Hypercom’s Networking Unit Wraps up a Promising First Year

An upstart supplier of transaction-networking infrastructure that was set up by a major maker of point-of-sale terminals has signed a dozen contracts since it began U.S. operations in April and is carrying transactions at the rate of 65 million a month. “It's been a very busy and successful last six months,” says Sharon Cline, a senior vice president at Hypercom Corp. who is heading up the new unit, HBNet Inc., adding that the volume of business since startup has exceeded her expectations. Half of the contracts are in production, she says, while the other half are in a testing phase. Clients announced so far include CEO America Inc., announced today, as well as Bell Canada and SiVault Systems Inc. Cline says she expects to close another four to six deals by the end of the year. HBNet competes with an established heavyweight, Reston, Va.-based TNS Inc., in the business of building the network infrastructure processors need to carry electronic transactions to and from data centers. Because it's new, the company has not targeted particular segments of the transaction business. “Frankly, this year it's been grab everything,” says Cline. But for 2005 it will focus on specific niche markets, such as ATM networks and medical-claims processors And it will continue to target transaction processors wanting to exploit a growing movement at the point of sale toward payments based on Internet Protocol, rather than dial-up, terminals. “Clients are using us as an IP gateway,” she says. “A lot of [independent sale organizations] and processors are not able to process IP connections directly into their hosts.” For its latest client, CEO America, HBNet is building a network that will support both dial-up and IP devices. The Beverly Hills, Calif.-based company offers a stored-value service, called Creditz, that allows merchants and issuers to load loyalty points and manufacturers' rebates onto cards as so-called digital cash that can then be spent at participating locations. HBNet entered the market by pricing aggressively. Cline won't give specifics, saying pricing depends on volume, but she adds the company's stance on pricing hasn't changed since April. The service is priced in blocks of time on the network, with an initial block of six to eight seconds and incremental pricing for each additional second. The service offers all-inclusive pricing, with “no line-item expenses,” Cline says. The monthly transaction volume HBNet has reached in the U.S. represents about 10% of the volume it had achieved in the Canadian market by the time it launched its U.S. operation. It sees a market potential in the U.S. of 28 billion transactions annually just for dial-up service at the point of sale. HBNet relies heavily on its parent company's existing network of MegaNAC 180 controllers, hardware that switches transactions within phone networks and at processor data centers. The unit in this way hopes to keep costs down by leveraging existing technology investments.