BOSTON Nova Information Systems Inc. is eyeing high-growth markets such as India and South America as the next targets for its expansion.
Nova, the merchant processing unit of U.S. Bancorp of Minneapolis, has no specific plans for either market yet, but as U.S. Bancorp's only international operation, it believes global reach is the key to success, said Pamela A. Joseph, the chairman and chief executive of the unit and a vice chairman of U.S. Bancorp.
Nova wants to build on the base it has developed in Europe, where its euroConex Technologies Ltd. subsidiary operates a licensed credit institution under Irish law to process card transactions.
Nova's business in Europe, which Nova began in earnest in 2001 as a joint venture, "is pretty much running on its own and doing quite well," Ms. Joseph said Thursday at a conference hosted by TowerGroup Inc. of Needham, Mass., an independent research firm owned by MasterCard Inc. "We are the only group in our bank that went international, and we are in 18 countries."
As Nova expands further, "you would probably see us next in India," Ms. Joseph said.
Unlike other regions where Nova could go, India has a robust payments infrastructure. "India is very debit-driven," Ms. Joseph said. "We would definitely go in with our ATM business as well as our merchant acquiring business."
The move into India is not imminent. Ms. Joseph said she still needs to present U.S. Bank's board with a plan "while we wouldn't necessarily have to get them to approve it we would certainly want their buy-in," she said and Nova needs to find a partner within India.
That has typically been Nova's approach in markets like Europe, where it provides "white label" services to European banks that market its merchant processing services to their customers.
euroConex got its start as a joint venture between Nova and Bank of Ireland in 2000 to do merchant processing in Europe, a year before U.S. Bancorp bought the Atlanta company.
"That is not a transaction that we would have ever considered doing in the United States," Ms. Joseph said.
Nova bought Bank of Ireland's half of euroConex in 2004, and it received approval from the Irish government in January to operate without sponsorship from another bank.
Nova also plans to expand to South America to better serve one of its European clients, Banco Santander Central Hispano SA.
Nova began to build its international operations after discussions with its U.S. customers, Ms. Joseph said. "We had some pretty large, international customers," and their banking and processing needs were complex, she said.
Some of those customers used dozens of processors and banks no one financial institution could support those companies in every country where they operated. Many customers, such as airlines, were inherently international businesses and would always need support in more than one country.
In addition, the processing space had already been dominated by a handful of companies in the United States but was still ripe for consolidation in Europe, Ms. Joseph said.
"If we just stayed put and only focused on the U.S. & we would most likely become extinct," she said. The survivors would be the companies that could process worldwide, she said.
Even so, Nova does not plan soon to enter China, another fast-growing market. Though it has a strong payments infrastructure, "China, for us, is just too darn big," Ms. Joseph said.
A community bank there could have 5 million customers; the country as a whole has four times as many debit cards as have been issued in the United States, Ms. Joseph said. She estimates that a new entrant would have to work in China for 10 years before it could expect to make money.
Jim Eckenrode, the banking research fellow at TowerGroup, said that any financial institution mulling international expansion has to find a specialty.
"As we've seen from Pam and from others, a niche strategy might be the way to go," he said. "Focus on what you're good at."
Researching the local industry and customs is just as important. "You've got to know the business that you're in," Mr. Eckenrode said. "You've got to understand the local customs & particularly on the retail front, local customization is important."
Kathleen Khirallah, the managing director for banking at TowerGroup, said in a presentation that U.S. retail banks looking to expand to Europe and Asia do not have to build a new business or acquire one.
One recent trend is for banks to buy a minority stake in a company in a new region.
"It's not always a merger," Ms. Khirallah said. "In some cases what we're talking about is a joint venture," or a majority or minority stake in an existing company.
As banks from Europe and other parts of the world expand, she said, they will increasingly focus on moving to the United States. "They will force domestic U.S. banks to change the way they do business."
