First Data's BluePay buy: a big move to acquire software vendors

Online sales and software development are two of the most dynamic categories in the payments processing market, and First Data's acquisition of BluePay will give it inroads into both.

"They're big in the card not present space and with online developers," said First Data CEO Frank Bisignano during a conference call to announce First Data's $760 million acquisition of BluePay from its current owners TA Associates and BluePay's management. The deal is expected to close in the fourth quarter pending regulatory approval.

Victor J. Blue/Bloomberg

BluePay, which was one of First Data's distribution partners, processes about $19 billion in annual payments volume for approximately 77,000 merchants in the U.S. and Canada. It's also integrated into more than 450 independent software vendors, and gets about 50% of its business from online payments, or "card not present" transactions.

Most ISVs do not view payments as a competitive play, according to First Data, creating an opportunity to expand payments revenue and relationships over time.

"The ISV space is highly attractive with high merchant retention rate," Bisignano said, saying ISVs have been a major strategy for First Data.

As part of that strategy, First Data recently acquired CardConnect to add enterprise resource planning that can be integrated with First Data's Clover POS system, which First Data has made more open to attract software development.

BluePay will add an e-commerce component to CardConnect's expertise in point of sale technology, Bisignano said.

"If you take that plus what BluePay brings in, we went from a plan a year and a half ago to a full hand today," Bisignano said.

It also follows JPMorgan Chase's acquisition of WePay, which boosts JPMorgan's ability to offer a range of software in addition to digital payments. Both of these companies are competing with Stripe, which is valued at about $10 billion, or far beyond the $220 million JPMorgan paid for WePay or the $760 million First Data is paying for BluePay. "Whether it's Cardconnect or BluePay, we continue to invest in new capabilities, competing in different ways," Bisignano said.