FrontStream Payments Inc. will double its annual transaction-processing volume to $2 billion following last week’s acquisition of Fast Transact Inc., a Lacey, Wash.-based independent sales organization, FrontStream CEO Emmet Seibels tells PaymentsSource.
Seibels declined to say how many merchants either company has under contract. New York-based Arsenal Capital Partners helped fund the acquisition. Terms of the deal were not disclosed.
FrontStream wants to integrate Transact’s online-payment gateway into other products and services, Seibels says. An online payment gateway enables merchants to connect to a variety of processors via an Internet connection.
Fast Transact also has other software useful for running a sales organization. Seibels says. Moreover, the addition of Fast Transact’s gateway will make it easier for FrontStream to work with software developers to build in payment support into their software using the gateway, he says, noting that could make it easier for Brentwood, Tenn.-based FrontStream to gain merchants that use the software.
“We can lower the merchant-acquisition cost and be a ‘stickier’ solution and maintain more margin,” Seibels says.
Merchant-services companies constantly look for ways to provide merchants more than one service in hopes the merchant finds it more difficult to switch. Merchant-services companies also have seen their profit margins for credit and debit card processing contract as merchants pressured the industry for lower costs and transaction pricing became a commodity.
“It’s not all about price anymore because prices for merchant services are going down,” Seibels says.
Fast Transact’s staff, including David Solomon, CEO and chairman, and Anna Solomon, president, will stay on, Seibels says.
Of Fast Transact’s approximately 40 employees, 10 work in its information-technology business, David Solomon tells PaymentsSource.
Besides its own gateway, Fast Transact has its own software for managing the enrollment and tracking of a merchant’s account and for managing the payment of recurring revenue to sales agents, Solomon says.
The FrontStream acquisition means Solomon and his staff will be able to expand, specifically targeting the integration of payment-acceptance software into other merchant software programs. Fast Transaction also is working with Dejavoo Systems, a Syosset, N.Y.-based point-of-sale terminal maker, on an advanced encryption and tokenization service, Solomon says.
The Fast Transact acquisition likely is not FrontStream’s last. Seibels says he is looking for potential purchases. “In terms of future acquisitions, we like ISOs that have a technology or other competitive advantage in industries they service,” he says.
Merchant-acquiring deals are rooted in bolstering a party’s competitive advantage and improving the economies of scale for the buyer, says David Fish, a senior analyst at the payments research firm Mercator Advisory Group Inc.
“The greater efficiency they can realize by combining two merchant portfolios and achieving larger scale, the better off they are,” Fish says.
Similar deals should be expected, Fish says. “The time is pretty ripe for the portfolio buyers in the market to snatch up some good deals,” he says. “Equity partners are more willing to fund deals, and the buyers who have been sitting dormant are ready to bite.”
