Mobile Payments and EMV Cards to Benefit VeriFone and NCR

The latest wave of credit card hacks has finally convinced U.S. retailers and card issuers such as MasterCard and Visa  that they urgently need to invest in security upgrades. Although the Target hack was the most-publicized event, other large retailers such as craft retailer Michaels Stores and Neiman Marcus as well as White Lodging, which manages Westin and Sheraton (owned by Starwood), Hilton, and Marriott hotels, have all been hit by massive security breaches in the recent past. Point-of-sale, or POS, equipment manufacturers VeriFone Systems and NCR Corp are some of the companies that are likely to see more business after the latest industry developments. 

The EMV standard
The EMV standard is named after three companies: EuroPay, MasterCard, and Visa. The standard contains the same personal information that is found in the magnetic strip of a credit card, but in in this case the data is encrypted which makes it much harder for criminals to access or duplicate the data. In many cases, the chips provide an additional layer of security that requires the use of a PIN number with every transaction.

VeriFone and NCR provide POS systems that are used at most retail outlets and banks that accept plastic. A smart card that sports an EMV chip also usually includes a magnetic strip that is compatible with existing equipment. However, this will have to change. For the new EMV standard to be truly effective and achieve its desired security objectives, the magnetic strips will have to be eliminated. This will effectively render the older generation POS systems redundant, and retailers will have to upgrade to meet the EMV requirements.

The new POS systems will come with other benefits too. They will be able to accept contact-less payments via Near Field Communication, or NFC, devices such as the ones used in many smartphones. The switch to EMV chip-based cards is expected to be complete by the fall of 2015. There are other companies that plan to build their own POS systems to meet the requirements of the new standard. Amazon is planning to launch a Kindle-based POS system, while eBay , Apple, and Square are all readying their own systems.

Both VeriFone and NCR have crushed the S&P 500 over the last couple of years, although they have recently been moving in different directions.

NCR enjoys much better net income than VeriFone, as the latter's bottom line has taken a hit lately.

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