Moneris Solutions Inc., the merchant processing venture between Royal Bank of Canada and Bank of Montreal, has spent the year trying to pick up business in the United States, and it has set its sights on becoming as large in that market as the industry's leaders, First Data Corp. and Vital Processing Services.
The Toronto-based Moneris was formed in December 2000 to help the two banking parents skirt Canadian rules against duality. Moneris can process both Visa and MasterCard transactions because of its owners' 50/50 partnership. Bank of Montreal issues cards and acquires merchants under the MasterCard brand; Royal Bank does so under Visa.
Though Moneris was conceived as an answer to a problem particular to Canada, its president, James Baumgartner, who came to the venture from the Dallas processor Paymentech Inc., said it can do well on both sides of the border.
"I think that the U.S. market is large enough, diverse enough, that it can easily support another provider of valuable solutions," he said. "With the consolidation that's occurring, it's our intention to be one of those top-tier players."
Most of Moneris' U.S. clients are clustered in Chicago, where the venture's merchant business bank, a unit of the Bank of Montreal subsidiary Harris Bancorp, is based. But the processor is casting a wider net. It has signed agreements with 18 independent sales organizations, to help it pick up business throughout the United States.
Moneris hopes to handle $250 million of U.S. processing volume through its most recent agreement, signed Nov. 12 with Standard Payments LLC of Detroit, Mr. Baumgartner said.
Meanwhile First Data, the global processing giant, has moved into Canada and is trying to form what he called "copycat" Moneris-like partnerships with banks.
Moneris is the No. 1 processor in Canada, but it has to compete with some much larger companies in the United States. Still, industry observers said the company could do well here.
"Moneris is fairly well run," said Paul Martaus, the president of Martaus & Associates, a Mountainhome, Ark., consulting firm. "They have a plan. I wish them luck. But the roadside of success is littered with competitors.
"If Moneris can come out with a better, faster, cheaper alternative than the ISOs have available to them now, then they'll try it."
Ken Kerr, a senior research analyst for the Stamford, Conn., consulting company Gartner Inc., said Moneris has size in its favor. A small company would have trouble competing in the United States, but "for a big company that's coming south of the border, they've got a shot," he said. "One of the keys is economies of scale. They could become a player over time."
Mr. Baumgartner said he did not think national borders would be a significant obstacle for the venture. "We are in the best position of offering a truly integrated North American solution to those companies that choose to operate on both sides of the border."
Royal Bank of Canada and Bank of Montreal have both been two of the largest processors in Canada for a long time, and Harris Bank Merchant Services has been operating in the United States for many years, he said. "So the reality is that Moneris Solutions is a new company, but it was formed by companies that have a lot of experience."
Moneris can also offer competitive pricing, Mr. Baumgartner said. The venture has been working to integrate its U.S. and Canadian processing onto one platform switch station, most likely in Toronto. Having a single station would allow Moneris to charge lower prices, he said.
"We can compete with the lowest-cost providers on the market and still make money," he said. "It's a combination of price, product, and service. We believe we've got the right combination that will ultimately prove successful."
