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Table of Contents

Lead Story

Light alleviating a dark decline

News

Industry Update

Legislative outlook: Interchange bills less likely than ID fraud rules

First Data's composite security system - a game changer?

TSYS, FNBO enter joint venture

Trade Association News

Features

GS Advisory Board:
Positive economic signs and actions - Part 1

Online banking in Canada:
What happens next?

Joseph Iuso
UseMyServices Inc.

Research Rundown

Selling Prepaid

Prepaid in brief

Win-win scenarios abound at Prepaid Expo

Views

Are banks losing grip on payments?

Patti Murphy
The Takoma Group

Dial or smile

Justin Milmeister
Elite Merchant Solutions

Payments industry issues:
First quarter 2010

Brandes Elitch
CrossCheck Inc.

Education

Street SmartsSM:
Parting thoughts for readers

Jon Perry and Vanessa Lang
Merchant Services Inc., Texas

Police warn of new skimming devices

Nicholas Cucci
Network Merchants Inc.

Ripples on the mobile Web

Dale S. Laszig
Castles Technology Co. Ltd.

Digging into PCI - Part 9:
Restrict physical access to cardholder data

Tim Cranny
Panoptic Security Inc.

Company Profile

Retail Decisions Inc.

New Products

A mobile payments bundle

MerchantWARE Mobile
Company: Merchant Warehouse

Statistical analysis of prepaid

The Stats Tool
Company: Stanton Consultancy Ltd.

Inspiration

Unleash the power of networking

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

March 22, 2010  •  Issue 10:03:02

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TSYS, FNBO enter joint venture

Seeking a foothold in the merchant acquiring space, processing giant Total System Services Inc. (TSYS) entered a joint venture with First National Bank of Omaha. The partnership, which the two companies anticipate finalizing April 1, 2010, gives TSYS a 51 percent stake in the FNBO acquiring arm, First National Merchant Solutions LLC, with FNBO retaining a 49 percent stake.

TSYS reportedly paid about $150.5 million for its share of FNMS, which had a net revenue of $93 million in 2009, according to FNBO.

Not unexpected

For TSYS, the deal is a widely expected move into the acquiring space by a prominent payment firm, long a leading provider of processing technology and services to ISOs and acquirers but never directly contracted with merchants until now.

"We've been thinking about this space for several years ... and came to a couple conclusions," said Troy Woods, TSYS President and Chief Operating Officer.

"We have a lot of products but would feel more comfortable if we could get closer to the endgame, if you will, closer to the transaction and the merchant and to have a better channel to our merchants.

"Two, we thought the reverse of that would be important in our business: to get more connectivity and feedback from the merchant and understand what's needed in the marketplace."

Neither representatives from TSYS nor FNBO would speculate about how the respective platforms of the two companies might be integrated; both said their existing acquiring and processing contracts would remain unchanged.

FNBO is already a full-service merchant acquirer - and one of the top revenue-generating acquirers in the United States - although many of its acquired merchants do process with third parties, and, according to Woods, TSYS might eventually look at providing processing services for merchants acquired by FNMS.

Diana Mehochko, President of FNMS, said FNBO would benefit from the use of TSYS' top flight processing services and technology, which would provide more efficient platforms for its merchant base.

"From a bank perspective, it increases our scale and provides opportunities for extended growth and value creation in synergy," Mehochko said. "They certainly have processing and product expertise, state of the art technology and a payments industry focus that's going to complement us quite well."

Better margins in acquiring

Greg Cohen, President of Canada-based processor Moneris Solutions Inc., said it had been all but inevitable that a giant processor like TSYS would eventually enter the merchant acquiring arena.

He added that direct merchant relationships tend to yield much better profit margins than indirect ones.

"TSYS for years has put itself in there as a processing partner, and I think it's been proven over the years that that model is a bit challenging," he said.

"Every time an ISO or acquirer's contract comes up for renewal, they ask [a third-party processor like TSYS] to lower their price or they threaten to move all the business. So your margins decrease substantially over time."

Cohen believes the merger is a natural evolution. "I think TSYS has been looking to get into the acquiring business for some time, and the synergies between these two organizations are pretty strong," he said.

Woods said talk about a possible partnership between TSYS and FNBO started in early 2009, but only really revved up later in the year. He added that TSYS was initially one of a large number of interested parties looking to buy into the bank's merchant services division.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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