A common topic of discussion in our industry is market saturation. Everyone seems to have a wallet full of credit cards and the card companies are all scrambling for the same US dollars. As a result, many companies have decided to go after more than just US dollars. They are venturing out in to the global marketplace, placing cards in wallets all over the world.
For example, 10% of First Data's transactions occur outside the US. "The international markets are very attractive to us," says Richard T. Robida, executive vice president of First Data Corporations's card services group. "There's a pent-up demand for consumer credit in some of these countries."
For the first nine months of 1998, First Data's international card business brought in $206 million, which reflects five percent of their revenue. At that time, their international portfolio grew 32 percent. But, it didn't happen overnight. First Data started its international business in Britain 10 years earlier and First Data also has smaller operations in Latin America and Australia.
Untapped Market
This trend has really taken off in the past few years. In fact, since 1996 foreign card accounts have increased 87 percent and the amounts charged to cards has increased 90 percent. During that time, the number of cards in circulation in the U.S. has increased only 11 percent.
Another company, NOVA, is expanding into Britain, partially due to the lack of language barrier. "Our company is only 8 years old," says Edward Grzedzinski, chairman, president and CEO of Nova Corp., "The domestic opportunities we've had have been so wonderful and tremendous that we really haven't had time or resources to divert internationally. We have finally come to be of a size that gives us more available resources."
Familiar Names
Other familiar names besides First Data and NOVA are also crossing the border.
Global Payment Systems LLC (partially owned by NDC) processes transactions in Canada and it also provides services in 40 other countries. Total System has a Canadian market share of 35 percent and a Mexican market share of 75 percent of the country's card issuers. According to Total System, the current financial climate could mean more profits for the company because banks may be forced to contract out card processing to cut costs.
Robida agrees. " The price of market entry will probably never be better than it is today. We're on the verge of critical negotiations in a number of countries."
Another familiar name, Equifax, has moved into India. They began processing transactions last spring and Standard Chartered Bank has become a partner. As part of the venture Equifax is giving terminals away, as a way to build card acceptance. "We knew we had to help that market develop," says Larry Towe, senior vice president and general manager of Cardsolutions. "You can't issue a lot of cards unless you build acceptance."
Of course, venturing into new markets, especially unproven and or foreign markets, can be risky. World expansion is not without its risks and setbacks. For example, when First Data entered Hong Kong, they found the conversion process quite intense. The delays caused monetary penalties. The deal was cancelled and First Data suffered a loss of $163.7 million. Nevertheless, we will still see continued expansion into the global marketplace.
