InterCept Inc., an Atlanta company that provides processing services to community banks, is accustomed to competing with bigger companies, such as Electronic Data Systems Corp. in core processing and Concord EFS Inc. in electronic payment switching.
And now that it is branching into a new business, merchant processing, it will soon be battling another set of giants, including First Data Corp.
InterCept bought two small merchant processors in the spring and says it has integrated those operations.
Last week it named two of its senior executives to additional posts. G. Lynn Boggs, who joined the company in February as its president, was given the added role of chief operating officer. Boone A. Knox, a director since 1998, was named vice chairman.
Mr. Knox will lead InterCept's outside directors. Before joining InterCept, he had been the chairman of Merry Land and Investment Corp. of Augusta, Ga., from December 1996 until its merger with Equity Residential Properties Trust of Chicago in October 1998. Before that, he had been the chairman and chief executive of Allied Bankshares Inc. of Thomson, Ga., from its formation in 1984 until its acquisition by Regions Financial of Birmingham, Ala., in January 1997.
Mr. Boggs said that InterCept's small size has been an advantage. "We think we understand these bankers better and can respond faster and do customer service better because we are not the big guy yet," he said.
Because InterCept's field representatives have close relationships with their customer banks, he said, "if there's a problem or something they want changed, we hear about it."
Mr. Boggs also has a banking background. Before he joined InterCept, he was the chief executive officer of Towne Services Inc. of Atlanta. (That company is now a part of Private Business Inc. of Brentwood, Tenn., which provides banks with accounts-receivable financing software for small business.)
Before that he had been a senior vice president at Bankers Bank of Atlanta, a correspondent bank serving community banks in the Southeast.
InterCept's primary goal now is to integrate its acquisitions of two merchant processors - Internet Billing Co. Ltd. of Fort Lauderdale, Fla., and Electronic Payment Exchange Inc. of New Castle, Del. - and begin to promote the services that its banks will be able to offer to their merchant customers who accept credit cards, Mr. Boggs said.
Though the two deals closed in the spring, I-Bill in April and EPX in May, the company's early focus was on moving I-Bill's back-end processing from First Data to the EPX settlement engine. The company did not brief its sales force about the new capacity to handle merchant processing until the end of August, and Mr. Boggs said he does not anticipate any "synergies" from increased sales before the fourth quarter.
But he predicts it will build on relationships with the 2,000 small banks to which InterCept already provides two or more services as it starts making the sales calls on them.
"If we can go to those customers with something that they haven't been able to offer till now, we can be the end-to-end technology [provider] for them," Mr. Boggs said.
Wall Street has generally looked favorably on the company, even though its share price is down substantially from its peak of $42.50 in February. David Trossman of Wachovia Securities is one analyst who maintains a "strong buy" rating on the stock, saying the company "has built an impressive track record" by expanding the bundle of services it offers its community bank clients.
By building up card processing the company "is adding a leg to the platform," Mr. Trossman said in a recent report to clients. But the heavily automated card processing business is largely one of scale, posing new challenges for InterCept to ramp up, perhaps through acquisitions of additional merchant-processing portfolios, Mr. Trossman said.
Others are more skeptical. Nikolai Fisken of Stephens Inc. rates InterCept "underweight" in part because of difficulties in the merchant business. He warned in an interview that the new business lines bring "higher risk than any other deal they've done."
In particular, he pointed to I-Bill, a specialist in online merchant acquiring, which he said relies heavily on processing payments for Internet pornography. Conservative bankers at small institutions may be reluctant to ally with such a provider, he said.
But Mr. Boggs of InterCept said pornography "as a percentage of our total processing … is insignificant." EPX accounted for significantly more, he said, and InterCept monitors all the transactions for compliance with the rules of the card associations.
"The main goal now is mainstream accounts," Mr. Boggs said. He said InterCept has recently signed up Sony Corp. and the Weather Channel's online service as new merchant customers.
InterCept shares closed Friday at $13.41, down 5% on the week.
