Metavante Corp. is breaking into the nascent market for closed-loop gift cards by buying Valutec Card Solutions Inc.
Metavante, a unit of the Milwaukee banking company Marshall & Ilsley Corp., offers debit, payroll, and health-care cards as well as open-loop branded gift cards, which bear the logo of a card company and can be used at more than one retailer. But it has not had a product for single-merchant gift cards.
"All of our offerings today have been in the branded card" space, said Frank D'Angelo, a senior executive vice president for Metavante and its group president for payment solutions. "Valutec has a closed-loop, store-branded solution."
He said the deal was signed Thursday and is expected to close this week. It was announced Friday. The price was not disclosed.
Michael Hayford, Metavante's chief operating and financial officer, said strong holiday sales of gift cards show there is a demand for such products, but it is "a pretty fragmented market" right now.
Merchant-specific gift cards, or closed-loop cards, appeal mostly to smaller merchants seeking to sell gift cards that are tied to their stores and can generate repeat visits, he said. Midsize and large merchants like them too, but Valutec "is really focused on small merchants, small retailers, and restaurants, who want a closed-loop card," Mr. Hayford said.
He said Metavante is open to further acquisitions in this field, but he would not discuss any specific plans.
Mr. D'Angelo said Metavante has acquired 18 companies in the past three years, and "we don't buy more of the same."
Any future acquisitions would add something Metavante does not have, he said.
Bill Horne, the president of Valutec, in Franklin, Tenn., said his company earns revenue from both the sale of gift cards and from processing the transactions made with them. That means Metavante will receive revenue as people use the cards they were given in the just-ended holiday season, he said.
It will also make money from other holidays. "The nature of what we do is largely driven by any holiday," he said, and "the statistics support that the No. 1 holiday is birthdays, and birthdays happen throughout the year."
