Total System Services Inc., a Columbus, Ga., processor majority-owned by Synovus Financial Corp., has created a managed services outsourcing joint venture for Europe, the Middle East, and Africa as part of its international expansion efforts.
TSYS formed the venture, TSYS Managed Services EMEA, on Nov. 15 with Merchants Ltd., a U.K. subsidiary of Dimension Data PLC of Johannesburg.
The venture, focused largely on Europe, performs customer service tasks, such as back-office, cross-selling, and upselling services for card issuers and merchant acquirers.
TSYS has worked with Dimension Data for almost two years to serve Europe, but David R. Figgat, the group executive for managed services at TSYS, said that the partnership was ill suited to pursue business from certain attractive clients.
Since with most banks, “we handle incredibly sensitive material for them and their customers, they really insist on us being in control and are kind of unwilling to expand to really large numbers of transactions on the managed services side unless we have that control,” he said.
TSYS owns 55% of the venture. “What this did is really put us in control,” Mr. Figgat said.
The venture “puts us significantly closer than we were” to signing “several very substantial contracts” with companies that demanded TSYS have control of such work, he said.
TSYS Managed Services EMEA has not signed any deals yet, but the venture already serves customers of the earlier Dimension Data partnership in the Netherlands and the United Kingdom, he said.
Though the venture focuses on Europe, analysts say TSYS has also made significant headway into Asia this year.
In September, it signed a deal to process transactions for a cobranded Visa debit card from Tokyo Finance Corp. and Nikko Cordial Securities, a large brokerage company in Japan. The card can be used for debit purchases and automated teller machine withdrawals in both yen and U.S. dollars.
The processing contract is TSYS’ first in Japan, a market that is notoriously difficult for U.S. companies to penetrate.
In December, TSYS bought a 35% stake in China UnionPay Data Co. Ltd., the credit card processing unit of China UnionPay Ltd., the country’s only card network. That stake grew to 44.5% in September.
Mr. Figgat said that his company will be looking next at India and the Philippines, though he would not say which country would be addressed first.
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said the creation of the European venture is “basically moving up the food chain here to become more relevant to their customers, which makes complete sense.”
The venture “could help pave the way to bring … [TSYS] potentially more into the strategic plans that European financial institutions may be considering.”
The issue of control is extremely important to large companies, especially in Europe, where the market is very interconnected, Mr. Schatt said. As with Japan and other places, TSYS needs to distinguish itself from the local competition if it hopes to win significant business in Europe, he said.
“They’ve got an opportunity to really demonstrate the value-add to FIs that may not see processing and a lot of these other potential services — even customer service — as a core capability that they can offer in-house effectively,” he said.
It may take time for the venture to prove its worth with prospective customers, Mr. Schatt said. “The sales cycles for these things take several months, at least.”
But even with slow sales cycles, the potential of the venture is clear, he said. TSYS’ controlling stake “does lend itself to an FI feeling more comfortable in strategically outsourcing key components of its portfolio to an outside company.”
