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September 24, 1997updated 03 Sep 2016 7:43pm

HP’S E-COMMERCE STRATEGY TARGETS IBM’S BANKING BUSINESS

By CBR Staff Writer

With an integrated payment system in hand courtesy of its VeriFone Inc acquisition, Hewlett-Packard Co has IBM Corp’s banking franchise firmly in its crosshairs. In addition to helping banks win back credit card processing from the likes of FedData and Synovus Financial who they outsourced the business to in the first place, VeriFone, which owns a 70% share of merchant credit card terminal market, is set to become the cornerstone of HP’s electronic commerce strategy. HP’s telling Wall Street the terminals account for $450m of VeriFone’s $500m revenue, a business growing at 15% per year and that as many as two-thirds of these terminals can be upgraded to use additional smart card technologies. The other $50 million comes from VeriFone’s server software which processes other kinds of credit and smart card schemes and collects transaction information. Merill Lynch & Co’s Steve Milunovich reports that the unit’s software revenue is supposed to double every year as the transaction server gains importance. As far as credit card processing goes, the banks are clearly looking to capture and mine the transaction data generated from all forms of electronic commerce. The report notes that consumer electronic transactions typically involve the buyer, the merchant, and the bank, and that VeriFone’s Omnihost software switches the transaction to the correct bank. HP, it says, is looking to place credit card processing systems in these banks, which can lead to additional sales. Also a single system sale can also lead to multiple terminal sales to the bank’s merchants customers and the addition of electronic wallet sales to the merchants customers. HP has Bain & Co on board to help formulate its internet approach, centered on secure access and customer service. It’s also supposed to de-emphasize this business to business transaction focus since at the end of every transaction there is some form of a consumer. Milunovich says HP also sees a potential market for VeriFone’s Personal ATMs venture where consumers could electronically add value to smart cards. IBM will supposedly cut prices rapidly to fend off HP’s challenge.

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