Another merchant transaction company is gearing up for an initial public offering.

National Bankcard Association, a San Diego-based independent service organization, signs up merchants to accept MasterCard and Visa, among other things.

To bulk up for an eventual IPO it has accepted investments of $2.7 million from Geocapital Partners, a Fort Lee, N.J.-based venture capital firm, and $3 million from JMI Equity Fund in Houston.

"We're hoping to get to critical mass for an IPO within 24 to 36 months," said Mark Leibowitz, president of National Bankcard . "We're going to focus more on acquisitions and what we can do to build an internal sales engine."

The venture capital investments, received in the past four months, will be used to buy merchant portfolios from commercial banks and other independent service organizations, he said.

Five merchant processing companies beat National Bankcard to the punch this year in going public: PMT Services Inc., Bank of America Merchant Services, First USA Paymentech, National Processing Co., and Nova Information Systems.

An industry observer said National Bankcard has decided to play the scale game and must bulk up its merchant portfolio to stay competitive.

National Bankcard "has decided it had better find a way to raise investment capital to buy as many portfolios as possible," said Paul Martaus, president of Martaus & Associates, Clearwater, Fla. "They must keep building scale."

National Bankcard has a portfolio of 15,000 small merchants, primarily new businesses that have not accepted credit cards before or that process paper-based transactions.

National Bankcard performs back-office functions like chargeback requests, sales-draft retrievals, customer service, and accounting. It also installs point of sale terminals and automated teller machines.

Mr. Leibowitz estimated the annual merchant sales volume at $1.5 billion. Mr. Martaus, however, placed it at $200 million.

By contrast, PMT Services, the No. 17 independent service organization, has more than 100,000 "mom and pop" merchants and a transaction volume of $5 billion, according to The Nilson Report.

"PMT is a competitor in terms of acquisition," Mr. Leibowitz said, "but we have a direct sales force on the street, which they do not."

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