TSYS, Now with NetSpend, Pitches Prepaid to More Banks, Merchants

With its purchase of NetSpend closed, the processor Total System Services (TSYS) is beginning to use the prepaid card marketer as a lure for financial institutions and merchants.   

"We're zeroing in on a couple of areas from a payment card perspective," said Troy Woods, president and chief operating officer of the Columbus, Ga.-based TSYS, during an Oct. 22 conference call that accompanied TSYS' third quarter earnings. "NetSpend has seven or eight financial institutions as referral partners. TSYS has hundreds."

TSYS' total revenue for the third quarter was $588.1 million, an increase of 25.6% over the third quarter of 2012. Net income attributable to common shareholders was $64.4 million, an increase of 6.7%.

The boost was due in part to the addition of NetSpend to TSYS' financial statements for the first time—the acquisition closed on July 1. TSYS had previously said the NetSpend acquisition would substantially increase its revenue. For the most recent quarter, NetSpend's income increased 22% from 2012, making a "significant" contribution to TSYS results, TSYS said.

TSYS has created a joint marketing segment with NetSpend, and is introducing NetSpend to its customers during sales meetings, Woods said. "NetSpend is a natural fit for TSYS, and they have told us that the credibility TSYS brings to the table opens doors," Woods said.

The NetSpend acquisition will allow TSYS to offer general purpose reloadable cards to issuers, and enable merchant clients to offer reloadable payroll cards to their employees.

TSYS did not discuss specific product launches, though Woods said TSYS and NetSpend would co-market to small businesses, which could serve as potential distribution partners.

"There are a lot of avenues on the merchant side," Woods said. "All of the cross-training is going on, and the joint calls are being conducted. We feel confident about the revenue and expense synergies that we have outlined."

In August, TSYS agreed to process PayPal payments made through the eBay subsidiary's partnership with Discover. The first stores to enable payments via the PayPal relationship should be established within the next month, Woods said.

TSYS also recently began using FICO fraud prevention technology to protect 1.8 million cardholders in Brazil.

TSYS reported that several ongoing IT initiatives are on schedule, including a processing platform migration that's slated to be complete by 2014 and an omnichannel data management project that's scheduled for completion in 2015. The company also recently formed internal research and development lab.

"We have placed an emphasis on being a more innovative company," said Woods, noting the company has invested $85 million in various research initiatives.