The death of cash has been fueling a gold rush for payment processors. Industry leaders Visa (NYSE: V), MasterCard (NYSE: MA) and Heartland Payment Systems (NYSE: HPY) have all posted market-beating gains of at least 29% this year.

But while these well-known blue chips have been surging, one of their lesser-known industry peers has been struggling. After losing market share and reporting a disappointing quarter early in the year, shares are down 50% in the past 18 months. 

VeriFone Systems (NYSE: PAY) is a global leader in the electronic payments industry, making point-of-sale (POS) machines that consumers use to swipe credit and debit cards. Its clients include some of the biggest and most successful retailers in the world, including Costco (Nasdaq: COST), Lowe’s (Nasdaq: LOWE) and McDonald’s (NYSE: MCD).#-ad_banner-#

But despite that market-leading position, VeriFone has struggled in the past year and a half. And that’s exactly why it’s a great time to check out the payment systems leader and recent industry laggard: Shares and sentiment are low, but the seeds of a turnaround are beginning to sprout.

One of the biggest factors weighing on VeriFone’s share price in the last year was management’s tarnished credibility after a series of bad revenue forecasts and earnings misses. To remedy the problem VeriFone went straight to the top, recently appointing former Citi Cards CEO Paul Galant as its new CEO.

Galant will continue to oversee the company’s major push into high-growth, high-margin mobile payment systems. In September, VeriFone introduced GlobalBay Merchant, a payments software suite for its small and midsize merchant clients that runs on Apple (Nasdaq: AAPL) tablets. At the time of the launch VeriFone had already contracted more than a dozen partners that serve more than 500,000 merchants. Looking forward, VeriFone expects more partners to sign on that can offer its systems to an additional 2 million to 4 million U.S. customers.

But Apple’s iOS isn’t the only operating system where VeriFone is targeting mobile users. In June, VeriFone announced a strategic partnership with Lenovo to offer an enterprise-class mobile payment system for its Windows 8 tablets. VeriFone began offering its mobile solutions on Android, the world’s most popular mobile operating system, in 2012.

VeriFone is also moving aggressively to tap into high-growth taxi-payment solutions, recently releasing a new mobile app called Way2ride that lets users pay a cab fare with a smartphone. The program is up and running in New York City and will soon be launched in other major cities as well. VeriFone’s global taxi business is also just one of two approved payment systems providers for new “green” taxis in upper Manhattan and New York City boroughs.

	VeriFone
	VeriFone is making a major push to control the mobile payment systems market.

VeriFone is tapping into high-growth emerging markets with its growing portfolio of market-leading payment solutions. Last quarter VeriFone said it had won a proposal for 450,000 terminals with Sberbank, Russia’s largest bank. In Brazil, VeriFone just landed a contract with one of the country’s largest payment processors. In India, VeriFone renewed a contract with the country’s largest petro provider that owns and operates thousands of gas stations. In August, VeriFone announced its mobile commerce and payment system was selected by SNCF, the operator of the French National Railroad, which serves more than 100 million people a year.

VeriFone is also in position to cash in on the growing implementation of EMV (Europay International, MasterCard and Visa), a worldwide standard for the interaction between “smart cards” and approved payment devices. This requires both merchant hardware and software upgrades and has already triggered a wave of conversions from VeriFone’s existing clients.

VeriFone has been aggressive on the buyout front, acquiring 15 companies in just the past three years, but VeriFone is now moving to strengthen its balance sheet, paying down $160 million in debt last quarter. That leaves cash and equivalents of $309 million and total debt of $810 million, down $102 million from last year.

There is also rampant speculation that VeriFone itself will be acquired. Although no specific names have emerged as early leaders, the company’s market cap of $2.5 billion would be an easy target for Visa or MasterCard — worth $129 billion and $86 billion, respectively — to absorb.

Analysts are calling for earnings growth of 15% in 2014 and 14% annually in the next five years for VeriFone, which does not currently pay a dividend.

Risks to Consider: VeriFone is still struggling with sluggish revenue growth that it expects to last through 2013. Although the company is moving aggressively to fix its problems, tepid revenue growth could limit shares up side in the near term after a 27% rebound in the last 3 months.

Action to Take –> VeriFone struggled through a challenging 18 months, but its recent investments in new products and markets beginning to bear fruit. In light of the recent decline, shares are trading with a forward P/E (price-to-earnings) ratio of 21 times, directly in line with its 10-year average but a discount to the industry average of 23 times. That makes VeriFone a buy anywhere below $25.

P.S. Apple isn’t limited its involvement with payment processing to running third-party apps. The tech giant just made a little $256 million move that could have huge consequences on your wallet. To find out how Apple is threatening the entire banking industry, click here.