TSYS Eyes the Future with 'Star Wars' Issuing Tech, NetSpend Deal

Total System Services Inc. is adopting a new infrastructure for card issuing, updating its existing "black box" to allow issuers to more quickly launch new products and services and provide a single view of consumers across multiple relationships.

"These guys here laugh at me, but I call it Star Wars because I think when a lot of people that we compete with see that, they're going to say, 'Oh, my God. We're going to have to compete against that?'" said chairman and CEO Philip Tomlinson in a conference call to discuss first-quarter earnings.

The multiyear initiative will also provide consumers with self-service options to access accounts through multiple channels, including bank branches, phone, Web, mobile and social media.

"I think it's going to hurt some people. I think it's going to be pretty slick…It has been a while since I have really been excited about a technology product and I am excited about this one," Tomlinson said during the April 23 call.

This and other new technologies will help TSYS distinguish itself from the competition, Tomlinson says. "It seems like everybody is wanting to compete on price. Obviously, we have to compete on price, but we also want to compete on service," he says.

TSYS' acquisition of ProPay closed in December, expanding its offerings to include mobile card readers. Square does not threaten TSYS' relationships with its core base of merchants, Tomlinson says, but TSYS can now expand its client base by offering ProPay's device to small merchants.

The Columbus, Ga.-based processor reported net income of $57 million for the quarter ending March 31, up 1.1% from income of $56.4 million in the year-ago quarter. Total revenue in the quarter was $465 million, up 0.8% from $461 million year-over-year. The quarterly results were negatively affected by fluctuations in foreign currency rates and by merger and acquisition expenses.

TSYS announced its $1.4 billion acquisition of prepaid card marketer NetSpend in February and the company says expenses associated with the deal totaled $6.2 million for the quarter. In addition, TSYS incurred $3.7 million in costs associated with a 3.5-hour-long power interruption at one of its two North American data centers in January.

TSYS has doubled-down on its foray into prepaid, securing an extension of its processing contract with prepaid issuer Green Dot just a day after announcing the NetSpend acquisition.

The NetSpend purchase is still on pace to close midyear. Once complete, the acquisition will provide TSYS' issuer clients with an option for offering general purpose reloadable cards. The deal should also let TSYS' merchant clients offer reloadable payroll cards to their employees.

"I know that the guys from NetSpend are chomping at the bit to go start calling on our clients," Tomlinson says.