With its $50-million acquisition of Sunnyvale, Calif.-based software house Infonox Inc., TSYS Inc. has become one of a handful of transaction processors that are in the early stages of overhauling and upgrading their acquiring operations to support what many experts view as a coming explosion of volume as new payment types establish themselves. The deal, which closed Tuesday, not only catapults product development for TSYS Acquiring Solutions, the Columbus, Ga.-based processor's merchant-processing unit, but also promises to help swell transaction volumes, the top executives with both TSYS Acquiring and Infonox tell Digital Transactions News. “We think there's significant upside for number of transactions,” says Robert J. Philbin, president of TSYS Acquiring, who adds that Infonox, whose data centers link directly to all principal credit card and electronic funds transfer networks, brings technology to TSYS that can support virtually any point-of-sale terminal, ATM, kiosk, or mobile device. “It would have taken us three to five years to be where [Infonox is today],” Philbin says. Indeed, the key to the deal is a recognition at TSYS that legacy systems in the merchant-processing business are likely incapable of meeting near-term demand, Philbin says. “It's time to take the technology in the acquiring space to the next level,” he says. “With our existing systems today, all of our old systems, it's 15 months to two years to enable a Revolution Money card or a PayPal. The industry's moving a lot faster than that.” The Revolution card is a product introduced last year by St. Petersburg, Fla.-based Revolution Money Inc. Nine-year-old Infonox's roots are in the gaming industry, where it soon saw a need to support any sort of check or card transaction on a variety of terminals or kiosks. “Casinos want to support every transaction known to man because they want to make it easy for patrons to get cash,” notes Safwan Shah, president and chief executive of Infonox, who now reports to Philbin. That forced the young company to build middleware that could translate transactions passed on from acquirers into message formats that back-end processors' legacy systems could handle. It also led the company to forge links not only to credit and debit card networks, but also to the image-exchange systems that emerged in the wake of Check 21. As a result, says Philbin, with Infonox's technology in hand, TSYS Acquiring can now offer money-transfer and bill-pay services for the first time. It also can offer direct connections to debit networks, links that until now were available only through partnerships with third parties. This arrangement hampered efficiency and made it hard to implement upgrades, Philbin says. But now TSYS Acquiring can target larger merchants, those ranking between No. 200 and No. 1,000 in annual sales, for debit card acceptance with competitive pricing, Philbin says. Before, he says, “we were too high.” For the near term, TSYS Acquiring will introduce a Web-based reporting system based on Infonox technology. This so-called dashboard will let acquiring clients track lead generation, terminal deployment, merchant underwriting, and the progress of transactions from authorization to clearing and settlement and, when necessary, chargebacks. “We will be the industry's first 360-degree payment provider,” says Shah. Other processors are also starting to see a need for more efficiency in boarding and managing merchants. Late last year, for example, Global Payments Inc. launched an application programming interface (API) to make boarding to its data center easier (Digital Transactions News, Jan. 16). Philbin expects to have all of the company's 250 or so acquiring clients?a mix of independent sales organizations and banks?converted to the system within 18 months. Smaller clients without such technology will welcome the change, Philbin says. “We're pretty confident our larger clients will scrap what they have” to make the conversion, he adds. Transaction pricing will remain roughly the same, he says, though the data-reporting tools will require additional fees that the company is still working out. Still, clients “will have more transactions, they'll make more money, and we'll make more money,” says Philbin. That could benefit Infonox veterans, as well. In addition to the upfront acquisition price, the deal calls for up to $25 million in payments over three years if performance goals are met.
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