NBA Positions to Compete With PMT for Acquisitions
No, it is not a reference to the National Basketball Association, but rather to the National Bankcard Association (NBA), head-quartered in San Diego, California, although we do have a sports connection in this story, if you read on.
NBA was founded in 1986 by CEO Glenn Reph and is the parent company of Electronic Processing Inc. (EPI), a registered ISO, and XTRA Cash ATM, the cash dispensing and ATM division of NBA.
The first thing you need to know is that National Bankcard Association is not an association, as the name may lead you to believe. It is a privately held sales and service organization that processes credit, debit, check, and ATM transactions for small merchants and professional businesses nationwide. NBA is processing through a number of banks, including, National State Bank, Metropolis, Illinois; First Bank of Beverly Hills, Calabasas, California; NOVA Information Systems, Inc., Atlanta, Georgia; and Telemoney Services owned by First Data Corporation.
The second thing that is important to know is that NBA is positioning itself to do three things:
The Plan:
1. Make ISO acquisitions in competition with PMT (see February 24, 1997 lead story on PMT, Where Have All the ISOs Gone?)
2. Create a financial incentive for ISOs to sell bankcard services to merchants who already own equipment and are happy with it.
3. Provide the most personal and caring support that can be given to the individual salesperson on the street.
It remains to be seen how effective this direction will prove to be for NBA, however, they are already well on their way and have raised significant venture capital to proceed.
Currently we are told that NBA handles millions of transactions each year, which account for more than $1 billion in processing. They have more than 15,000 merchants and provide service to more than 1,000 wholesale bank customers. According to Kurt Schusterman, Senior Vice President, Sales and Marketing, "NBA has approximately 180 sales offices and projected revenues for 1996 are more than $34 million. NBA also has the added dimension of being the nation's largest wholesale equipment distributor of VeriFone products, producing sales in excess of $10 million annually in Bankcard equipment and supplies."
The company attributes its rapid growth to penetration achieved by its 400 sales professionals as well as strategic acquisitions. "With 15,000 accounts, NBA is one of the fastest-growing sales and service organizations in the country," reports Mark Leibowitz, President of NBA. "An acquisition strategy has enabled the company to increase revenue by nearly 170 percent over the course of 1995/96. These acquisitions were made possible by the financing of JMI and GeoCapital Partners," says Leibowitz. (More details of the Venture Capital follow.)
In fact, on February 20 NBA announced the acquisition of the portfolio of ATM International of Dallas. ATM International will continue as the company selling the services and NBA will serve as the portfolio manager.
Currently NBA's management team is pursuing a two-pronged growth strategy that includes continued acquisition of merchant portfolios and other bankcard processing companies, and growth of their independent sales force.
Their goal is to be a total payment solution that offers a full range of commerce for merchants. According to Leibowitz, "Commercial banks are finding it increasingly difficult to compete with more efficient processors like NBA. Many banks want to sell their merchant portfolios to ISOs that are able to provide higher quality service."
Financing:
As The Green Sheet reported last year, NBA received $5 million in financing from JMI Equity Fund (Baltimore and San Diego) and $2.7 million from GeoCapital Partners (Fort Lee, NJ). With this added financing, NBA aspires to improve their level of service by improving staffing and technology.
JMI Equity Fund is a venture capital company with holdings in real estate and 17 software companies. It is owned by John Moores who also owns the San Diego Padres baseball team. Moores does not perform in a daily capacity at NBA, but does sit on the board. Moores is joined on the board by Harry Gruner, former managing director of AlexBrown and Sons, currently of JMI.
Geocapital Partners is a leading source of venture capital and buyout financing for the software and information services industry.
The combined funding has allowed NBA to recently move to a new 36,000-square-foot facility that houses all sales and operations for NBA. Also, according to literature distributed by the company, the financing will be used to accelerate NBA growth through acquiring other payment processing companies and purchasing additional merchant portfolios, such as the February acquisition of ATM International.
With the increased financing, NBA is making some changes for the future. They have reorganized the Application Processing group, improved bankcard product offerings to include debit and check guarantee and, as The Green Sheet reported in the 3/10 issue, XTRA Cash ATM is to offer a free NCR ATM placement to qualified merchants.
The Team:
NBA is building an aggressive team of experienced industry personnel in its current growth efforts.
The company CEO is Glenn Reph who was President of Credit Card Systems of America, one of the first ISOs in the country working through AMCOR, American Marketing Corporation, the first ISO. Hal Miller is Chief Operating Officer and was EPI's first salesperson in 1986. Mark Leibowitz, President, was formerly with First Boston Corporation, in its Mergers and Acquisitions group. Reph, Miller, and Leibowitz were the original owners before the company obtained the venture capital. Schusterman, SVP, was formerly SVP and General Manger of NABANCO, and was co-founder of Brown-Forman.
New ISO Program:
In addition to having their eye on acquisitions, NBA is focused on creating a better selling environment for its Independent Sales Agents.
Caroline VanderGalien, Vice President of Sales at EPI, NBA's bankcard arm, announced that EPI has a new "Conversion Program" that will get sales professionals excited.
The company tags it a "real hot program" geared toward agents selling to customers who already have POS equipment, says VanderGalien. "This program is aimed to provide incentive by offering both residuals AND up-front money."
VanderGalien reported, "EPI was finding that sales offices weren't motivated to call on existing processing merchants because there wasn't any hardware to sell. Instead, ISOs were competing to set up the same new merchants." VanderGalien also points out that there is a higher risk with these merchants going out of business and limited income opportunity due to low processing volumes.
EPI's plan is to encourage the independent sales offices to go out and call on existing merchants who process a higher volume than new businesses do. EPI's "Conversion Program" consists of the following:
1. Waives the application fee.
2. Pays one year's profits up front for writing the deal. (EPI provides ten basis points commission up front on annualized yearly processing volume).
3. Keeps the remainder of the program in place. The sales agent has the same buy rate, statement fee income, and on-going residual income.
In VanderGalien's view, "EPI is not that different from everybody else. So, we tried to figure out what's the one thing that differentiates us? That one thing is that we really do care about the people in the field."
While the recent PMT story may have given you a phone number to call if you were thinking of selling your bankcard portfolio, NBA gives you a second phone number and a fresh opportunity for income, if you're looking for a change in direction.
NBA can be reached at 800-576-2220; EPI can be reached at 800-745-2758. Also, note the new category in the Resource Guide, "ISOs Looking to Buy Portfolios."
