Charles Fote, who stepped down as First Data Corp.'s chief executive in 2005, is returning to the payment industry with plans to launch a company much like the one he left.
He has already lined up private-equity investors and created a management team for a yet-to-be-named holding company, and he is on the lookout for payment companies he can acquire, according to Staci Busby, a spokeswoman for Fote. The goal is to combine fund transfers, card processing, bill payments, money orders, global currency conversions and electronic payment capabilities.
Fote intends to announce the venture when he acquires his first payment company, Busby said.
An integrated system that processes payments and handles transfers is a model that Fote's former employer, First Data (now a unit of Kohlberg Kravis Roberts & Co.) opted not to pursue.
In 2006, when it spun off its Western Union Co. money transfer division, First Data said that separating the operations would enable both companies to focus on their distinct businesses, markets and specialties.
According to Busby, Fote intends to offer a "complete package" of payment products at the point of sale, including money transfer, card processing, bill payments, money orders, global currency conversion and digitized payments.
The spokeswoman said that Fote was unavailable for interviews last week.
She said also Fote's planned company would be one of the first to integrate these various payment capabilities.
However, Gwenn Bezard, a research director at the Boston consulting firm Aite Group LLC, said that other providers of payment products and services are starting to move toward more integrated offerings.
"The idea of adding additional offerings in addition to core services — that approach has been around a few years now," he said. "We have seen a trend with acquirers trying to provide additional services on top of processing."
For example, Bezard said, part of the rationale for Total System Services Inc.'s purchase of the technology vendor Infonox Inc. last year "was to provide more integrated services." Infonox offered software that enabled acquiring clients to accept multiple forms of payment, including checks, contactless cards and cards with magnetic stripes, while using a single process to clear them.
The challenge for Fote will be persuading merchants that already offer fund transfers or bill payments through multiple vendors to switch to an integrated offering, Bezard said. "To displace existing offerings," a product or service must "be very compelling and add value."
In addition, some of the current providers, such as Western Union, have a strong hold on the industry, he said. "Why would a merchant take … [a transfer offering] through an integrated vendor? Why not go right to Western Union?"
According to Busby, Fote believes consumer interest in picking their payment options will persuade merchants to switch to an integrated offering and away from the a la carte model that is common now.
For example, someone who is making a purchase in New York may want to make it with euros, the spokeswoman said. "Through global currency conversion, the merchant can take euros as payment, and the consumer won't have to be concerned" about foreign exchange calculations.
Fote intends to work directly with merchants, but he is open to partnering with or purchasing independent sales organizations, Busby said.
A First Data representative would not discuss Fote's plans.
