With ‘Chunky’ Deals in the Works, Vantiv Has High Hopes for its Litle E-Commerce Unit

Transaction volume at electronic-commerce processor Litle & Co. grew 39% in the first quarter, Litle’s new owner, Vantiv Inc., reported late Monday. Vantiv, a big merchant and card-issuer processor based near Cincinnati, said Litle contributed only one or two percentage points of Vantiv's 23% increase in merchant transactions from a year earlier, but Vantiv clearly expects Litle to add more oomph to its future growth numbers.

Vantiv chief executive Charles D. Drucker attributed Litle’s growth both to new contracts and growth from its existing merchants.

“We expect Litle to continue to add to Vantiv’s top-line growth rate going forward as we continue to gain traction with our approach to the market, including pursuing cross-selling opportunities in our existing merchant base as well as re-engaging with potential new clients that Litle was too small to pursue as a stand-alone company,” Drucker told analysts during the company’s quarterly earnings call.

Vantiv, a major acquirer for large merchants as well as small and mid-sized ones through its National Processing Co. subsidiary, was a minor player in e-commerce until it bought Litle in October for $361 million in cash. In response to an analyst’s question about whether any “chunky” deals were in Litle’s pipeline, Drucker says Vantiv is training its sale force to broaden Litle’s reach.

“We believe we’re going to have some good wins coming up that will be ‘chunky,’” he said.

In related new ventures, Vantiv in the first quarter signed or began converting to its system three leading aggregators for property payments—YapStone, Property Solutions and PayLease. These companies enable consumers to pay their monthly apartment rentals or other property obligations on credit or debit cards.

Vantiv didn’t reveal how many transactions Litle generated, but the company processed 3.12 billion transactions, up 22.8% from 2.54 billion in 2012’s first quarter. About 42% of merchant transactions originate on PIN-debit cards, chief financial officer Mark L. Heinbouch reported, with the remainder split about evenly between signature-debit and credit cards. Average revenue per merchant transaction decreased slightly from 6.19 cents a year ago to 6.13 cents.

Transactions for card issuers totaled 851 million, up 3.4% from 823 million a year earlier. Average revenue per transaction rose to 9.55 cents from 9.13 cents in 2012’s first quarter.

Drucker also reported in response to an analyst’s question that Vantiv’s merchants are not clamoring for a deal like the one announced in February by Visa Inc. and JPMorgan Chase & Co. in which Chase will license a version of the VisaNet processing network. With the license, the new Chase Merchant Services (CMS) entity will process transactions from Chase Visa cards originating at locations served by Chase’s acquiring subsidiary, Chase Paymentech. With the deal, Chase hopes to get more control over card-acceptance pricing and rules, and add a tool to send offers to its cardholders.

“The Chase-Visa deal has not been a topic of conversation,” said Drucker. “It hasn’t been … on their radar screen.” He went on to say that Vantiv is capable of offering its clients the types of services CMS will.

Visa, however, last week said a number of other financial institutions had expressed interest in their own versions of the CMS model.

Vantiv reported net income of $26.1 million compared with an $18.4 million loss in 2012’s first quarter on revenues of $498 million, up 15.1% from $432.8 million.

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