With HBNet, Hypercom Will Price ‘Aggressively’ for Network Volume

Hypercom Corp., a supplier of point-of-sale transaction devices, has entered the electronic-transaction networking business with the formation of a new subsidiary, HBNet Inc. The new unit has been set up to compete with the dominant player in transaction networking, Reston, Va.-based Transaction Network Services Inc., which completed an initial public offering last month. “There would appear to be room for plenty of competition,” says Sharon Cline, a Hypercom senior vice president and former president of Transaction Transport Technologies LLC who is heading up the new unit. HBNet, she says, will price “aggressively,” undercutting TNS, though she won't give specifics, saying pricing will depend on volume. The service will be priced in blocks of time on the network, with an initial block of six to eight seconds and incremental pricing for each additional second. Cline promises the service will offer all-inclusive pricing, with “no line-item expenses.” Although it's starting operations in the U.S., HBNet is already routing credit and debit card transactions in Canada at a rate of 600 million annually, or close to half of all electronic card transactions in that country. It sees a market potential in the U.S. of 28 billion transactions annually for dial-up service at the point of sale. Hypercom in a statement indicates the new unit plans to capture a “significant” share of this market, but the company refuses to project transaction volumes. Cline says HBNet is starting with the dial-up market but plans to move into transaction routing on IP connections as well in the near future. “We're purchasing large blocks of 1-800 time from a carrier,” she says, adding that the phone company's identity is protected by a non-disclosure agreement. HBNet's potential clients include transaction processors, acquirers, insurance-claim processors, and independent sales organizations. Cline says ISOs are of particular interest because they are showing increasing signs of wanting to contract directly for routing services rather than go through processors. “They want to take back some control,” she says. HBNet will rely heavily on its parent company's existing relationships with this client base, as well as on Hypercom's network of MegaNAC 180 controllers, hardware that switches transactions within phone networks and at processor data centers. In this way, she says, HBNet will not require substantial incremental capital from its parent. “We can leverage other parts of Hypercom,” she says.