VeriFone falls on report that Square may grab NYC taxi business

Oct 9 (Reuters) - Shares of VeriFone Systems Inc fell as much as 8.5 percent after a report that mobile payments startup Square Inc was set to displace VeriFone in some New York City cabs.

Research firm PrivCo, quoting sources close to Square and the New York City, said the City would likely soon announce a contract to put Square payment systems into about 1,000 cabs.

Both Square and the New York Taxi and Limousine Commission (TLC) rejected the PrivCo report.

"There is no truth whatsoever to PrivCo's reported statements regarding a deal in the works between Square and the TLC," Commission spokesman Allan Fromberg said.

VeriFone and privately held Creative Mobile Technologies run the payment and entertainment systems in New York's 13,000 cabs.

Shares of VeriFone were down 7 percent at $28.68 on the New York Stock Exchange in afternoon trade, after dropping as low as $28.22.

The company did not comment directly on the report, while Square said PrivCo's report of an imminent deal had "no basis in fact."

PrivCo said on Monday that Square, co-founded by Twitter creator Jack Dorsey, would equip about 1,000 cabs with credit card readers attached to iPads over the next 12 months, costing Square $1 million. ()

New York City Mayor Michael Bloomberg and Dorsey took a ride in a taxi last weekend and used the Square device to pay for the one-block ride, PrivCo said.

(Reporting by Aurindom Mukherjee and Sayantani Ghosh in Bangalore)

(( U.S. +1 646 223 8780, outside U.S. +91 80 4135 5800)(Reuters Messaging: