First Data Corp. says its purchase of PaySys International Inc., a private company that sells software for international credit and debit card processing, will help the larger processor strengthen its foreign operations.
PaySys, of Norcross, Ga., does business in 35 countries including some where First Data says it could use some help.
For Atlanta-based First Data, the acquisition, a done deal announced Monday, is an opportunity to have a presence in some markets we were slower to get to, said Eula L. Adams, its senior executive vice president in charge of worldwide card operations. On the card issuance side of our business in Asia-Pacific and Latin America, we see it as perhaps the centerpiece platform of what we would like to use.
PaySys specializes in licensing software for crossborder credit and debit card processing, and has offices in England, Ireland, Singapore, China, Costa Rica, and Australia. Neither First Data nor PaySys would disclose the price of the deal, which was said to be the result of lengthy negotiations. First Data said the acquisition will have no impact on its 2001 earnings.
Mr. Adams said First Data has not decided how to add PaySys 140 million customer accounts to its own accounting of how many cards it processes, or whether to keep them in a separate accounting system. PaySys customers are mostly processed under licenses, not core processing deals, which is our specialty, he said.
Industry insiders called it a smart purchase, sorely needed. First Data has had a very hard time deploying their platform internationally, other than in the United Kingdom, said Philip R. Grennan 3d, a partner with the payment systems consultancy Business Dynamics Consulting in Nyack, N.Y. They had a dismal failure in Hong Kong a couple of years ago, so it doesnt surprise me that they are looking to acquire a platform with multicurrency and expanded language capability.
First Datas 1997 foray into Asia saddled it with a $121 million charge in 1998, the result of a money-losing contract to serve Hong Kong & Shanghai Banking Corp. This contract part of a seven-year agreement to serve several subsidiaries of HSBC Holdings of London was eventually cancelled, and First Datas Hong Kong operations were shut down.
More recently First Data Europe lost Royal Bank of Scotlands processing business to a much smaller competitor, TSYS European subsidiary. TSYS won in true head-to-head competition, Mr. Adams said, adding that First Datas European operations were successful nonetheless.
PaySys may help change First Datas luck abroad, Mr. Grennan said. Asia is a significantly growing market, and Peoples Bank of China is talking about opening more, he said. My estimation would be this is an acquisition to facilitate international expansion.
TSYS has already made inroads in Asia with its purchase of a controlling interest in the Japanese merchant processor GP Network Corp. In February First Data announced the formation of Nihon Card Processing Co. Ltd., in Japan, to provide third-party credit card processing outsourcing services to the Asia-Pacific market. Its partners in the venture are NTT Data, the data processing subsidiary of Japans leading telecommunications company, NTT Corp.; DC Card, the fourth-largest bank card issuer and acquirer in Japan and an affiliate of the Mitsubishi Bank of Tokyo; and Diamond Computer Service Co.
Mr. Adams said Nihon Card Processing had not yet decided whether to use PaySys software.
We were able to convince our board that this was a good opportunity for us that we could obtain at an affordable price, Mr. Adams said. There are increasing opportunities around the world. We see it as a great way for us to really grow our card issuing business.
