To expand its foreign customer base, Total System Services Inc. has acquired the privately held London payments technology vendor Card Tech Ltd.
The $55 million cash acquisition, announced and closed Tuesday, also gave the Columbus, Ga., company a new transaction processing system it hopes to use to gain footholds in new areas.
“This acquisition provides us the opportunity to go into markets that we couldn’t go into, or didn’t have the resources to go into,” Phil Tomlinson, TSYS’ chairman and chief executive, said in an interview Tuesday. “We think it certainly has a huge amount of growth potential.”
Currently, 190 banks in 70 countries in Africa, Asia, Europe, and North America, including six of the world’s top 25 banks, use Card Tech’s credit card issuing and processing software.
Though the vendor is based in the United Kingdom, its main operations site is in Cyprus, which Mr. Tomlinson called a gateway to such important and growing card markets as Eastern Europe and the Middle East.
“It’s a good footprint for us and gives us opportunities to move into more countries faster than doing it country-by-country,” he said.
Both TSYS and First Data Corp. have called international markets a critical component of their long-term growth plans, and First Data’s international unit is the fastest-growing of its three card divisions.
Mr. Tomlinson said TSYS, which is 81% owned by Synovus Financial Corp., also plans to restructure its international operations this year.
Card Tech has been renamed TSYS Card Tech. No jobs are expected to be cut.
Though the vendor’s extensive customer list was an important factor in the deal, Mr. Tomlinson said, the processing system will also play a valuable role in TSYS’ foreign expansion. “This brings us a new option that we can use, especially as we try to enter new countries.”
TSYS’ TS2 transaction processing system is considered one of the most powerful in the industry. However, analysts said it typically runs on expensive mainframe systems and is best suited for large issuers, while the Card Tech system, which runs on servers and can easily scale, is a good fit for small customers.
Larry Berlin, an analyst for First Analysis Securities Corp. in Chicago, said offering the Card Tech system to new customers with low processing volume, especially in new areas, would be more cost-effective than installing TS2 in such markets, because the mainframes likely would be underutilized for some time.
The acquisition “gives them a product for the more price-sensitive end of the market,” he said.
First Data has long used a similar strategy, Mr. Berlin said — offering its most powerful processing system to large North American customers and promoting its VisionPLUS software abroad, especially in areas where the card industry is less developed and issuers have lower volume. VisionPLUS also runs on servers, so expanding its capabilities as customers’ needs change is easy and cost-effective, he said.
Robert J. Dodd, an analyst with Regions Financial Corp.’s Morgan Keegan & Co. Inc., said that the despite its long list of customers, Card Tech was not a huge company, and that the acquisition is a growth play for TSYS.
“It’s a step forward, but not a huge step,” he said. “The question is, can they leverage it into something bigger?”
