Nxgen International is opening operations in the United Kingdom and Italy as part of a European expansion strategy the Whitefish, Mont.-based merchant-service provider announced last week. Diversifying geographically can help Nxgen grow and differentiate itself further, says Giuseppe Caltabiano, Nxgen president.
Expanding into regions beyond the United States can help payment-service providers diversify and stabilize their revenue streams, though the tactic is not suitable for all companies, note industry analysts.
Nxgen intends to begin boarding UK merchants in late March and begin operations in Italy two to three months after that, says Caltabiano. Nxgen has incorporated Nxgen UK and Nxgen Italia and will have office locations in Chesham, UK, and likely Milan and Rome, Italy, he says.
The company intends to work with local partners in both regions and use local salespeople to reach merchants. Nxgen is working with UK-based payment-service provider SilverPay and an undisclosed partner in Italy that is a “major vendor of payments systems” in the market, says Caltabiano.
Global Strategy
Nxgen’s strategy is “act local and think global,” says Caltabiano. The company finds local partners that would benefit from partnering with Nxgen so the two companies together can offer a full range of payment products and services, he says.
Nxgen first began its international expansion in Canada in 2006 with Nxgen Canada.
Expanding into multiple geographic markets can benefit a company by spreading its revenue among different currencies and regions, says Caltabiano.
“If all of a sudden a country goes into a [economic] crisis, hopefully another country isn’t going into the same crisis at the same time,” says Caltabiano. “And if a currency goes lower, hopefully another will go higher.”
While global expansion will not serve every company, there is “real truth” to the financial benefits of diversifying business geographically, says Cliff Gray, an associate and merchant-processing and product-services expert with The Strawhecker Group, an Omaha, Neb.-based consulting firm. “As the global marketplace matures, it will become more and more common,” he says.
Payments companies should “think globally” but also “execute at a level they can support,” agrees Todd Ablowitz, president of Double Diamond Group, a Centennial, Colo.-based consulting firm.
Expansion Benefits
There is “more stability and diversity of revenue” in international operations, says Ablowitz. “One area might get hot for your niche, and another might be stagnant for a while,” he says, noting for example that Near Field Communication technology is growing faster in some regions than it is in others.
Many service providers that have expanded beyond the United States also are operating in Canada, he says.
The U.S. merchant market also is quite saturated with card services, and some providers may look internationally to find untapped areas, says Gray. “A lot of people have to be thinking there is more business out there on the other side of the pond,” he says. “In the U.S. especially it’s very saturated.”
International expansion is not an appropriate strategy for every merchant-service provider, notes Ablowitz. It makes sense “if you have the scale to be thinking that way,” he says. “Just deciding to do it, if you are on the smaller scale, it’s not enough.”
Many expansion opportunities are available in international locations. However, it helps if U.S.-based companies have existing relationships through business partnerships or local employees in the areas where they wish to expand, says Ablowitz.
