Global Payment Systems LLC, the company MasterCard International and National Data Corp. formed two years ago to give banks a bigger stake in the merchant processing business, is more guerilla than gorilla.
Content to let others fight for the big-volume, large-merchant prizes, Global goes after the smaller accounts that industry giants have less time for.
"While we will service large customers-particularly on the front end of the business-our strength really would be more the regional-size to smaller institutions," said David K. Hunt, who was tapped as Global's president and chief executive officer in early 1997 after leaving the high-profile post of president of AT&T Universal Card Services.
Mr. Hunt will leave the largest banks to First Data Corp., the biggest in the transaction processing business. Its merchant bank alliance strategy, which Mr. Hunt said was a smart way to keep major banks in control of their merchant accounts while relying on First Data for back- office support, has produced some "class distinctions."
That leaves plenty of room for Global to court smaller institutions that "don't feel they get the attention or the relationship they need," Mr. Hunt added.
One example was Chittenden Bank, a subsidiary of Chittenden Corp., which moved some of its processing to Global. "We were looking for someone who felt we would be an important part of their business," said Chittenden senior vice president Michael Seaver.
Last fall, when the Burlington, Vt., bank experienced a spike in credit card chargebacks-disputed payments that have to be reversed pending a resolution of the problem-it turned to Global.
"In two days, we went in and worked all those chargebacks and retrievals for them," Mr. Hunt said. "So now we do an enhanced level of service" for the bank.
Mr. Hunt, 52, is best known for his card-issuing experience, both at AT&T Universal, which he left amid concerns about its portfolio quality and growth, and at Signet Banking Corp., which in an earlier incarnation was one of the first credit card banks in the 1960s. Mr. Hunt rose to senior executive vice president at Signet and helped sow seeds for its monoline spinoff, Capital One Financial Corp.
"David has a terrific knowledge of the industry," said Robert A. Yellowlees, chairman and chief executive officer of NDC. He said that Mr. Hunt "has developed a sound strategy to build our business in for the long haul."
Customer service was a common theme that Mr. Hunt carried over to the merchant-acquiring side with Global.
He said Global offers itself as a one-stop shop for merchant-bank clients. "End-to-end, whatever it takes, we'll do it," Mr. Hunt said.
His banking credentials were critical to communicating what Global was about. The company was launched in 1996, a few months after Visa U.S.A. and Total System Services announced their merchant processing entry, Vital Processing Services. Visa's was a fifty-fifty partnership, a point Visa underscored in saying how "bank-friendly" it would be.
By contrast, Global is 92.5%-owned by National Data, the transaction processing specialist with which it shares an Atlanta base. MasterCard got its small interest in return for a point of sale processing business it contributed to the new venture.
The nonbank-control aspect was "not an issue," Mr. Hunt said. "It is a huge market."
Indeed, merchant acquirers accounted for $604 billion ofbank card volume for MasterCard and Visa alone in 1997.
"There is a lot of business for everybody," Mr. Hunt said. "Since I have been here, I cannot remember a single conversation where a potential customer has said, 'I would do business with you, but NDC owns you.'"
Building on National Data's customer base and the MasterCard processing network known as MAPP, Global serves more than 750,000 merchants in North America through 700 financial institutions, generating $2.7 billion of annual transaction volume.
Global has been quietly but systematically accumulating the tools it needs to be a full-service merchant processor. Last year it bought Electronic Data Systems Corp.'s credit card processing platform, and Merchant Services USA, a Winston-Salem, N.C., company that strengthened its customer service.
It recently added a network software product for the lodging industry, Global Hospitality LAN, and a touch-tone telephone system than enables small merchants to enter transaction data in the absence of a POS terminal.
Consultant Stanley Anderson, president of Anderson & Associates, Arvada, Colo., said Global's challenge is to meld its disparate pieces into a cohesive catalogue of offerings.
Mr. Hunt said those pieces are falling into place, but he acknowledged the challenges ahead.
Global recently signed a big contract with First Chicago NBD Corp., which concurrently announced a merger with Banc One Corp.-a company well ensconced in a First Data alliance arrangement. The First Chicago deal is no longer "a slam dunk," Mr. Anderson said.
Global's revenue increased 12%, to $80 million for the first half of its fiscal 1998, which ended Nov. 30. But that is below the 20% that analysts view as the industry norm, said David Robertson of the Nilson Report of Oxnard, Calif.
Global "will have to start being seen as a viable alternative to Vital, Paymentech," and others, Mr. Robertson said. (Paymentech is a processor controlled by First USA Inc., which in turn was acquired last year by Banc One.)
Global, already in Europe, expects to expand internationally, Mr. Hunt said.
Meanwhile, he said he anticipates regional and smaller banks will fuel domestic growth as they look for outsourcing alternatives.
"We are a combination of four businesses strung together in a pretty quick period of time," Mr. Hunt said. "You can put together people from different parts of the world to create a single culture, and the good news is you can kind of make it what you want. Everyone wants to buy into your objectives and missions."