which are tying their lowest interchange rates to the
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`merchant's ability to insert additional data at authorization to track a transaction through the settlement process.
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`This requires more sophisticated terminals, but the card associations hope that the new rates will be incentive
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`enough for most Mom &Pop merchants to invest in new terminals. "The moves by the card associations are
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`going to push a lot of |ow—vo|ume merchants to make terminal upgrades in order to get the lower interchange,"
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`says VeriFone's Shade, who adds that VeriFone shipped 560,000 terminals in 1992, a 16.4% increase.
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`Lower interchange is just one incentive small and mid—size merchants will have to open the door to new POS
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`terminals. The advent of national debit networks Interlink and Maestro U.S.A. is being hailed by terminal
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`vendors as one more reason small merchants will pay closer attention to card—based payment systems.
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`Handling more payment options, such as credit, debit, and electronic benefits transfer, justifies the cost of
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`purchasing the terminal, argues Shade.
`OVERSEAS LINK
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`With national debit networks sparking the development of programs in previously virgin markets, small
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`merchants will have a tougher time avoiding card—based retail programs. "|t's getting to the point where
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`merchants have to offer some type of card—based payment," says Connie A. Festa, executive vice president for
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`Petitioner First Data — Exhibit 1012 — Page 31
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`

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`International Verifact Inc. "Debit is no longer a question of when in the U.S. and Canada and that has a lot of
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`people listening to debit presentations." Toronto—based Verifact benefited handsomely from the rollout of
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`Canada's lnterac national debit network in Quebec and Ontario last September. The company shipped 65,400
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`units in 1992, a 306% leap.
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`Debit is but one vehicle vendors can leverage to push terminals into new merchant segments. With the federal
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`government mandating guidelines for electronic medical claims processing and the card associations pushing
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`their products harder to physicians and dentists, health care is a ripe market for sales, says Hypercom's lrato.
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`"As the federal government pushes automation, more physicians will embrace electronic payment terminals that
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`can do claims processing," he says.
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`As card—based payment systems wend their way deeper into the merchant psyche and become a bigger
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`competitor with cash, vendors say they intend to step up their emphasis on integrating stand—a|one terminals
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`with PC—based cash registers and |ow—end electronic cash registers without card—swipe devices. The benefit of
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`integration for the merchant is that cashiers only have to enter data once on one device, explains VeriFone's
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`Shade, instead of once on a cash register and again on a stand—alone box. "There is a massive number of
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`electronic cash registers that are not sophisticated enough to integrate all payment functions," he says. "There
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`will be a strong integration market."
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`Shade predicts that sales of equipment to integrate free—standing terminals with PC—based cash registers will
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`provide robust sales, well above the less than 10% of total U.S. sales they now account for at VeriFone.
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`VeriFone improved its case for integration products in March with the introduction of Omnihost, a PC—based
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`network platform that links with the host system and supports a variety of terminals and functions, such as credit
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`and debit switching, draft capture, and negative—fi|e authorization. VeriFone plans to market the product
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`overseas, where poor telecommunications hinder the centralized processing so common in the States.
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`But, while integration products may make sense in markets with poor telecommunications networks, some
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`vendors have their doubts about the integration market in the United States. Hypercom's lrato argues that most
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`major merchants with PC—based cash registers have already added at least a card—swipe device to the unit. And
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`he says small merchants are reluctant to invest in new technology unless there is c|ear—cut financial advantage.
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`"Most merchants want to hang on to technology as long as possible and are not going to rush into making a
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`significant capital investmentjust to accommodate a new payment system when the old one works fine," says
`lrato.
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`What really works these days, says Hypercom, is cost—cutting technology like its plural interface processor
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`program. This product accounted for about half the company's sales in 1992. PIP allows merchants on—line to
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`American Express Co. to send bank card transactions directly to third—party processors, rather than routing
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`them first through AmEx. PIP also allows merchants using third—party processors to avoid fees for AmEx
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`transactions by routing those transactions directly to AmEx. PIP has sold especially well with trave|—and—
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`entertainment merchants, such as restaurants.
`BLESSING IN DISGUISE
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`Indeed, surging sales are pushing technical innovation at all the vendors. With merchants being required to add
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`more transaction data at the point—of—sa|e, for example, the demand for larger screens and improved graphics is
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`growing. Market leader VeriFone plunged into the market last month with the introduction of its Omni 390
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`terminal, which supports up to 2,000 graphic characters and can mix languages on the screen display.
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`International Verifact is testing a hand—held terminal and PIN pad. It hopes th