Top Exec at the New Chase Paymentech Sees Smooth Transition

With the melding of Chase Merchant Services and Paymentech L.P. going smoothly as the new Chase Paymentech Solutions LLC, boss Michael P. Duffy foresees his giant merchant-acquiring firm doing more than $600 billion in charge volume this year. In an interview for a story to appear in Digital Transactions' March issue, Duffy, CPS's president and chief executive who headed the original Paymentech, says he “could not be happier” with the integration of the two acquirers, announced Oct. 5. “I always knew that with the merger of these companies, that one plus one would be greater than two,” he says. Paymentech, which was 52% owned by banking giant JP Morgan Chase & Co. and 48% by processor First Data Corp., brought to the table a dominant presence in catalog and Internet merchants. Chase Merchant Services, a 50-50 merchant alliance of Chase and First Data, had broad reach in retail and travel-and-entertainment, including Wal-Mart Stores Inc. Today, CPS has about 500,000 merchant contracts, more than 1 million locations, and more than 400 partnerships with agent banks and ISOs. On a pro forma basis, the combined entity processed 15.5 billion transactions in 2005, up 19% from 2004's 13.1 billion, according to JP Morgan Chase's fourth-quarter earnings report. Charge volume hit $563 billion, up 15%, easily making CPS the nation's largest acquirer. Integration of the former CMS and Paymentech began as soon as the deal was announced and is expected to be completed at mid-year. Layoffs have been minimal, confined mostly to the administrative side, because the predecessor companies had few overlapping markets, according to Duffy, The Dallas-based firm now has about 2,000 employees, 60% to 70% of them in sales and related functions. Duffy describes the original Paymentech as “good technology company” with its own platform, while CMS was “an incredible sales machine” that used First Data's back-office systems. “We've gotten the best of both,” he says. CPS will continue to focus on all of its major merchant markets and is studying ways to expand and cross-sell its services with Chase, according to Duffy. The fastest transaction growth is coming from the international segment, he says. CPS already is a major acquirer in Canada and has a European office in Dublin, Ireland. Now it's looking to set up shop in fast-growing Asia, though no timetable has been set, Duffy says. JP Morgan Chase owns 51% of CPS while First Data owns 49%. Duffy reports to an eight-member board of directors; each owner company appoints four members.