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Apple Uses VeriFone Shell in New mPOS System

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Reportedly, Apple (AAPL - Free Report) is launching a new mobile point-of-sale (mPOS) system in its U.S. based stores. The mPOS system will use an iPhone 5S and Verifone (PAY - Free Report) shell, which is capable of accepting EMV (Europay, Mastercard and Visa) enabled cards.

The news drove VeriFone shares up by 8.78% ($2.82) to close at $34.94 on May 12.

Apple launched its EasyPay mPOS technology in stores way back in 2009. It comprised of an iPod Touch and a shell made by Infinite Peripherals that included a card swiper and a barcode scanner.

In the new mPOS system, the iPod will be replaced by iPhone 5S. Apart from being a POS terminal, the device can also be used to call or receive phone calls within the store. Additionally, near field communication (NFC) technology will be available on the device.

Apple’s selection of a VeriFone shell reflects the company’s increasing focus on securing user transactions. The EMV enabled cards are much more secured than the magnetic striped credit cards, as users are required to key-in their personal identification numbers (PINs) to authenticate a transaction.

As data breaches continue to negatively impact consumer confidence, Apple’s decision to use an EMV-based device is a welcome move. The enhanced security feature is expected to boost customer footfall at Apple’s retail outlets.

By Oct 2015, both MasterCard (MA - Free Report) and Visa (V - Free Report) are expected to amend their liability regulation, which will force most U.S. merchants and banks to use EMV based cards and devices. Moreover, we believe that Apple’s usage of the technology will speed up EMV adoption among enterprises particularly large retailers in the U.S.

Increasing adoption will be beneficial to VeriFone over the long term. Despite a sluggish adoption rate, the company already ships 25% of overall EMV enabled devices in the U.S. VeriFone estimates that approximately 3 million EMV terminals will be added to the U.S. market on top of the current installed base over the next several years. This will significantly expand the company’s total addressable market going forward.

Moreover, higher demand for VeriFone’s encryption solution will also drive top-line growth. VeriFone’s strong product pipeline, growing payments-as-a-service business offerings and new digital marketing solutions are expected to drive top-line growth through 2014.

Currently, VeriFone sports a Zacks Rank #2 (Buy), while Apple has a Zacks Rank #3 (Hold).

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