By VANCE CARIAGA, INVESTOR'S BUSINESS DAILY Posted 03/25/2011 02:00 PM ET

There seems no limit to what companies will do to make it easier for consumers to pay for things. You half expect that in a few years you'll be able to blink your eyes to close out a transaction.

For now, all you have to do is swipe your credit or debit card at the pay terminal. But even that will look antiquated in a couple of years.

VeriFone Systems (PAY), a leading supplier of electronic payment systems, is reportedly involved in a partnership with Google (GOOG) that would let consumers make payments with their smartphones.

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News of the partnership was first reported March 15, sending VeriFone's stock price up more than 7%.

Analyst Gil Luria at Wedbush Securities says Google is working on a cellphone with near-field communication (NFC) capabilities. That means phones will be equipped with a chip that deducts money from your card balance upon purchase.

Terminals And Phones

VeriFone will provide the pay terminals that work with the phones.

"It opens a whole world of possibilities around electronic payments," Luria said. "It is not only more convenient for consumers, because they won't have to worry about carrying wallets or remembering PIN numbers. But it also opens up a lot of new types of services when the technology is adopted."

VeriFone should benefit in two ways, he says. First, it will get business upgrading existing terminals to accommodate mobile payment technology. Second, it will get business making and selling new, NFC-enabled terminals.

That spike probably won't happen for a couple of years, though. The technology is still in the early testing stages, and Google has no plans for a large-scale launch anytime soon.

"While the buzz around mobile payment is high, our sense is that most of these initiatives are still in pilot mode at best," JPMorgan analyst Tien-Tsin Huang noted in a recent report.

Luria doesn't expect a material change to VeriFone's sales either this year or next year.

"But it is a very important long-term upgrade prospect for VeriFone," he said.

The key is persuading retailers to migrate to the new technology. VeriFone CEO Douglas Bergeron addressed that challenge during a conference call earlier this month.

"It has become quite clear that we're at a tipping point where mobile payments can begin to change the way we pay for goods and services," Bergeron said. "But the rate of adoption and ultimate success of any mobile payment solution depends on service providers winning over the merchant."

Bergeron listed a number of challenges he and other firms will face getting merchants to adopt the technology. After that, he made the case for VeriFone.

"With our large footprint and payments and security expertise, VeriFone provides the reach to achieve broad acceptance quickly, without adding complexity and additional cost to merchants," Bergeron said.

Given VeriFone's success at selling its core point-of-sale terminals — the company's annual revenue has more than doubled over the past five years — most analysts reckon that it will have little problem getting clients to transition to the mobile phone technology.

And once the technology is adopted on a larger scale, VeriFone should have little competition grabbing up a fat share of market. Its main competitor is Ingenico, a French company. Beyond those two, competition is slim.

VeriFone currently ranks No. 2 in the global market for payment systems. But it should take over the top spot when it closes its $485 million buyout of Hypercom, a maker of point-of-sale equipment based in Scottsdale, Ariz.

The deal was announced in November and is expected to close in the second half of the year. A few years earlier, Ingenico had failed in a bid to buy Hypercom.

When the VeriFone-Hypercom deal closes, VeriFone and Ingenico will control more than two-thirds of the global market, Luria says.

"On a global basis the two will split things pretty evenly, but in the U.S., VeriFone will have a very dominant market position," he said.

Competitors Coming

Google, which introduced the first NFC-enabled smartphone, will probably run into competition from other mobile-device makers. BlackBerry maker Research In Motion (RIMM) is working on NFC-enabled phones. Apple is also rumored to be planning to include the technology in a future iPhone model.

How that would affect VeriFone's market position is anyone's guess at this point. But analysts say the company's dominance, particularly in the U.S., will pose a big hurdle to other entrants.

Meanwhile, VeriFone has plenty of business with its current lineup. It's reeled off four straight quarters of double-digit sales and profit growth as it continues to rebound from a rare hiccup in 2009, when the global recession led to lower sales.

VeriFone earned 43 cents a share during its fiscal first quarter ended in January. That was up 65% from a year earlier and 6 cents above Wall Street estimates. Revenue rose 27% to $283.5 million, topping views for $269.5 million.

"The company continues to benefit from an economic recovery in most regions and is also benefiting from demand in innovative products," analyst Huang noted.

Analysts polled by Thomson Reuters expect full-year earnings to rise 37% to $1.81 a share.

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