In the 18 months since becoming its president and chief executive officer, Philip G. Heasley has been putting his stamp on Transaction Systems Architects Inc., which sells automated clearing house software and wire transfer systems for large banks.
He has streamlined the Omaha company's operating structure, unified its marketing efforts under the brand of its ACI Worldwide, and made acquisitions in the United States and Europe.
And with last week's announcement that Transaction Systems would acquire the Newton, Mass., Internet cash management vendor P&H Solutions Inc., Mr. Heasley signaled an interest in broadening his company's capabilities to offer a customer-facing front end and to reach institutions that are not big enough to use its industrial-scale back-office systems.
In an interview last week after the P&H announcement, Mr. Heasley, the former president and chief operating officer of U.S. Bancorp, described the global opportunities he sees for Transaction Systems.
In recent years many U.S. bankers have focused on the convergence of traditional check payment with electronic payment systems, such as converting paper checks into ACH transactions or routing digital images of checks across electronic clearing networks.
Mr. Heasley has been exploring a different type of convergence: unifying ACH payments and wire transfers.
The two types of payments are not often lumped together - ACH payments are widely used for high volumes of low-value payments, while wires typically carry much larger transactions, but in far lower volume. However, Mr. Heasley said that both systems are essentially electronic methods to deliver payment instructions, and that Transaction Systems is developing a system that could carry both type of files.
The company earns about 60% of its revenue outside the United States, and Mr. Heasley said he expects strong sales abroad to continue, especially in Europe, which is in the middle of a major overhaul of its payments systems.
"There's an awful lot of opportunity in Europe," he said. "Europe is going through another Y2K, and it's called Sepa."
The Single European Payment Area plan by the European Union and the European Central Bank calls for the development of continent-spanning payments networks to replace national-level systems. Sepa-compliant systems are mandated to be functional by Jan. 1, 2008, in euro-zone institutions.
"They're in the same place as the American banks were in the '80s, when deregulation was taking place," Mr. Heasley said. He expects "a lot of consolidation" among European financial companies, "which is also a good thing for us."
To capitalize on the imminent demand there, Transaction Systems has been beefing up its European capabilities. In May it bought 84% of the Frankfurt software maker Electronic Payment Systems AG; it expects to buy the rest of the shares next month.
Transaction Systems agreed to pay $35.96 million, including $22.2 million in cash, to acquire EPS.
"They had a couple of products that they only sold in Germany that we're going to sell around the world," Mr. Heasley said.
Transaction Systems plans to integrate EPS' products with its own, including those inherited from S2 Systems Inc., the Salt Lake City company it bought for $35 million in July of last year. S2 sold its payment and connectivity applications in Europe, the Middle East, and the Asia-Pacific region and generated nearly half its revenue abroad.
As the financial services industry becomes more global, banking companies will increasingly turn to vendors such as Transaction Systems to replace the systems they developed in-house, which are its biggest competition, Mr. Heasley said.
If consolidation is going to drive demand from big banks in Europe, the opportunity in the United States is with smaller institutions, Mr. Heasley said.
Buying P&H, which gets 60% of its revenue by providing hosted online cash management, would enable Transaction Systems to offer its products to midsize and small banks, which would not have been viable prospects in the past, he said.
Transaction Systems is interested in further acquisitions, according to Mr. Heasley, and he has a half-dozen candidates in mind around the world. Though he would not name any of them, he mentioned an interest in using the venerable electronic data interchange payment format to connect payments into the corporate supply chain - "a convergence capability for more complex systems, EDI, or whatever."
Aaron McPherson, the research manager of payments at Financial Insights Inc., a Framingham, Mass., research unit of the Boston technology publisher International Data Group Inc., said the current initiatives are likely to keep Mr. Heasley busy for some time.
Not only does Transaction Systems face challenges in integrating ACH and wire systems that have grown up separately - an effort that is "still a work in progress" - but also "they have the additional challenge of integrating P&H," Mr. McPherson said.
On the sales front, Transaction Systems' biggest challenge was to persuade big banks to replace reliable systems with new technology that could surprise them, he said. "Unless you're going to rip and replace, you're going to be adding new components into an existing system that may not work the way you thought they would."
Thomas McCrohan, an analyst at the Philadelphia investment bank Janney Montgomery Scott LLC, agreed that the global payments networks are undergoing significant change, but said "you can't necessarily draw a hard line between these trends and demand for TSAI products." Mr. McCrohan, has a "neutral"rating on the company's shares.
